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Value Added Tax (VAT)

I. General
  Thailand adopted the VAT and Special Business Tax (SBT) in 1992. Almost every transaction involving the exchange of goods or services in Thailand is subject either to the VAT or the SBT. A business registered under the Thai VAT system generally receives a "credit" for the VAT it pays when buying goods or services ("input tax") and a liability for the VAT it receives from customers when they purchase the businesses goods or services ("output tax").

A business registered under the VAT must file a monthly return with the Revenue Department. If the output tax exceeds the input tax, including the balance of input tax credits carried over from previous filings, the business must remit the amount by which the output tax exceeds the input tax and accumulated credits. If the input tax together with the accumulated credits exceeds that month's output tax, the business carries over the balance of credits to the next month after deducting the output tax.

II. Transactions subject to VAT
  Basically, any exchange of goods or services performed or used in Thailand might be subject to the VAT In addition to the exchange of goods or services for money, an "exchange" would include barter transactions, the "free" provision of goods or services and other transactions that might not at first appear to be a transaction for value in a commercial sense.
III. VAT rates
  According to the Revenue Code, the basic rate for most VAT transactions is 10%. However, under Ministerial Regulations, the current basic rate is reduced to 7.0%. Several types of transactions, notably the export of goods or services, qualify for "zero percent" VAT. The significance of zero percent VAT, as opposed to a transaction exempt from VAT (see III below), is that a business qualifying for zero percent VAT is entitled to earn credits for its input tax, and possibly apply for a VAT refund.
IV. Exemptions
  Certain types of transactions are exempted from the Thai VAT. Significant exemptions include those for businesses earning less than Baht 1.2 million per year, the sale or import of qualified agricultural products, the sale or import of published materials and books, auditing services, litigation (though not legal consulting) services, health services, other qualified professional services, cultural and religious services, educational services and certain forms of domestic and international transportation services.
V. Refunds
  A business carrying a large amount of input tax credits is entitled to request a refund of its accumulated input credits. Major export firms may wish to do so, as they often incur significant input taxes and minimal output taxes, since their export sales are subject to the zero percent rate. However, before applying for a refund a business should beware that the request often triggers a scrupulous audit by the Revenue Department of the business's VAT records, and in general the actual receipt of the refund can be slow, if ever, in coming.
VI. Registration requirement
  A company must register under the Thai VAT law once its revenues reach a level of Baht 1,200,000 in any 12-month period. In most cases, however, it is recommended that a company register under the VAT immediately after formation. A company not registered under the VAT is not entitled to the input tax credit. A company registered under the VAT must register separately each individual branch office or place of business, unless permission has been granted for the filing of a consolidated return.
VII. Warning
  When Thailand first introduced the VAT there was reportedly a high incidence of VAT fraud, with persons attempting to obtain VAT refunds through the fraudulent accumulation of VAT "credits". Three consequences of the risk of VAT fraud are:
1. Difficulty in registering for the VAT. In particular, it is critical that a business maintain a verifiable place of business in Thailand, including compliance with strict rules which require the cooperation of the (often reluctant) owner of the premises at which the business is located. A business should obtain assurance of the cooperation of the lessor before taking out a lease.
2. The need for stringent record keeping and invoicing requirements. The Revenue Department can and does examine VAT records, invoices and returns with great scrutiny, and will disqualify credits if such documentation is not perfect. It is critical for a business in Thailand to assure that its VAT documentation is correct.
3. Difficulty in obtaining refunds.
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