Service Charge And Tax In Restaurants

[MonkeyNuts]

Why do some restaurants charge 10% service charge and 7% tax, yet others don't? Is it a choice of the owners? Can any restaurant owners shed some light on the subject for me? what are your thoughts about it?

Edited December 18, 2007 by MonkeyNuts

[Zorro888]

If the Resturants follow Thai Law they must give you a bill with 7% Govt VAT, service charge is optional.

However most restuarants and bars run two sets of books, the real one and the one for the tax man.

If oyu go to a resturant or a bar in an established hotel such as Zico's Brazilian resturant or go to Tesco you wil lsee the 7% VAT on the bill. If you want to claim the tax back you must ask for a VAT invoice, and unless it is a big Hotel or Tescos etc, you can forget it as the place will be running two sets of books.

Hope this helps...

[kdvsn]

If the Resturants follow Thai Law they must give you a bill with 7% Govt VAT, service charge is optional.

However most restuarants and bars run two sets of books, the real one and the one for the tax man.

If oyu go to a resturant or a bar in an established hotel such as Zico's Brazilian resturant or go to Tesco you wil lsee the 7% VAT on the bill. If you want to claim the tax back you must ask for a VAT invoice, and unless it is a big Hotel or Tescos etc, you can forget it as the place will be running two sets of books.

Hope this helps...

What I've wondered in places where they charge a 10% service charge is whether the staff gets the 10% or whether the owner of the restautrant pockets it. In such places one normally wouldn't leave a tip since the "tip" is automatically added to the bill for the "convenience of the customer", but does this just mean that the staff is getting screwed?

[bbcsamui]

Why do some restaurants charge 10% service charge and 7% tax, yet others don't? Is it a choice of the owners? Can any restaurant owners shed some light on the subject for me? what are your thoughts about it?

If the company is VAT registered then they must use proper bills and receipts which would include the VAT. (If they are not VAT registered then they are just using the charge as a way to make 7% more profit)

This can be done in 2 main ways - either the price is inclusive of VAT - i.e. you get billed THB100 for an item listed as THB100 (actual cot is THB93.45 + 7% VAT), or it is exclusve ie you get billed THB107 for an item listed as THB100. You can ask for a copy of the bill if you are also VAT registered so you can claim the expense and the VAT. This bill should have the sellers proper details on it including registered name, address and Tax ID .. and it should have your VAT registered name on it as well.

If you have such an invoice / bill, then you would also be able to claim it as an expense off your taxable profits, so in effect you are getting 7% back in VAT setoffs as well as 100% off as a true business expense. (not much use for an individual, but certainly worth it for a business - for example, because I have a VAT registered company, I can get a VAT receipt from Tesco Lotus and claim all of the VAT back and also claim the total bill against expenses - except for the wifes makeup etc and kids toys).

To be VAT registered you need to earn a certain amount of income (can't remember exactly how much) and most small bars and restaurants are not large enough ... or do not declare enough to have to bother registering.

Service charge is totally optional and as far as I am aware, there is no legal obligation for anyone to charge it and no legal obligation for you to pay it (although there are some who say that if it was written clearly on the menu that a service charge is going to be applied, when you ordered the goods, you therefore agreed to the terms of paying service charge ... does have rational merit but never heard of it being challenged in a Thai court).

I do not charge a service charge but rely on the customer to decide if they want to leave tips. It actually is hard for us small guys because good staff are being tempted away by large hotels etc who can provide big service charge payments. I have heard of cases where a cleaner on THB4,000 a month can get as much as THB8,000 to 12,000 a month in service charge. We cannot compete directly with that so have to offer other incentives - some bar owners give personal attention to staff which can help keep them, I just pay overtime because I would lose a bodily part if I ever thought of getting too close to the staff.

[highdiver]

BBC

you are absolutely right.

the VAT is applied to any business that has a turn over of more then 1.8 million per year. if you make moe then that as an individual or a companyyou must apply for a VAT registration.

All busineses under that sum are exempted from VAT.

since most local resteraunts dont dream of making so much or dont report making it they never charge the VAT.

[ClaudeFeller]

I know one resort where the service charges is given to the stuff. There the basic salary is rather poor about 5.000 THB, in high season 10% SC can rise up to another 5.000 THB = 10.000 THB together. Meanwhile tip box is used for staff party etc.

[MonkeyNuts]

Thanks for the info guys

[Samuian]

SC is a good staff motivation tool!

And seems to be the "thing" with larger operations!

If a "Family Restaurant" charges Service Charge it's quite certain a rip off!

But the downside for customers is that they are left without the choice good service = tip, bad service = no tip!

[MonkeyNuts]

But the downside for customers is that they are left without the choice good service = tip, bad service = no tip!

I agree, if the bill comes to 2000 baht and the service was poor, I wouldn't leave a 200 baht tip. But if the service charge is already added to the bill I wouldn't dispute the charge. I would just make sure I didn't go back to the restaurant again.