Vat Exports

[dave111223]

We have to register VAT soon because the sales of the company now exceed the 1.8M threshold.

The company primarily exports small packages via the post office (value of each package ranging from 1000-10000THB)

The problem is:

- In order to get 0% VAT on exports you must have an "airway bill" for every package, with customs details

- At the regular post office they do not offer this airway bill.

- According to post office the only place in Bangkok that one can get this is at the post office in Hua Lumpong

- It would take us at least a 3 hour round trip *every day* in order to do this (which is not feasible) and we have many boxes to ship, which often requires bringing them in a car (ie cannot send a motorbike messenger etc..)

- Plus they charge 140THB per airway bill (so pretty much most of the VAT saving are used up paying for this fee)

Pretty much all the accounting companies, shipping companies, customs helplines, and post office helplines have not been able to give us any way out, or much help.

Basically if we pay that VAT out of our own pocket (because of not being able to get the correct paperwork) it equates to paying 30% of total profit as VAT alone...for a tax that we should not be paying at all.

Does anyone know of an accounting company who are familiar with these kind of small package VAT export situations?

Also another side note...is the actual shipping cost itself deductible from the PorPor 30?

For example, customers pays us:

5000 THB for products

2000 THB for shipping

We then spend 2000THB on shipping. Would we put 7000THB as the total sales on the PorPor 30 and then deduct 2000THB as exempt...?

[LivinLOS]

I was told by a couple of people who were due VAT back via export, that even if they fully proved it to the full satisfaction of the revenue.. Actually getting the money back was an exercise in futility, and they had to just write it off as a cost of doing business.

[dave111223]

I was told by a couple of people who were due VAT back via export, that even if they fully proved it to the full satisfaction of the revenue.. Actually getting the money back was an exercise in futility, and they had to just write it off as a cost of doing business.

Even if we didn't get a refund for VAT paid to suppliers the cost would be minimal.

But for example:

We buy a product for 100THB, and pay 7THB tax

We then customize it and export it for 1000THB, the tax on that is now 70THB.

We should be able to cut the 70THB and get a 7THB refund...So even if we don't get the refund of 7THB nevermind...but if we have to pay the full 70THB that is a problem.

Which would mean at the end of the month we'd still have to send in 63THB of tax, which we are not able to charge to customers because they are in another country (so they are not liable for VAT).

Edited October 20, 2009 by dave111223

[raro]

the way I see it, and this is from a forwarder's not from an accountant's perspective, you cannot get the VAT back if you have no prove of export. This would be the export entry form, not the AWB. The problem you have is that if you send out by mail , the goods are not officially exported as no proper customs process was made.

It is possible to reclaim the VAT but the process is indeed rather painful. The Revenue Department will check your books and this might take some times. It is understood that your books should be squeaky clean before you hand them over

[Sam125]

the way I see it, and this is from a forwarder's not from an accountant's perspective, you cannot get the VAT back if you have no prove of export. This would be the export entry form, not the AWB. The problem you have is that if you send out by mail , the goods are not officially exported as no proper customs process was made.

It is possible to reclaim the VAT but the process is indeed rather painful. The Revenue Department will check your books and this might take some times. It is understood that your books should be squeaky clean before you hand them over

Sounds correct.

A related question is a refund of customs duty paid for raw materials that are then reexported in a finished product.

In this case again through the Thai post office which is less expensive overall than UPS etc..

In the US I have done this but it required two steps - paperwork from US customs waiving the right to inspect the exported goods and then export documentation showing the goods had left the country. Sure enough the duty was refunded less a small fee.

If the paperwork is similar in Thailand I would imagine that it would not be practical to do this "duty drawback".

So it seems that VAT and duty often becomes a cost of doing business. Working from a special zone is an option but not an attractive one.

[Topprofile]

3 years and counting and we still haven't received our VAT back from the government even though we have all papers in order.

There is always a new excuse when you call them.

