1. Basic Concept
The value-added tax (VAT) was introduces on January 1,1992 to replace the 'business tax'. The VAT is of a consumption type with full
tax credit. Effectively, VAT is therefore a tax on total consumption
expenditure, the burden of which will be borne by consumers not by entrepreneurs.
2. Tax Payer
Any person conduting a taxable activity is required
to register for VAT purposes. As a result, he will be liable for VAT payment.
The tax will be charged at each stage of the production and distribution
chain. VAT effectively covers the following:
1) Manufacturers, importers, exporters, wholesalers,
retailers, and any other sellers who sell goods in the course of their
business;
2) Any person who renders services in the course
of their business or profession;
3) Any person deemed to be a VAT taxpayer by the
Act.
3. Tax Rate
In general, an organization that makes taxable supplies
is required to collect a 7 percent tax (called "output tax") inclusive of surcharge tax for local goverment-on the value of its supplies and secure
an input tax credit for its taxable inputs. Many large business fall
into this category.
Organization with annual taxable turnover
less than 1,200,000 baht are exempt from VAT however, they cannot use
input tax as a credit against its output tax.
The trading of certain kinds of goods and services are liable to a zero-percent-rate VAT. In such cases, the supplier is not required to collect tax on its supplies, but can secure a full recovery of its input tax. Zero-percent-rate VAT will be applicable to the following items:
- Exported goods
- Services rendered in the Kingdom
but used abroad
- Services of international
trasportation by air and sea. In the case of foreign company, the
zero-rate will only be applied to companies of countries that grant the
same treatment to Thai international transport companies
- Sales of goods or services
to a Ministry, Department, Local Government or public enterprises under
the loan or grant assisted project from abroad
- Sale of goods and services
to the United Nation and its specialise agencies as well as embassies,
consulates, etc.
- Sale of goods and services
between bonded warehouse or between enterprises located in export processing
zones.
4. Exemptions
There are ten major categories of business exempted
from VAT. However, a trader engages in such an exempted category
cannot claim for any of the input tax credits. Those aforementioned categorized
business are:
1) Small entrepreneurs
with an annual sales volume less than 1,200,000 baht
2) Unprocessed agricultural
products and related goods, such as fertilizers, animal feeds, pesticides,
etc.
3) Newspapers, magazines,
and text books
4) Certain basic services, such as:
a) Domestic trasportation
b) International trasportation by land
c) Health care services, including government and private hospitals and clinics
d) Educational services, including government and education facilities
e) Medical and auditing services, services provided by lawyers in court and
other liberal profession
f) Renting of immovable properties
5) Cultural services such
as:
a) Amateur sports
b) services of liabraries, museums, zoos.
6) Services in the nature
of employment of labor, research and technical services and services of
public entertainers
7) Goods exempted from import duties under the Industrial Estate Law imported into an Export Processing Zones (EPZs) and under Chapter 4 of the Custom Tariff Act.
8) Imported goods that are kept under the supervision of the Customs Department, which will be re-exported and be entitled to a refund for import duties.
9) Other services such
as
a) religious and charitable services
b) certain services of government agencies and local authorities.
5. Tax Liability Computation
The VAT is charged on the amount
of the sale invoice at a single rate of 10 percent inclusive of municipal
tax. The net tax liability of each taxpayer is calculated monthly
by crediting the amount of VAT paid on the purchase of inventories, capital
goods, and raw materials for sale or utilization in the production process
during the month (i.e. the Input Tax) agianst the total value of VAT due from
sales of goods or services during the same month (the Output Tax).
Hence,
| VAT payable = Output Tax - Input Tax |
|---|
6. Tax Point
- Goods:
The tax point for goods generally arises on the delivery
of goods (accrual basis) unless one of the following events occurs prior
to the delivery of goods:
- Transfer of ownership of goods
- Payment for the price of goods
- Issuance of the related tax
invoice
- Services:
The tax point for the provision of services generally
arises on the payment of the service fee (cash basis) unless one of the
following events occurs prior to the payment.
- Issuance of the related tax
invoice
- Use of such services by the
business itself or other parties
The tax point arises when the one of the above events
occurs.
7. Accounting System
In general, all VAT taxpayers are requried to maintain
three accounting books. The books are as follows:
1) Output Book-Showing the income accounts that
record every amount received before the deduction of expenses, together
with what is and is not subject to VAT.
2) Input Book-Showing the VAT paid by taxpayer
in the course of conduction the business.
3) Inventory Control Book-Showing the quantities
of goods and raw materials acquired and sold on a daily basis.
8. Tax Invoice
Registered VAT-payers are required to issue tax invoices
showing details of the nature and value of goods sold or services rendered
and the corresponding VAT due at each time of transaction. A tax
invoice is necessary as evidence for claming input tax credit by the taxpayers
buying such goods or services.
A tax invoice must contain at least the following elements;
1) The words tax
invoice in a prominent place;
2) The name, address,
and tax identification number of the issuer;
3) The name, address of
the purchaser of goods and services;
4) The serial numbers
of the tax invoice and the tax invoice book, where applicable;
5) A description of the
type, category, quantity, and value of the goods or services provided;
6) The amount of VAT levied,
which must be clearly stated and separated from the face of the invoice; and
7) The date, month, and
year of issuance of the tax invoice.
However, if the VAT payer is a retailer and has a large
number of customers (e.g. department stores, supermarkets, etc.) a simplified
tax invoice or even a receipt from cash register may be used as a tax invoice. In the case of sale at value less than 500 baht, the taxpayer has the right
not to issue tax invoice unless requested by the buyer.
Note: for further information, please directly contact The Revenue
Department at Tel. (662) 617-3000-9.
Souce: Tax Policy Division, Fiscal Policy Office, Ministry of
Finance of Thailand
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