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Formalities Associated with Invoicing and Accounting in Thailand

Transcript of the above video:

In this video, we're going to briefly discuss the difference between invoicing and quoting. This is an issue that actually comes up and as a practical manner, it's sort of an insight that once people understand between these two things, it's really kind of lightning with respect to doing business here.

I often get clients who request an invoice for services before we got started. Basically they're requesting an invoice they want to know how something is going to cost. And I'll often tell those folks in an email and say "Look, due to the tax regime here in Thailand we're compliance quotes work, I'll go ahead and send you a quotation." And most folks say "Why are you sending me a quotation?" Because in Thailand, and this is the important part, when a tax invoice is issued pursuant to the revenue code, the tax income to be derived for the Revenue Department here in Thailand, that tax income becomes immediate tax liability to the issuer of the tax invoice. So whether or not the money has been received is irrelevant to that.

If an invoice is issued, that's the moment at which the Revenue Department believes they're owed taxes. This is overly important with respect to overall corporate income tax and actually, the provisions of this came into effect before VAT came along. But for purposes of VAT, it's extremely important because VAT is payable on a monthly basis and in order to maintain compliance with Revenue Department, one has to maintain one's VAT filings once a month.

So for example if a tax invoice is issued and you don't have to say tax invoice just invoice, if an invoice is issued and that individual, the counter party doesn't pay it within the taxable month, then the person issuing the invoice can have some problems because they're going to pay the VAT liability that they owe notwithstanding the fact that they haven't paid yet. And in some cases, they may never be paid at all and yet this invoice exists and there's a tax liability attached there too.

So for this reason, quotations providing fee quotes or quotes to those who wish to purchase a product, those who wish to purchase services, those who wish to do any sort of business with a company here in Thailand, it's also a good idea to just go ahead issue a quote rather than a tax invoice because a fee quote does not have these, I won't say honoris, but does not have these tax liability issues attached to it. So for that reason, it's sometimes a good idea to go ahead issue a quotation rather than an invoice.

And it's been my experience that once this is explained to counter parties especially in a foreign context, most people would say "Okay  you'll have to issue a quotation because we may be liable for taxes here in the country and we don't even know if we want to purchase your services or buy your product yet. So please go ahead issue us a quotation."

And then when things are underway, tax invoicing and things like that can be dealt with once the business relationship is more firmed up. So for that reason, it's kind of rather obligatory to understand the difference between quotations and invoicing in the context of Thai revenue.