What You Need to Know About VAT in Thailand

Value Added Tax (VAT) is an indirect tax applied worldwide at every stage of production and distribution—paid by manufacturers, service providers, and intermediaries. Thailand is no exception: it has VAT payers and non-payers, tax liabilities and tax credits, a standard rate, and specific exemptions.

General Information

Tax Rate

The VAT rate set by Thai law is 10%, but a temporary reduced rate of 7% is currently applied and extended annually.

Some activities are:

Subject to 0% VAT
Exempt from VAT entirely

Who Does Not Pay VAT

Small businesses with annual turnover below 1.8 million baht (unless voluntarily registered)
Certain sectors, such as:
- Agricultural products (sale and import)
- Printed materials
- Transport services
- Professional services (medical, legal, etc.)

Zero VAT Rate Applies To:

Export of goods
Services provided in Thailand but used abroad
International shipping and air transport
Sales to international organizations, embassies, and consulates

Who Must Pay VAT

Any company with annual turnover exceeding 1.8 million baht must register as a VAT payer within 30 days of reaching this threshold.

After registration:

Monthly VAT reports must be submitted
The company gains the right to claim input tax credit

Foreign companies providing services used in Thailand must also pay VAT. In such cases, the Thai client acts as a tax agent.

Tax Base

After VAT registration:

Each transaction must include a tax invoice specifying goods/services, value, and VAT amount
This invoice forms the basis for claiming tax credit

Monthly VAT payable = Output VAT – Input VAT

Output VAT: charged on sales
Input VAT: paid on purchases

Reporting and Penalties

VAT returns must be filed by the 15th of the following month
Payment is made at the same time

Penalties:

Failure to register → fine equal to double the VAT liability
Late filing → fine equal to double the VAT due
Incorrect reporting → fine equal to double the underpaid tax

Practical Application

After company registration, a business is automatically registered for corporate income tax (reported annually).

When planning taxes, business owners must:

Accurately estimate income and expenses
Clarify with an auditor what qualifies as “turnover” for VAT purposes
Monitor monthly financial performance to avoid unintentionally exceeding the VAT threshold

Failing to track this can lead to:

Penalties for late VAT registration
Mandatory transition to monthly VAT reporting
Significant changes in tax planning

Pricing Strategy After VAT Registration

Once registered, all transactions are subject to VAT. Businesses must decide:

Absorb VAT within existing prices (reducing profit), or
Increase prices and pass VAT on to customers

Special Cases

Businesses operating under 0% VAT must still register and file reports
When paying foreign service providers, Thai businesses must withhold 7% VAT, regardless of their VAT registration status
VAT-registered businesses can claim this as input tax credit

VAT Refunds

If input VAT exceeds output VAT, the company may:

Carry the credit forward (up to 6 months), or
Apply for a refund

However, applying for a refund usually triggers a tax audit. If improper expenses are included, the refund may be denied, and penalties may apply.

Exporters

Companies with exports exceeding 70% of total sales may qualify as “preferred exporters,” allowing VAT refunds within 2–4 weeks.

Domestic Businesses

For companies focused on the local market:

Refund procedures are slower
Audits may take a long time
Refund approval is not guaranteed