Can Someone Explain Thai Vat?

[VocalNeal]

Foolishly but not anymore I have been showing VAT on my price quotes but am fed up with "..but I don't need a tax receipt so can you take the VAT off?"

Which of course basically means "can I have another 7% discount?"

Some local hardware shops add 7% if we request a receipt.

Now I have heard something about business to business only charging 3 or 4% or something.

Is there a simple answer?

[soundman]

Foolishly but not anymore I have been showing VAT on my price quotes but am fed up with "..but I don't need a tax receipt so can you take the VAT off?"

Which of course basically means "can I have another 7% discount?"

Some local hardware shops add 7% if we request a receipt.

Now I have heard something about business to business only charging 3 or 4% or something.

Is there a simple answer?

Yes - simple answer.

If, for example, a business has made too much profit on their books, they will go to other business's and buy "tax invoices" to create ficticious costs so their end of year tax liability (or paper profits) is much smaller.

The general "fee" for the "ficticious" tax invoice is between 3 - 4% of the invoice value.

Quite often these types of invoices can be bought from large mom and pop wholesalers and retailers who have to create invoices to balance their stock because most of their customers pay cash and are not issued with a VAT invoice.

As a word of warning, I would not consider this very good SME business practice because you will get audited in the future & if the team of auditors find anything fishy about your paperwork they may well put your business through the wringer including showing up with a court order to confiscate your computers as well as your books.

Cheers,

Soundman.

[raro]

I for one ask ALWAYS for a VAT receipt - and almost always got one. Just threaten to buy somewhere else and it takes milliseconds to produce a VAT bill. My employees do know that if they buy something for the company and do not have a VAT bill, they have to pay it out of their own pocket, as otherwise I would have to do it.

The best one I ever had was for 20 Baht parking fee, signed by the Managing Director of Central World Plaza. Yes, I was a bit in a mood that day....

I for one sell also ALWAYS including VAT. Some customers do not want to pay "the extra", but sorry, no way around. I am not shy lecturing about good business practices and that VAT is an expense but not a cost.

[soundman]

The best one I ever had was for 20 Baht parking fee, signed by the Managing Director of Central World Plaza. Yes, I was a bit in a mood that day....

Could see it now. "I want a VAT receipt for that bowl of noodles because it is a company expense!"

Good one raro!

[Boksida]

Foolishly but not anymore I have been showing VAT on my price quotes but am fed up with "..but I don't need a tax receipt so can you take the VAT off?"

Which of course basically means "can I have another 7% discount?"

Some local hardware shops add 7% if we request a receipt.

Now I have heard something about business to business only charging 3 or 4% or something.

Is there a simple answer?

Yes - simple answer.

If, for example, a business has made too much profit on their books, they will go to other business's and buy "tax invoices" to create ficticious costs so their end of year tax liability (or paper profits) is much smaller.

The general "fee" for the "ficticious" tax invoice is between 3 - 4% of the invoice value.

Quite often these types of invoices can be bought from large mom and pop wholesalers and retailers who have to create invoices to balance their stock because most of their customers pay cash and are not issued with a VAT invoice.

As a word of warning, I would not consider this very good SME business practice because you will get audited in the future & if the team of auditors find anything fishy about your paperwork they may well put your business through the wringer including showing up with a court order to confiscate your computers as well as your books.

Cheers,

Soundman.

I don't think this is what the OP is referring to. It is a standard and legal practice, when purchasing goods or services from an individual, a small company which falls below the VAT income level, or a company that does not supply a VAT invoice, to deduct 3% with-holding tax from their payment. You then pay this to the Revenue Department, usually with a copy of the suppliers ID card. There is an official form for this and they must be provided with a copy. Essentially you are paying the tax on their behalf and they can use the receipt as an expense if they so wish.

Common examples are house and vehicle rentals.

[raro]

The best one I ever had was for 20 Baht parking fee, signed by the Managing Director of Central World Plaza. Yes, I was a bit in a mood that day....

Could see it now. "I want a VAT receipt for that bowl of noodles because it is a company expense!"

Good one raro!