Better just att 7% on the price to customer and forget about trying to get the money back.

Sad but true... but the government will keep as much money as it can...

[Maestro]

dave111223, the fact that you were referred to the post office in Hua Lumpong could mean that this post office has a customs office which can issue the “export entry form” that for sea and air shipments are obtained from customs by the forwarder on behalf of the exporter. And yes, there is an official fee for this customs export certificate, which can make it impractical to go this route for shipments of a low value.

--

Maestro

[raro]

Sounds correct.

thanks for approval

A related question is a refund of customs duty paid for raw materials that are then reexported in a finished product.

If you thought he VAT is difficult, then wait for the duties...there is a process "biz19" but it requires to register for it and significant paperwork (you will find yourself employing someone to handle only this soon...) so it is really only worth it if the savings outweigh the effort.

One notch above is BoI approval with the additional benefits of tax saving, Work Permit facilitation etc.

[Sam125]

Raro,

I do not read Thai so I never know for sure what is correct - but your posts that I have read all sound correct. - smiling.

The VAT refund sounds simple if you are good at paperwork and your books are in order - it is very similar all over the world.

As does the customs refund.

I have no interest in doing tax work anymore so the challenge is finding really good experts at reasonable prices....

Sounds correct.

thanks for approval

A related question is a refund of customs duty paid for raw materials that are then reexported in a finished product.

If you thought he VAT is difficult, then wait for the duties...there is a process "biz19" but it requires to register for it and significant paperwork (you will find yourself employing someone to handle only this soon...) so it is really only worth it if the savings outweigh the effort.

One notch above is BoI approval with the additional benefits of tax saving, Work Permit facilitation etc.

[CarlBkk]

It's an interesting thread for me, but all I can deduce to get round the problem is to ensure sales from exports are kept below 1.8m in the books! If using the post office to export (as I do) it shouldn't be too much of a problem.

[torrenova]

Well, one way would be to look at the costs of starting and running a new company which would double the amount of turnover you could undertake before having to deal with VAT.

Not a permanent solution but a temporary one, perhaps ?

Or some turnover never hits the books ?

You obviously need a long term solution but what you need in the long term might not be available to you in the short term.

[worldfun]

Indeed an interesting topic although I'm not in 'goods', but 'services'.

Overall as was pointed out the refund of initial supply VAT is a minor, but still worthwhile issue even should the local revenue office prove 'difficult'!

However as I see it why even let the VAT office owe you in the first place given they're unlikely to ever pay up?

Just assert your own situation as an 0% VAT exporter & thus do NOT pay in any 7% sales VAT right?

More significantly for your overseas clients in high VAT import rate countries e.g. EU of up to 25% or more! Would incoming shipments not be duty/VAT bound?

Thus what difference does a mere 7% at Thai end (should one need to push that on the customers) really mean? Of course all counts so best not to pay any of them if there's rules stating one shouldn't, but just for arguments sake...

On the more technical 'official export document' if at least taking 'services with no physical (only electronic) export should an tax invoice to overseas customer not suffer as sole 'evidence' of 0% VAT rate?

Obviously I'm skeptical how easy it's going to be as my previous RD office insisted 7% VAT is to be paid on export of services, but maybe Huay Kwang RD office will be more cooperative - any experiences?

Lastly on the initial (1.8M?) sales/revenue/turnover be exempt - does that also apply to Thai companies with foreign share holders, directors & work permits as at least in order to get WP one need to be registered for VAT from day 1?

[raro]

issue a debit note and not an invoice to your oversea customer. No idea why, but for debit notes you don't have to add the 7% VAT.

[worldfun]

'debit note'?

never heard of it, but sounds too easy if thats all it takes to avoid VAT...

what's the catch with debit notes then?

how does a debit note differ from a tax invoice - only in word or that it doesn't have the 'VAT' line???

thanks

[raro]

'debit note'?

never heard of it, but sounds too easy if thats all it takes to avoid VAT...

what's the catch with debit notes then?

how does a debit note differ from a tax invoice - only in word or that it doesn't have the 'VAT' line???

thanks

that's pretty much what it is. Couldn't believe it at first either, but we do that for a while and never had a problem.

