Company Vat

[Jared]

I'm a little bit confused about the company VAT system in Thailand. I understand it is set at 7% of any income but to be eligible to pay the 7% the company has to be making over X amount per year, I believe 1.7millionBaht.

All of my clients are abroad and I only bring in enough money to the company to pay for salaries, bills and office rent in Thailand. I did this deliberately so that I could keep under the VAT bracket and not pay any VAT on the company income.

I found out today from my accountant that it doesn't matter how little money the company brings in or if its under the tax bracket because the company has been registered for VAT. I understand that to get my work permit the company HAD to be registered for VAT but I don't understand why I am having to pay it if I am under the minimum bracket.

Can anyone shed some light on this?

[raro]

one basic misunderstanding!

the 1.7 Mio Baht (I think it was 1.2 Mio...whatever...) limit decides whether you have to register for VAT or not.

If you want to have a work permit for this company, you have to register for VAT. Once you have registered, you have to pay VAT for ALL sales, whether they are below the 1.x Mio or not.

Apart from that...your m/m salary is 50k (assuming you are European, for North Americans it would be 60k). 4 x minimum salary of 6,500 for your Thai staff is another 26,000 per month. Plus other overheads such as office rent, electricity and so on, 1.7 Mio (= 140,000 per month) is not much money!

[Jared]

Ok so the limit decides on whether you register for VAT or not and as I needed a work permit I had to register for VAT. I understand that now.

Ok so I guess the next question is, Do Thai companies have to pay VAT on income from abroad?

[raro]

Ok so the limit decides on whether you register for VAT or not and as I needed a work permit I had to register for VAT. I understand that now.

Ok so I guess the next question is, Do Thai companies have to pay VAT on income from abroad?

you must issue a debit note to your customer, not an invoice. No idea why it makes a difference, but it does. No VAT on debit notes.

[opalhort]

My experience with VAT and WP (In BKK):

(married to Thai)

We were in the VAT system when they started it but as an export company we could claim all VAT payments back. After 3 or 4 years the Revenue department told us that since our revenue is below 2M Baht per year we should leave the VAT system (I think this was in the year 2003 or 2004).

I never had any problems with WP renewals since we left the VAT system but 2 or 3 years ago Labour wanted to know why we are not in the VAT system. Supplied them with the letter from Revenuw department suggesting we leave the system, our application to leave the VAT system and revenues approval letter and everything is OK now. No more questions about VAT when renewing WP.

opalhort

[raro]

that is very interesting and first time I hear about it! Leaving the VAT system is possible, but that you get a WP without being VAT registered is good news!

[opalhort]

<snip>...but that you get a WP without being VAT registered is good news!

Please note that I mentioned only WP renewal! I do not know if first time applicants will get a WP without VAT registration.

opalhort

[TravelerEastWest]

you must issue a debit note to your customer, not an invoice. No idea why it makes a difference, but it does. No VAT on debit notes.

What does the revenue department consider a "debit note" to be?

As an example is it an obligation to pay a sum of money in the future - say a year from now?

If so it may be that a debit note delays a VAT liability but doesn't the liability need to be paid later?