The Value Added Tax (VAT) System In Thailand
Newsletter No. 2 (EN)The Value Added Tax (VAT) Systemin ThailandMay 2017Although Lorenz & Partners always pays great attention on updating information provided in newsletters andbrochures we cannot take responsibility for the completeness, correctness or quality of the informationprovided. None of the information contained in this newsletter is meant to replace a personal consultationwith a qualified lawyer. Liability claims regarding damage caused by the use or disuse of any informationprovided, including any kind of information which is incomplete or incorrect, will therefore be rejected, if notgenerated deliberately or grossly negligent.All rights reserved Lorenz & Partners 2017
Newsletter No. 2 (EN)The rate of Thai Value Added Tax is currently at 7 %Question:In which cases does a company have to add Thai VAT on the invoiced amount?(A German company gets an invoice from a Thai company or a Thai company gets an invoicefrom a German company:)Invoice issued for?service(“5 hour painting”)work(“invoice for painted wall”)Jobperformed inGermany or ThailandGermany or ThailandResultused inGermany or ThailandGermany or ThailandThe following combinations are possible:A German company has performed a service, that is used in GermanyGerman VAT only performed a service, that is used in Thailand7 % Thai VAT performed a service in Germany, that is used in Thailand7 % Thai VAT performed a service in Thailand, that is used in Germany0 % Thai VAT performed work, that is used in GermanyGerman VAT only performed work, that is used in Thailand7 % Thai VAT performed work in Germany, that is used in Thailand7 % Thai VAT performed work in Thailand, that is used in Germany0 % Thai VATA Thai company has performed a service, that is used in Germany Lorenz & PartnersGerman VAT onlyMay 2017Tel.: 66 (0) 2–287 1882Page 2 of 8E-mail: info@lorenz-partners.com
Newsletter No. 2 (EN) performed a service, that is used in Thailand7 % Thai VAT performed a service in Germany, that is used in Thailand7 % Thai VAT performed a service in Thailand, that is used in Germany0 % Thai VAT performed work, that is used in GermanyGerman VAT only performed work, that is used in Thailand7 % Thai VAT performed work in Germany, that is used in Thailand7 % Thai VAT performed work in Thailand, that is used in Germany0 % Thai VATExamples:aforesaid rights, it shall not be regardedas a sale of intangible goods. It shall beregarded as a rendering of service abroadused in Thailand:A) Service rendered abroad, and used inThailand:1. In case a foreign registered company hasrendered service abroad and the service isused in Thailand, it shall be regarded thatthe service in question is rendering ofservice in Thailand:The Company has the duty to add 7%VAT2. The rendering of service abroad andservice used in Thailand refers to anyaction that could be used to seek benefitthat is not a sale of goods.4. A company registered abroad hasrendered service abroad and the servicehas been used abroad, the mentionedservice shall be regarded as if the servicehas been rendered outside Thailand:It is not subject to VAT in Thailand.Transfer of ownership of intangible goods(i.e. transfer of ownership of rights in patent,a transfer of ownership of trademark,copyright, royalty) from abroad into Thailandshall not be regarded as a rendering of serviceabroad and that such service is used inThailand:0% VAT has to be added on the invoicedamount.3. But: If the company registered abroadhas permitted any Thai Co. or any personin Thailand to use rights, whereby thiscompany is still the owner of the Lorenz & PartnersThe Thai Co. has the duty to add 7 %VATB) Service rendered in Thailand, andused abroad:1. In case service is rendered in Thailandand used abroad:0 % VAT has to be added. (Sec. 80/1 (2)),but:2. Transfer of ownership of intangible goods(i.e. transfer of ownership of rights inpatent, a transfer of ownership oftrademark, copyright, royalty) fromThailand to abroad shall not be regardedas a rendering of service in Thailand andthat such service is used abroad:May 2017Tel.: 66 (0) 2–287 1882Page 3 of 8E-mail: info@lorenz-partners.com
Newsletter No. 2 (EN)The Thai Co. has the duty to add 7%VAT 3. If a Thai company has permitted anycompany abroad to use rights (patents,etc.), whereby the Thai company is still theowner of the aforesaid rights, it shall notbe regarded as a sale of intangible goods.It shall be regarded as a rendering ofservice in Thailand used abroad and VAThas to be added: 0 % VAT has to be added. (Sec. 80/1 (2)) VAT exempted business (RevenueCode, Div.5, Sec. 81) Financial support from foreign headquartersto the Thai subsidiary. Sale of: agricultural products, animals, fertilizers,fish meals, animal feeds, drugs and chemical productsof plants and animals, newspapers, magazines, textbooks,goods or provision of services by aministry department, goodsor provision of servicesexclusively for the benefit of a religion,or a public charity in Thailand, of whichthe profits are not applied for otherpurposes, goods or provision ofservices designated by a royal decree.Provision of: educational services, an artistic andcultural service in the branch, services by practicing arts of healing,auditing, advocacy in courts, services in healing and nursing by a clinicunder law governing clinics, Lorenz & Partners research