What is Value Added Tax (VAT) and How Does It Work?

Value-added tax (VAT) is a tax collected from the sale of goods or services at each step of the production and distribution process, whether the goods or services are produced domestically or imported from abroad. The rate at which entrepreneurs collect VAT in Thailand is 7% of the value of the goods or services sold.

VAT Registration (Form P.P. 20)

VAT registration can be done through two channels:

1. Submitting a paper application

Submit the registration application at the Revenue Department office in the area where the business is located. The documents required for VAT registration are as follows:

1.1 VAT Registration Application Form (P.P. 01) in triplicate, signed by the authorized signatory.

1.2 Proof of the business location, including:

- Lease agreement for the business location with a stamp duty (if leased) or a letter of consent for using the location as a business (if the owner allows the use without compensation).

- A copy of the house registration document for the business location.

- A copy of ownership documents of the lessor/consenter, such as being the property owner, sale agreement, house number request, title transfer document, or sublease agreement.

- A copy of the national ID card, house registration document of the lessor or consenter, and a certificate of incorporation (if a legal entity is the lessor).

1.3 A map showing the location of the business, along with a photo of the business premises showing the house number.

1.4 Power of attorney with stamp duty, a copy of the national ID card of the grantor and the recipient of the power of attorney.

1.5 A copy of the national ID card and house registration document of the authorized signatory.

1.6 A copy of the partnership or company registration certificate along with the objectives of the business.

Requesting VAT Registration (Online)

The steps to prepare the information and documents are as follows:

1. Display the business name and registration address (company sign) clearly at the business location.

2. Submit a request for VAT registration using Form P.P. 01 and P.P. 01.1.

3. Check the approval status of the request from step 2 via E-mail as indicated in Form P.P. 01.

4. The local Revenue Department will send an email with instructions on the necessary documents for approval of VAT Registration (Form P.P. 20), as per the request in step 3.

The following documents must be prepared:

1. Full certificate of incorporation of the company.

2. A copy of the company’s registration certificate.

3. A map showing the location of the business.

4. Photographs, including the following:

• - Photographs showing the business sign and house number clearly (2-3 photos).
• - Photographs of the business structure to indicate whether it is a detached house, townhouse, or commercial building (2-3 photos).
• - Photographs of the interior office of the business (2-3 photos).

5. Once the business is approved for VAT registration, the business will have the rights and responsibilities as a registered taxpayer from the date specified in step 3. Afterward, the business will be able to issue tax invoices.

6. The local Revenue Department will send a notification to the business to collect or receive by mail the VAT registration certificate (Form P.P. 20) within 45 working days. The certificate must be displayed clearly at the business location.

7. Once the business is VAT registered, the first VAT return (Form P.P. 30) must be filed by the 15th of the month following the registration date in step 3, and subsequently by the 15th of every month.

Calculating VAT and Filing Form P.P. 30

The calculation of VAT for each month is based on the purchase and sales tax reports, where the sales tax is deducted by the purchase tax to determine the VAT for that month.

How to Prepare the Purchase and Sales Tax Report

In the case where a legal entity has registered for VAT, it is necessary to file VAT (Form P.P. 30) with the Revenue Department by the 15th of each month. Along with this, the entity must prepare the purchase and sales tax report as supporting documentation, which must be kept as evidence. The business owner not only has the responsibility to collect VAT from buyers or service recipients and issue tax invoices, but also, in terms of accounting, must prepare the purchase and sales tax report. This can be explained in more detail as follows:

1. The purchase tax report is a report prepared by the business to record the details of purchases of goods or services made by a VAT-registered business from another VAT-registered business.

2. The sales tax report is a report prepared by the business to record the details of tax invoices issued for the sale of goods or the provision of services by a VAT-registered business.

The details in the purchase and sales tax reports must include the following elements:

2.1 Purchase Tax Report must include the following details:

– Title indicating it is a purchase tax report.

– Tax period and year.

– Business name and tax identification number.

– Business address as registered for VAT purposes.

– Head office or branch submitting the purchase tax report.

– Details of tax invoices for purchases in that tax period, including: date, invoice number, name of seller/service provider, seller/service provider's tax identification number, head office/branch of the seller or service provider, value of goods/services, and VAT amount.

2.2 Sales Tax Report must include the following details:

– Title indicating it is a sales tax report.

– Tax period and year.

– Business name and tax identification number.

– Business address as registered for VAT purposes.

– Head office or branch submitting the sales tax report.

– Details of tax invoices for sales in that tax period, including: date, invoice number, name of buyer/service recipient, buyer/service recipient's tax identification number, head office/branch of the seller or service provider, value of goods/services, and VAT amount.

Once the VAT filing deadline has passed, the business must compile the purchase and sales tax reports along with the tax invoices for both purchases and sales, separating them into two sections. The business can then calculate the VAT and file Form P.P. 30 either online or submit the paper form at the local Revenue Department office. If unsure about which purchase and sales tax report to use, additional reading from other articles may help, or the business can send it to an accounting office for proper handling to ensure the reports are accurate.