Value-added tax (VAT)
The standard rate of VAT is 10%, but the rate is currently reduced to 7% until 30 September 2021 (unless further extended by the government). VAT is levied on the sale of goods and the provision of services. Exports are zero-rated, while a number of goods and services are exempt (e.g. basic groceries, education, healthcare, interest, leasing of immovable property, sale of real estate).
Digital service tax
The Act Amending the Revenue Code No. 53 (the digital service tax law) was published in the Royal Gazette on 10 February 2021 and came into force on 11 February 2021. However, the VAT liability under this law will apply to overseas digital service providers or operators of electronic platforms on revenue received from 1 September 2021 onwards.
Under this law, the overseas digital service providers or operators of electronic platforms will be required to file VAT returns and pay output tax to the Thai Revenue Department without any input tax deduction.
The following are the key conditions for VAT collection:
- Digital services are provided from overseas
- Services are provided by electronic means and are used in Thailand
- The recipient of the service is not a VAT registrant.
Furthermore, VAT registration may be effected by electronic means. Details of the registration procedures will be released at a later date. Overseas digital service providers that are VAT registrants are prohibited from issuing tax invoices.
The following definitions are included:
‘Electronic services’ means a service, including intangible assets, delivered via the internet network or any other electronic network in which the nature of the service is substantially automated, such that the service cannot be performed without information technology.
‘Electronic platform’ means a market, channel or other process that many service providers use to provide electronic services to the recipients.
Subordinate regulations providing more guidelines will also be announced.
Basis of taxation
Customs duties are imposed under the Customs Act and the Customs Tariff Decree. Customs duties are collected on both imports and a limited number of exports. Classification of imports is based on the Harmonised Commodity Description and Coding System (the so-called 'Harmonised System'). Thailand has adopted the Association of Southeast Asian Nations (ASEAN) Harmonised Tariff Nomenclature (AHTN) 2017, which is based on the Harmonised System 2017, as its import tariff nomenclature.
Duties are levied on a specific or an ad valorem basis, whichever is higher, and the applied ad valorem duties range between 0% and 80%. Exemptions from import duties are available on particular items of goods as prescribed in the Customs Tariff Decree. Preferential duty rates are available on imported goods from countries that have a preferential free trade agreement (FTA) with Thailand.
Currently, Thailand has FTAs with the following countries:
- ASEAN member states (Singapore, Vietnam, Malaysia, Indonesia, Philippines, Cambodia, Laos, Myanmar, and Brunei)
- New Zealand
Also, as a member of ASEAN, Thailand has preferential trade agreements with the following countries:
- Australia and New Zealand
- Hong Kong
Generally, the value of imports is based on their cost, insurance, and freight (CIF), whereas exported goods are based on their free on board (FOB) amount.
Thailand has implemented the World Trade Organisation (WTO) Valuation Agreement. The primary basis for the customs value is the transaction value, which is the price actually paid or payable for the goods when sold for export, subject to adjustments for certain elements that are considered to form a part of the value for customs purposes or that can be deducted from the value of the imported goods (e.g. the cost of transportation after the importation, duties, and taxes associated with the import).
Elements that may need to be added include royalties and licence fees that are related to the goods and paid as a condition of sale, proceeds from subsequent resale in the importing country, and the value of goods or services supplied by the buyer, such as design or development fees related to the imported goods. If the declared price is evidently low or is unlikely to be the true value of such goods, Thai Customs will likely dispute the declared price.
Customs controls and procedures
Customs procedures for goods arriving in Thailand in any manner are similar to those existing in most other countries. An importer is required to file an entry form together with other requisite documents, including a bill of lading, invoice, and packing list via the e-Customs system.
Customs duties are due upon the arrival of the vessel carrying the imported goods, and goods may be stored in a Customs bonded warehouse for up to 45 days with no submission of an import entry and 60 days in the case of submission of an import entry. Landing and storage charges must be paid before the goods are released.
Customs incentives schemes
Various customs incentives schemes, each with its own specific conditions and duty privileges, are available, including the following:
- Duty and tax compensation (tax coupons).
- Duty drawback for imported raw materials used in export production.
- Duty drawback for re-export in the same state.
- Free zones (Customs or Industrial Estate Authority of Thailand Free Zones).
- Manufacturing bonded warehouses.
- General bonded warehouses.
- Board of Investment (BOI) promotion.
- Preferential import duties under FTAs.
Offences and penalties
Although, technically, an offence against the customs law is a criminal offence, in practice, legal procedures are usually concerned with the recovery of tax arrears and fines. Offences include non-compliance with customs procedures, false declarations, and the most serious offence of smuggling and evasion of customs duties. Statutory penalties are as prescribed by the relevant provisions of the Customs Act. Where Customs and the offender agree to settle the case at the Customs level (i.e. waiver of prosecution), the penalties would be in accordance with the settlement criteria as prescribed by the Director-General of the Customs Department. Currently, we understand that a duty evasion offence would typically be settled with a fine of from 50% to 200% based on the duty shortfall per the import entry. The VAT penalty would also be applied proportionally based on the duty fine. Duty and VAT surcharges (capped at the amount of the shortfall) are applied in this respect as well.
For import licensing errors, the settlement criteria would be the surrendering of the goods or a fine in lieu thereof based on the value of the goods plus the duty and tax payable. For offences related to smuggling, the penalties are based on a multiple of the value of the goods.
Basis of taxation
Excise tax (ET) is a form of consumption tax that is imposed on the sale of a selected range of services and goods (whether manufactured locally or imported) that are considered ‘luxuries’. The tax liability arises on locally manufactured goods when leaving the factory and at the time of importation for imported goods.