[CWMcMurray]

Didn't realize that....our company only issues debit notes to all of our overseas partners.... now I understand why.

[worldfun]

raro,

excellent news - I'll take the word 'debit note' to the rd office/accountant/legal boys to see if that should make everything crystal

owe you one (if you ever come up to bkk buzz me!)

wf

[CarlBkk]

Anyone been using debit notes and had a tax investigation/audit, and still came out with no sniff of avoidance? If so...it's a goer.

[Robbogeordie]

issue a debit note and not an invoice to your oversea customer. No idea why, but for debit notes you don't have to add the 7% VAT.

Changing invoice to debit note to avoid VAT for overseas customers sounds so simple it could be correct thanks for sharing !

Anyone else done this as my accountant doesn't know about it - Maybe I need to change to one that does.

There must be lots of us sending small parcels through the post office that are impossible or too costly to get all the export paperwork for.

We're also hitting the VAT threshold,but registering would make us uncompetitive unless we could do this.

On a side note one of our suppliers who sells 100 millions of Baht never issues any VAT invoices..what gives?There's lots that we don't know about running a business in Thailand,that's for sure.

[raro]

issue a debit note and not an invoice to your oversea customer. No idea why, but for debit notes you don't have to add the 7% VAT.

Changing invoice to debit note to avoid VAT for overseas customers sounds so simple it could be correct thanks for sharing !

Anyone else done this as my accountant doesn't know about it - Maybe I need to change to one that does.

There must be lots of us sending small parcels through the post office that are impossible or too costly to get all the export paperwork for.

We're also hitting the VAT threshold,but registering would make us uncompetitive unless we could do this.

On a side note one of our suppliers who sells 100 millions of Baht never issues any VAT invoices..what gives?There's lots that we don't know about running a business in Thailand,that's for sure.

The Debit Notes are for services only. If you export a physical good, you do not charge VAT anyways.

[Robbogeordie]

The Debit Notes are for services only. If you export a physical good, you do not charge VAT anyways.

Agreed in theory,if the paperwork required to prove that the goods are exported is completed then they should not be subject to VAT.

However,for many export only companies dealing with many smaller parcels it is simply too expensive and impractical to undertake for each parcel and as they are sent through the post office there is not official proof that the goods have been exported as no proper customs process was undertaken.So,even if you didn't charge VAT then presumably they could be subject to VAT as correct procedure was not followed to prove export of the goods.

- In order to get 0% VAT on exports you must have an "airway bill" for every package, with customs details

- At the regular post office they do not offer this airway bill.

- According to post office the only place in Bangkok that one can get this is at the post office in Hua Lumpong

- It would take us at least a 3 hour round trip *every day* in order to do this (which is not feasible) and we have many boxes to ship, which often requires bringing them in a car (ie cannot send a motorbike messenger etc..)

- Plus they charge 140THB per airway bill (so pretty much most of the VAT saving are used up paying for this fee)

Pretty much all the accounting companies, shipping companies, customs helplines, and post office helplines have not been able to give us any way out, or much help.

Basically if we pay that VAT out of our own pocket (because of not being able to get the correct paperwork) it equates to paying 30% of total profit as VAT alone...for a tax that we should not be paying at all.

[raro]

That is correct. If your turnover is below the VAT registration requirement and/or you are Thai and thus do not require a work permit, you do not need to register for VAT. In that case you cannot claim back the VAT you spend when buying your merchandise.

[Robbogeordie]

That is correct. If your turnover is below the VAT registration requirement and/or you are Thai and thus do not require a work permit, you do not need to register for VAT. In that case you cannot claim back the VAT you spend when buying your merchandise.

