Vat Question

[Sunny Valentine]

Here are the facts: I have just registered a Company (49% me, the foreigner) and have secured a lease for a shophouse that I will turn into a bar in Pattaya. (Yes, I know, but anyway, that's my plan, and I am fairly optimistic ...).

The work (floor, walls, Electricity, aircon, lights, toilets, bar ...) will start on the day the lease begins, July 1st.

I will have to buy some materials for the work myself, beginning in June.

The work is planned to last for 2 month, with the option of opening the venue in September.

Now, I will apply for a work permit later during the construction, so that I should have it by the time we open.

But what about VAT? I understand I have to register for VAT in order to get a Work Permit. I also understand that the VAT rules here demand a Minimum gross income of 100000 Bt a month, otherwise you have to top up the VAT Bill, or so I am told.

In my sitaution I would then register for VAT in time to get it for the Work Permit, or?

What about the VAT I pay every month during construction on VAT-Included bills? Can I reclaim it, even when I (my company) was not registered to VAT by the time these bills were issued and paid? or do I need to register VAT before I start spending money? And if the second option is right, how about the 100000 Bt rule?

I wont have any income before September, so do I still have to pay the 7000 Bt (7% of 100000) even though I accumulate a VAT bonus?

The balance could look like this (and yes, I know, some of my investment will be without VAT, from Companies or individual contractors who do not register for VAT):

June:

VAT included in income: 0 Bt. (No income!)

VAT included in Payments for Contruction, furniture ..... 15000 Bt.

July:

VAT included in income: 0 Bt. (No income!)

VAT included in Payments: 60000 Bt.

August:

VAT included in income: 0 Bt. (No income!)

VAT included in Payments ... 40000 Bt.

September (expected opening ...)

VAT included in income: 10000 Bt.

VAT included in Payments for Construction .... 10000 Bt.

VAT included in Payments for drink Stock etc. 10000 Bt.

October (First full month, construction finished):

VAT included in income: 15000 Bt.

VAT included in Payments for drink stock etc. 5000 Bt.

In theory, and as I understand the VAT system from home, I would have now accumulated a VAT Bonus, to be deducted from monthly payments in the future. Is this the same in Thailand? And what about the 100000 Bt rule?

I tried in vain getting this information from the Accountants I talked to before, I guess I have not found the right accountant, also because of language troubles ....

Someone can help?

Sunny

[~G~]

But what about VAT? I understand I have to register for VAT in order to get a Work Permit. I also understand that the VAT rules here demand a Minimum gross income of 100000 Bt a month, otherwise you have to top up the VAT Bill, or so I am told.

Sunny, my understanding (partly based on previous advice given in this forum) is that this rule is not applied strictly upon new companies, in their first years of operation. It is unreasonable to assume a newly opened company can immidiately gross 100,000B a month.

In my sitaution I would then register for VAT in time to get it for the Work Permit, or?

In this case you'll be taking the risk of working with no WP during this time, just for the sake of postponing the VAT registstration for 3 months! Apart from that, don't you want to open a bank account for the company? You will need a WP in most banks.

In theory, and as I understand the VAT system from home, I would have now accumulated a VAT Bonus, to be deducted from monthly payments in the future. Is this the same in Thailand? And what about the 100000 Bt rule?

I tried in vain getting this information from the Accountants I talked to before, I guess I have not found the right accountant, also because of language troubles ....

I find it difficult to get accurate info as well. But I think you will have bigger troubles, apart from the first months: in your business most suppliers will not be VAT registered. Nevertheless you will be (for the WP). You will have to pass 7% of your income as vat. In order to keep the same profit margin as other bars, which are not VAT registered, you will need to be 7% more expensive. Can you do that?

Edited May 28, 2005 by ~G~

[Sunny Valentine]

Thanks for the Info, G-Man!

I have already opened a Bank Account for my Company without the need for a WP, so this is ok.

Also, I will not work (apart from signing contracts and paying money) during construction, so so far everyone tells me I should be ok. Also have registered my business address at the place of the bar, and keep being told that the authorities want to see a real business adresss, and not a construction site, when applying for WP. But I will recheck this (where, oh, where ....!)

I also have found a supplier who will issue VATable bills for beer and the like, so no problem here.

Sunny

[~G~]

Thanks for the Info, G-Man!

I have already opened a Bank Account for my Company without the need for a WP, so this is ok.

Also, I will not work (apart from signing contracts and paying money) during construction, so so far everyone tells me I should be ok. Also have registered my business address at the place of the bar, and keep being told that the authorities want to see a real business adresss, and not a construction site, when applying for WP. But I will recheck this (where, oh, where ....!)

I also have found a supplier who will issue VATable bills for beer and the like, so no problem here.

Sunny

<{POST_SNAPBACK}>

So it seems like you're fine. Good luck!

[Digger]

In the contract with the builder/renovator guy - ensure that it states that you will deduct withholding tax from the payments you make to him - then you can include these expenses in your company accounts. Not sure of the exact timeline, but you can accrue VAT credits on things you buy versus things you sell. So in all liklihood you will be in credit for first couple of months. From memory you have 6 months in which to submit the tax receipts. They must be made out to your company and show your correct address in full to be valid tax invoices. For example, if you buy something from say Home Pro for your business, you have to take the till receipt to the customer service desk and ask them for a tax invoice. Its usefull to have a few cards made up with your correct address in English along with the company name. They will then enter this info and create a proper tax invoice which you can include as legitimate expense and reclaim the VAT element.

[Sunny Valentine]

Thanks, digger.

This is how I would understand it. I still look for an accountant who is able to explain me the fine details. They are all friendly and keep telling me "No problem", but unable to answer any questions I have.

Digger, did I understand what you were saying that I can reclaim VAT on correct issued bills up to 6 Month back after I made the VAT registration? This was one thing I believe one of the Accountants said, so I have now two people saying the same, a very rare ocurrance in Thailand!

Still confused

Sunny

Edited June 6, 2005 by Sunny Valentine