The excise tax calculation is based on both ad valorem rates (a percentage of the suggested retail price [SRP]) and/or specific rates (based on the quantity or weight of the goods). The excise tax formula varies depending on type of excise taxable products, for example:
- (SRP x ET rate) is applicable for motor vehicles, motor cycles, and cosmetic products.
- (Specific rate x quantity) is applicable for petroleum oil products.
- (SRP x ET rate) + (specific rate x quantity) is applicable for non-alcoholic beverages and tobacco products.
- (SRP x ET rate) + (specific rate x quantity x degree of pure alcohol) is applicable for alcoholic beverages.
Taxable goods and services
|Goods/services||Ad valorem rate (%)||Specific rate|
|Petroleum and petroleum products||0||THB 0 to THB 6.5 per litre or kilogram|
|Certain non-alcoholic beverages||0 to 14||THB 0 to THB 44 per litre|
|Certain electrical appliances||0||-|
|Batteries||0 to 8||-|
|Motor vehicles||0 to 40||-|
|Motorcycles||0 to 20||-|
|Perfume products and cosmetics||0 to 8||-|
|Marble and granite||0||-|
|Ozone depleting substances/CFCs||0 to 30||-|
|Alcoholic beverages||0 to 22||THB 0 to THB 1,500 per litre of pure alcohol|
|Cigarettes containing tobacco||0 to 40||THB 0.005 to THB 1.2 per piece or gram|
|Playing cards||0||THB 2 to THB 30 per 100 cards|
|Entertainment services||0 to 10||-|
|Race courses and lotto||0 to 20||-|
|Golf courses||0 to 10||-|
In addition to the excise tax, an interior tax is also levied by the Excise Department at the rate of 10% of the excise tax payable. Other taxes, such as the health tax, Thai Public Broadcasting Service tax (TPBS tax or TV tax), and the elderly fund tax, may apply to certain specified products in the categories of cigarettes and alcoholic beverages.
The manufacturer of the products must file a return and remit the tax due prior to taking the goods from the factory or bonded warehouse. If a VAT liability arises before the goods are taken out of these locations, the manufacturer must file a return and remit the excise tax to the Excise Department within 15 days from the end of the month.
Stamp duty is levied on 28 different types of documents and instruments, including contracts for hire of work, loans, share transfers, leases of land or buildings, and insurance policies. The rate of stamp duty varies depending on the type of document, but ranges from THB 1 per THB 1,000 of value on most contracts and agreements to a fixed amount per instrument on most commercial and other documents.
Stamp duty is generally paid by way of affixing stamps on the instrument and crossing them out. However, certain instruments are required to have the stamp duty paid in cash to the Revenue Department instead, such as agreements for the lease of land and buildings, other construction or floating rafts with a rental of THB 1 million or more, and hire of work agreements with a remuneration of THB 1 million or more.
E-instruments in the nature of hire of work, loan of money or agreement for bank overdraft, power of attorney, proxy for voting at a meeting of a company and guarantee, are required to be filed and have the stamp duty paid in cash via the internet. In this case, the filing of the return and payment can be made before the execution of the instrument or within 15 days from the date following that on which the instrument was executed.
An alternative means of filing the stamp duty returns of these e-instruments executed between 1 July 2019 and 31 December 2021 is allowed, whereby payment can be made in cash at the Revenue Area Office. Furthermore, the instruments referred to above, which are executed in hard copy from 29 September 2020 to 31 December 2021, are allowed to have the stamp duty paid via the internet.
Unstamped documents are not admissible as evidence in a civil lawsuit, and the surcharge can be as high as 600% of the duty for failure to pay the stamp duty on a timely basis.
Specific business tax
Specific business tax is collected at fixed rates on the gross revenue of certain businesses not subject to VAT, such as commercial banking, similar financial businesses, and the sale of immovable property, which are taxed at 3%, and life insurance, which is taxed at 2.5%.
The rate of specific business tax has been reduced to 0.01% for certain revenue derived by commercial banks and finance, securities, and credit foncier businesses, as well as businesses that have regular transactions similar to commercial banking.
An additional 10% of the tax is levied as municipality tax.
There are no capital taxes in Thailand.
An employer is responsible for withholding personal income tax (PIT) from all salaries and benefits paid to or on behalf of an employee and remitting such tax to the Revenue Department within seven days from the end of the month in which the salaries and benefits were paid.
Social security contributions
Contributions are levied at the rate of 5% of the monthly salary of each employee, subject to a maximum levy per employee of THB 750 per month. These contributions are payable by both the employer and employee.
Land and building tax
An individual or juristic person who owns or possesses land or buildings is subject to the land and building tax. Condominium units and rafts are included within the definition of buildings.
The tax base is the value of the land, building, or condominium unit as appraised for the collection of fees by the relevant government authority for registrations under the Land Code.
The tax is levied on an annual (calendar year) basis and the local municipal authority will send a tax assessment letter to the taxpayer before the end of February each year. The taxpayer must pay the tax so assessed before the end of April each year.
For 2020 and 2021, which are the first two years of the current land and building tax law, the statutory maximum tax rates range from 0.01% to 0.7%, depending on the purpose of use, and thereafter will be from 0.15% to 3%. However, the actual rates to be applied each year are published in a royal decree, although a municipal administrative body is empowered to prescribe tax rates higher than those published in the royal decree provided that the rates do not exceed the statutory maximum rates.
Signboard tax is levied annually on certain commercial signs or billboards at varying rates according to the size and language used. The rates per 500 square centimetres are THB 3 if all words are in Thai, THB 20 if both Thai and foreign words are used, and THB 40 if only foreign words are used or if the Thai words are below the foreign words.