But if your turnover is higher and you are VAT Registered and exporting many small parcels there does not appear to be a practical and economic way to reclaim VAT that has to be added to the selling price.

There must be a way to do this for this type of business,but I can't figure it out!

Any ebay powersellers out there that know a way?

[raro]

That is correct. If your turnover is below the VAT registration requirement and/or you are Thai and thus do not require a work permit, you do not need to register for VAT. In that case you cannot claim back the VAT you spend when buying your merchandise.

But if your turnover is higher and you are VAT Registered and exporting many small parcels there does not appear to be a practical and economic way to reclaim VAT that has to be added to the selling price.

There must be a way to do this for this type of business,but I can't figure it out!

Any ebay powersellers out there that know a way?

send by parcel service and make a proper export declaration. Not sure if this is possible with the post office.

[Robbogeordie]

send by parcel service and make a proper export declaration. Not sure if this is possible with the post office.

Seems correct what you say - it doesn't seem possible to make a proper export declaration through normal Post and because of this all sales sent this way would be subject to 7% VAT which would have to be paid by the company as their customers are all abroad and therefore do not pay Thailand VAT.

So,as an example an export company with t/o 3m which uses regular post would mean 210,000 bt in VAT to pay because the goods do not have the proper export declaration even though they have been sent abroad and customers address and invoice and Post Office receipts show it.

If these parcels were sent by courier they would be 0% VAT to pay,but probably zero sales due to increased mail costs.

I'm going to have to rethink our business model!

[CarlBkk]

We're back to square 1 here. It's been said previously that even doing things by the book and declaring VATable goods doesn't necessarily mean you'll get the VAT back (especially through the Post Office method), so forget about reclaiming VAT....use the debit notes suggestion and keep exporting by EMS.

[Robbogeordie]

We're back to square 1 here. It's been said previously that even doing things by the book and declaring VATable goods doesn't necessarily mean you'll get the VAT back (especially through the Post Office method), so forget about reclaiming VAT....use the debit notes suggestion and keep exporting by EMS.

Debit notes are for services only.Large numbers of low value parcels cannot be sent EMS profitably.Many businesses are like this... do they all fly under the radar?

The Debit Notes are for services only. If you export a physical good, you do not charge VAT anyways.

[raro]

We're back to square 1 here. It's been said previously that even doing things by the book and declaring VATable goods doesn't necessarily mean you'll get the VAT back (especially through the Post Office method), so forget about reclaiming VAT....use the debit notes suggestion and keep exporting by EMS.

we are not...sending items by the post office is not by the book as no proper export declaration has been done. Sending items by a parcel service or freight forwarder IS by the books and you get your VAT back.

[ebug2004]

I have a related question, but for different goods: I'm checking the possibility to import some steel parts into Thailand. These are special gas tanks, that i couldn't find in Thailand, and some control equipment/PLCs. In Thailand a machine should be made of this, some PLC programming and automation is necessary, and then the equipment should be exported to another Asian country.

What special tax and duty obstacles I have to consider? What do I have to assume as import duty, VAT payment etc. ? Seems I need to pay VAT when importing, and can get it back when exporting. Are there special Anti Dumping Duties on some goods in Thailand?

Thanks! Matthias

[raro]

I have a related question, but for different goods: I'm checking the possibility to import some steel parts into Thailand. These are special gas tanks, that i couldn't find in Thailand, and some control equipment/PLCs. In Thailand a machine should be made of this, some PLC programming and automation is necessary, and then the equipment should be exported to another Asian country.

What special tax and duty obstacles I have to consider? What do I have to assume as import duty, VAT payment etc. ? Seems I need to pay VAT when importing, and can get it back when exporting. Are there special Anti Dumping Duties on some goods in Thailand?

Thanks! Matthias

This is a rather complex question with many more questins to come. I suggest you contact a freight forwarder (such as me... ) to discuss this in detail.