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ResourcesCorporate and Tax AdvisoryThailand Tax LawRecent Discussion of Possible VAT Increase in Thailand

Recent Discussion of Possible VAT Increase in Thailand

Transcript of the above video:

In this video today, we are going to be discussing VAT specifically, that’s “Value Added Tax”, there are other videos which specifically go into issues pertaining to VAT and specifically accounting protocols associated therewith. I urge those who are interested in that information to check out some other videos on this channel.

But recently, in the past 3 weeks, from the time of filming of this video, there was an announcement with respect to VAT that was published in the Royal Thai Gazette and subsequent to that announcement,  we went ahead and translated the announcement in the Royal Thai Gazette and went ahead and put it up on the Integrity Legal blog, I’ll go ahead and leave a link below in the comment section/description of this video leading exactly to that specific translation  because I think it’s important for people to read this specifically because it provides better insight into how this works. I was under certain misconceptions with VAT in the past and I’m hoping this video will kind of sum up the finer points and certain ways in the broader strokes with respect to that. But subsequent to the announcement in the Royal Thai Gazette, there was an article written on October 7th for the Bangkok Post. The article is entitled “Nobody Likes VAT but the Poor Like it Far Less”. I strongly encourage those interested in this topic to check out this article specifically. I’m only reading some specific portions of it which pertain to the sort of overall academic notion of VAT. This article is really actually very interesting with respect to how VAT operates and how it operates within the economy over here. But that being said, to quote directly from what I felt was relevant sections of this article specific to VAT sort of in an academic sense. Quoting directly, “the subject returned to the public attention once again when a royal decree recently published in the Royal Gazette was widely shared on social media attracting much discussion and concern.

The decree states that the VAT rate will be 6.3%, 7% when municipality tax is added, until September next year will rise to 9% plus 1% for municipal tax for the 1 year period after that. It fell upon the revenue department to clarify that nothing will change until October next year, that’s October 2018, for those watching this in the future, but it expected the new decree would then be issued to keep VAT at 7% as this has been the normal practice since the VAT law came into effect in 1992.” And this article goes into some things we’ve discussed previously on this channel with respect to prior announcements or prior comments, I shouldn’t say announcement, comments which were just simply kind of broached by various government officials with respect to VAT in the past. Again, I really, strongly urge those watching this video to check out this article. (but that being said) One thing of note that I had never been aware of until a few years ago; technically, VAT in and of itself is 6.3% in Thailand effectively right now. There’s another 0.7%, so like 10% of the overall amount goes into this “Municipal Tax” which actually goes to the local, Municipality is kind of the wrong word in say an American context, within Bangkok proper, which is its own province, there are various sub districts of the province which take that percentage of those funds. That’s where that money goes. With respect to VAT, if it goes up to an overall rate of “10%”, then the actual rate of real VAT is only 9% and the municipality picks up this other 1 percentage point.  So that’s kind of interesting. Most folks are not overly aware with respect to that.

The other thing to keep in mind; we may not actually see an effective rate of 10% as was noted in this article. At the time VAT was passed in Thailand, it started at 10% and they immediately placed sort of an ongoing exemption on it and basically said “we are going to lower it down temporarily to 6 plus the municipality which came to 7” and thereafter, it’s remained there. VAT is sort of, and I don’t wish to get particularly political, but it has been something of a hot button issue, taxes often are, it’s just a fact of life. Most folks don’t really like paying taxes. But that being said, it’s kind of the cost of doing business as well but VAT periodically been discussed raising it up,  but seemingly at least up to this point, it’s always been decided “no, we are going to keep it at the current rate” which is 6.3 plus the other 0.7% which gives you the effective rate of 7%. My thinking is, I never assume anything with respect to any kind of policy that can be passed by any Government until I see it in writing so unless and until I see a Royal Thai Gazette announcement sometime around this time next year in 2018, round October, probably more likely August, September of 2018, that  specifically stipulates that the VAT is going to remain where it is, I think we have to base all assumptions, and we have to operate based on the assumption that VAT is going to be 10% after October 2018. I think it’s probable or possible that old policies will kick in again and  they’ll  go ahead and lower it back down but according to the announcement as it sits right now, it’s going to be 10% starting in the fourth quarter of 2018.