On 24 July 2008, the Thailand Revenue Dept Tax Lawyers issued yet another Tax Ruling determining that the subsidy funds received by a Thailand company are excluded from the VAT base, and therefore not subject to VAT.

The Thailand VAT Law

Section 77/2 of Thailand's VAT law prescribes for VAT to apply to a transaction, it must be either:

1. A sale of goods or provision of services transaction; or
2. An import of goods transaction.

And Section 79(2) of the law prescribes that the tax base for VAT excludes:

• Subsidies.
  

The Tax Ruling issued on 24 July 2008

According to the facts provided, as the Thailand company received the support funds from its foreign parent company without any obligation to repay the funds and without any obligation to perform any services or any act for the funds, the funds are the nature of subsidies, which are not included in the VAT base under Section 79(2), and therefore not subject to VAT.

The Tax Ruling issued on 24 July 2008 is one of many by the Revenue Dept Tax Lawyers, each of them saying just about the same thing, that because:

• The Thailand entity received the funds without any obligation to provide services or perform any act for the funds, and​
• The funds were received without any obligation to repay them,

then the funds received are subsidies, which Section 79(2) of the Revenue Code excludes from the tax base for VAT, and therefore are not subject to VAT.

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