The guy at the parking asked for 20 Baht and was not willing to give me any receipt and that somehow blew a valve....went straight up to the office that runs the show, asked for the MD for explanation and indeed, regardless how much you spent there, you pay. The MD himself happily filled in the VAT receipt and signed it. Made my day.

[Cyberstar]

I for one ask ALWAYS for a VAT receipt - and almost always got one. Just threaten to buy somewhere else and it takes milliseconds to produce a VAT bill. My employees do know that if they buy something for the company and do not have a VAT bill, they have to pay it out of their own pocket, as otherwise I would have to do it.

You must be living in some special reality, where nothing but VAT-registered companies/businesses exist and one can't eat, park or do business anywhere where it isn't a VAT-registered entity that grabs the money. In Thailand you aren't required to even be in the VAT system unless you make minimum 1.8 million a year (or rather - are in the unlucky position that you must admit to RD that you make more than that).

I'm VAT-registered, but only because that was a requirement to get a work-permit. However, at least 90% of the places where I eat, park or do business aren't in the VAT-system at all and thus can't produce such a sophisticated item as a RD-acceptable VAT-receipt regardless of how much I might scream, stamp my feet, and turn red-faced.

Edited March 14, 2008 by Cyberstar

[raro]

I for one ask ALWAYS for a VAT receipt - and almost always got one. Just threaten to buy somewhere else and it takes milliseconds to produce a VAT bill. My employees do know that if they buy something for the company and do not have a VAT bill, they have to pay it out of their own pocket, as otherwise I would have to do it.

You must be living in some special reality, where nothing but VAT-registered companies/businesses exist and one can't eat, park or do business anywhere where it isn't a VAT-registered entity that grabs the money. In Thailand you aren't required to even be in the VAT system unless you make minimum 1.8 million a year (or rather - are in the unlucky position that you must admit to RD that you make more than that).

I'm VAT-registered, but only because that was a requirement to get a work-permit. However, at least 90% of the places where I eat, park or do business aren't in the VAT-system at all and thus can't produce such a sophisticated item as a RD-acceptable VAT-receipt regardless of how much I might scream, stamp my feet, and turn red-faced.

It is correct that the VAT system only applies to companies with a yearly turnover of more that 1.8 Million Baht. Rest assured that the Central World Plaza is one of those companies.

If the vendor is not in the VAT system, he still has to produce a proper bill with his company address and yours. Not just a cash receipt as this is not accepted by the revenue department. Never had a problem obtaining at least this one.

[soundman]

I don't think this is what the OP is referring to. It is a standard and legal practice, when purchasing goods or services from an individual, a small company which falls below the VAT income level, or a company that does not supply a VAT invoice, to deduct 3% with-holding tax from their payment. You then pay this to the Revenue Department, usually with a copy of the suppliers ID card. There is an official form for this and they must be provided with a copy. Essentially you are paying the tax on their behalf and they can use the receipt as an expense if they so wish.

Common examples are house and vehicle rentals.

AFAIK 3% withholding tax is only applicable to services. Purchases of goods and materials from non-VAT registered entitites can only be claimed at the end of the financial year & there is no 3% with-holding tax to be paid.

I am see-ing my accountant early next week so I will bring these questions up and re-post with (hopefully) clearer answers on these issues.

Cheers,

Soundman.

[raro]

I don't think this is what the OP is referring to. It is a standard and legal practice, when purchasing goods or services from an individual, a small company which falls below the VAT income level, or a company that does not supply a VAT invoice, to deduct 3% with-holding tax from their payment. You then pay this to the Revenue Department, usually with a copy of the suppliers ID card. There is an official form for this and they must be provided with a copy. Essentially you are paying the tax on their behalf and they can use the receipt as an expense if they so wish.

Common examples are house and vehicle rentals.

AFAIK 3% withholding tax is only applicable to services. Purchases of goods and materials from non-VAT registered entitites can only be claimed at the end of the financial year & there is no 3% with-holding tax to be paid.

I am see-ing my accountant early next week so I will bring these questions up and re-post with (hopefully) clearer answers on these issues.

Cheers,

Soundman.

3% for services is correct. If a private person does something for you that is also considered a service and the 3% apply. They do not apply for th purchase of any goods.