or technical services in thebranch, library, museum, or zoologicalgarden services,services under an agreement on hire ofservice,services of organizing amateur sportscontests,services of public entertainers, only ifbeing the service in the branch,services of domestic and internationaltransport, not being transport by means ofaircraft or sea-going vessels,services of letting out an immovableproperty on hireservices by a local government authority,not including its commercial services orservices for seeking revenues or benefits,whether or not being a public utility.Import of the following goods: agricultural products, animals, fertilizers,fish meals, animal feeds, drugs and chemical productsof plants and animals, newspapers, magazines, textbooks, goods from a foreign country that arebrought into an export processing zone,only if the goods are exempt from importduty, goods listed in the part on the goodsexempted from duty under the lawgoverning customs tariff, goods imported and kept under thecustody of the Customs Department, export of goods or provision of a serviceby a registrant liable to value added taxunder Sec. 82/16, RC, a small company with an annual turnoverless than 1,800,000 THB. Zero percent VAT (0 %VAT) (RevenueCode, Div.4, Sec.80/1):May 2017Tel.: 66 (0) 2–287 1882Page 4 of 8E-mail: info@lorenz-partners.com
Newsletter No. 2 (EN) provision of a service performed inThailand and used in a foreign country,according to the categories, rules,procedures and condition, prescribed bythe Director-General (provision of serviceperformed in Thailand for manufacturinggoods in an export processing zone forexport and service performed in an exportprocessing zone for manufacturing goodsfor export) export of goods other than that exemptfrom value added tax provision of an international transportservice by aircraft or sea-going vessels bya supplier who is a juristic person.C) Calculation of VATThe main problem however, is how tocalculate the amount of VAT that a Thaicompany has to pay to the RevenueDepartment (“RD”). The formulas will beexplained in the following.1. PrinciplesTo understand the below formulas there is aneed to clarify the used terms.“Output Tax” is the received VAT amount(received from customers).“Input Tax” is the paid VAT amount (paid tosupplier).General calculation of the amount that has tobe paid to the Revenue Department on amonthly basis is as follows:Output Tax – Input Tax tax debt (to paymonthly)In case the tax debt is negative, the taxdebtor can claim this negative amount fromthe Revenue Department or may use it inthe future as a tax creditExample:Thai company (A) has received 214 THB(200 THB for service 7% VAT( 14 THB VAT) in total 214 THB) fromcompany (B): Lorenz & PartnersMay 2017Tel.: 66 (0) 2–287 1882Page 5 of 8E-mail: info@lorenz-partners.com
Newsletter No. 2 (EN)200 THBABVAT: 14 THBThai company (A) has receivedVAT from company (B):14THB Output tax (VAT)The same Thai company (A) has paid 107 THB (100 THB for service and 7 THB VAT) tocompany (C):100 THBACVAT: 7 THBThai company has paid VATto company (C):7THB Input tax (VAT)----------------Thai company (A) has to payto the Revenue Department:7THB tax debt (VAT) Calculation as stated above:14 THB Output tax - 7 THB Input tax 7 THB VAT/ tax debt2. ExceptionIt is important to distinguish between normal VAT (7%), 0 % VAT business and VAT exemptedbusiness!“0 % VAT”-business can be used as Input tax. It is not possible to offset VAT exempted business:If over 10 % of the company’s revenue is VAT exempted, then, the company’s claimable Input tax hasto be reduced proportionally. Lorenz & PartnersMay 2017Tel.: 66 (0) 2–287 1882Page 6 of 8E-mail: info@lorenz-partners.com
Newsletter No. 2 (EN)Claimable Input tax:Exempted Revenue per month------------------------------------total Revenue per month1 –X total Input Tax claimableInput VATExample:VAT (7%) -Amount:To be used asTotal Revenue100 THB7Output TaxThereof exemptedrevenue40 THBexemptedOutput TaxTotal purchase80 THB5.6Input Tax40 THB1 - ------------100 THB1 – (0.4) 0.6X 5.6 THB X 5.6 THB 3.36 THB claimable Input VATAmount of VAT be paid to the Revenue DepartmentOutput VAT – claimable Input VAT:7-3.36 3.64 THB has to be paid tothe Revenue Department(and not: 7 – 5.6 1.4 THB) Lorenz & PartnersMay 2017Tel.: 66 (0) 2–287 1882Page 7 of 8E-mail: info@lorenz-partners.com
Newsletter No. 2 (EN)We hope that the information provided in this newsletter washelpful for you.If you have any further questions please do not hesitate tocontact us.LORENZ & PARTNERS Co., Ltd.27th Floor Bangkok City Tower179 South Sathorn Road, Bangkok 10120, ThailandTel.: 66 (0) 2-287 1882E-Mail: info@lorenz-partners.com Lorenz & PartnersMay 2017Tel.: 66 (0) 2–287 1882Page 8 of 8E-mail: info@lorenz-partners.com
(A German company gets an invoice from a Thai company or a Thai company gets an invoice from a German company:) Invoice issued for? service (“5 hour painting”) work (“invoice for painted wall”) Job performed in Germany or Thailand Germany or Thailand Result used in Germany or Thaila
VAT ( ) C VAT EU Tax Authorities * Electronic Interface EU , VAT EU-established Intermediary (Tax Representative) . Tax Representative VAT Return VAT EU Tax Authorities VAT & IOSS No. Commercial Invoice Data DHL IOSS EU Tax Authorities VAT Return VAT 10
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