Thailand Export Services VAT
Update | March 2011
On 29 March 2011, the Director-General of Revenue issued Notification on VAT (No 181), which supposedly eases the rule prescribed in Notification on VAT (No 105) for applying the 0% rate of VAT to export services -- services performed in Thailand and consumed in a foreign country.
The rule prescribed in Notification (No 105) was that 0% VAT shall apply to services performed in Thailand and consumed in a foreign country “entirely”.
Following the issue of Notification (No 181) the rule now prescribes 0% VAT shall apply to services performed in Thailand and consumed in a foreign country “for that part of the services that are consumed in a foreign country”.
Whilst Sherrings brings this supposed easing of the 0% VAT rule for export services to your attention, we should you to note that many Revenue Dept tax audit officers in Thailand still do not easily allow the 0% rate of VAT for export services.
Tax Insight | December 2008
Export services are services performed in Thailand and consumed outside Thailand, and in virtually the same way as for Thailand goods consumed outside of Thailand (export goods), export services should enjoy the export rate of 0% VAT.
But unlike export goods, export services is one of the horrors of Thailand VAT compliance. Whilst the intention of the law is for export services to enjoy the 0% VAT rate, Thailand tax audit officers investigate just about every export service transaction that a company zero-rates, and their challenges for the 7% VAT rate plus penalties and surcharge can often be horrendous.
Section 80/1(2) of the Revenue Code prescribes clearly the 0% rate, not the 7% rate, shall apply to export services. But Section 80/1(2) also prescribes that the application of the 0% rate is subject to the rules procedures and conditions prescribed by the Director-General of Revenue, and this is where the problem lies.
The Director-General's Notification on VAT (No 105) prescribes that the 0% rate is to apply for services performed in Thailand and consumed "entirely" outside Thailand.
The compliance matter to note is the word "entirely", and even in the case of only a small part of a service not being consumed outside Thailand, such as, for example:
International businesses should note that Thailand Revenue Department tax audit officers do not easily allow the 0% rate of VAT for export services, and if your Thailand company is not able to prove to them beyond doubt that the services were consumed outside Thailand, they will require you to pay 7% VAT plus penalties and surcharge.
This Tax Insight is general information only. It should not be used to determine any particular matter without consulting with an experienced Thailand tax advisor.