Vat On Exported Goods

[jimmiejackson]

Hi all,

I have a question regarding exported goods.

Basically, we issue tax receipts/invoice to our customers when they order goods from us (ordered from a client abroad with "ship to" address also abroad, money remitted to business bank account from abroad) with 0% vat, as it is an export.

We are an import/export company (100% foreign owned, due to the export exception).

We ship all goods through DHL. We receive an airway bill from them (well we fill it in, they sign it when they collect and we get a copy) as well as of course a bill to the company detailing boxes shipped, price etc.

My accountant has today said we are meant to be charging our clients VAT, after months of doing it this way.

There is no way I can charge clients VAT so I would have to cover the cost, issue being our gross margin is under 7% so would result in a loss!

Any suggestions? Is the accountant correct or is the airway bill sufficient proof of export (that and the fact we are an export only company and legally not allowed to sell within Thailand anyway) and can I continue to bill 0% Vat to my foreign customers.

To note - we have not and will not reclaim any VAT so that isn't an issue for us.

[sas_cars]

The issue with you is that, you need to do the customs export formality on all your DHL shipments, which at the moment you aren't doing, AWB is not considered a proof of an export shipment unless you have right documentation obtained from customs department for each shipment. They will issue you a shipping document which is called ใบขนสินค้าขอออก or Bai Khon Sinkhaa Khaa oak. If you want to export at 0 % VAT rate, you must have to get this document, and once you have this document, you can also claim back your purchase Vat. But that's another story and a long tedious process .

By the way, DHL will do the above said customs export formality for you for free, if you are their account holder. So you don't increase any costs, just do your documentation properly and you are set.

Your accountant is correct about the 7 % VAT charge, since in the past you didn't do the above process, you didn't qualify for a 0 % sale. Now let your accountant talk to customs and inquire about ใบขนสินค้าขาออก, and you are set.

[jimmiejackson]

The issue with you is that, you need to do the customs export formality on all your DHL shipments, which at the moment you aren't doing, AWB is not considered a proof of an export shipment unless you have right documentation obtained from customs department for each shipment. They will issue you a shipping document which is called ใบขนสินค้าขอออก or Bai Khon Sinkhaa Khaa oak. If you want to export at 0 % VAT rate, you must have to get this document, and once you have this document, you can also claim back your purchase Vat. But that's another story and a long tedious process .

By the way, DHL will do the above said customs export formality for you for free, if you are their account holder. So you don't increase any costs, just do your documentation properly and you are set.

Your accountant is correct about the 7 % VAT charge, since in the past you didn't do the above process, you didn't qualify for a 0 % sale. Now let your accountant talk to customs and inquire about ใบขนสินค้าขาออก, and you are set.

That is very helpful thank you. I don't want to impose but I am quite worried about this and you are clearly knowledgeable. If you could help with the below I would really appreciate it!

1. So once we get DHL to do this for us we will be ok from now on, that great. The issue is that when we bill the customer and what we ship won't exactly be the same, as for example they buy 100 products a week but as they are all individually made, sometimes we ship 30 products, 40 products - some from the old bill and some from the new bill (production times vary). Can we still charge them 0% vat on the invoice?

2. Is there no way with creative accounting we can get away with not being liable for the 7% on invoices already sent?

Thanks a lot

[sas_cars]

The issue with you is that, you need to do the customs export formality on all your DHL shipments, which at the moment you aren't doing, AWB is not considered a proof of an export shipment unless you have right documentation obtained from customs department for each shipment. They will issue you a shipping document which is called ใบขนสินค้าขอออก or Bai Khon Sinkhaa Khaa oak. If you want to export at 0 % VAT rate, you must have to get this document, and once you have this document, you can also claim back your purchase Vat. But that's another story and a long tedious process .

By the way, DHL will do the above said customs export formality for you for free, if you are their account holder. So you don't increase any costs, just do your documentation properly and you are set.

Your accountant is correct about the 7 % VAT charge, since in the past you didn't do the above process, you didn't qualify for a 0 % sale. Now let your accountant talk to customs and inquire about ใบขนสินค้าขาออก, and you are set.

That is very helpful thank you. I don't want to impose but I am quite worried about this and you are clearly knowledgeable. If you could help with the below I would really appreciate it!

1. So once we get DHL to do this for us we will be ok from now on, that great. The issue is that when we bill the customer and what we ship won't exactly be the same, as for example they buy 100 products a week but as they are all individually made, sometimes we ship 30 products, 40 products - some from the old bill and some from the new bill (production times vary). Can we still charge them 0% vat on the invoice?

2. Is there no way with creative accounting we can get away with not being liable for the 7% on invoices already sent?

Thanks a lot

1, You can informally bill /proforma invoice whatever to your customer, that doesn't matter. That's between you and customer.

On the official side of things, You just issue a 0% invoice every shipment of whatever products you ship i.e. if you ship 30 products at a time, you'll need to issue an invoice/packing list contains details of that 30 products, and let DHL do the customs formality thing, and for next shipment of 40 products, repeat the process etc.

2, About the past shipments which were done without doing the customs formality, there's no way unfortunately. You only enjoy 0 % if you could show the Bai Khon Sinkhaa Khaa Oak ใบขนสินค้าขาออก to the revenue department, which you don't have. But that applies only for the shipment of the products which you purchased having paid the 7 % VAT and your accounts have already recorded their purchase VAT on monthly VAT report. If there are some products which you bought from no-name vendors and having paid no VAT , then you are lucky and you don't need to pay the 7% vat on shipments already carried out. For that, you just let your accounts department to take them out of the official inventory of your company and do not declare them to revenue department. But it's only possible if your accountant didn't record their sales to the monthly VAT report of the company. If they've recorded their sales to the monthly VAT report, then unfortunately there's no way anymore

Edited May 30, 2013 by sas_cars

[jimmiejackson]

Thanks again for your time, you have really helped me out and I really appreciate that. Might get some sleep tonight now!

Hopefully we can find a way to resolve this with the accountant.

In case you have it in you to give me one last reply... Suppose my client wants to me under declare values on the pro forma invoice which I give to DHL along with the shipment (in theory only of course), would that make any difference (as the amount billed for the goods on the tax receipt given to the client and the amount declared on the pro forma that goes with the shipments for the goods doesn't match)? The number of goods is correct though (ie they buy 10 of product A, over x number of shipments 10 of product A will be shipped).

As you can tell I am quite new to exporting! Right now the customer sends me a PO, I send them a tax invoice/receipt, they send the money, we produce, goods are shipped by DHL with a pro forma for customs. That's how I was told to do it. From what you said maybe I need to provide the client with a receipt each time I ship (with whatever is in that box) instead of when they send me the PO (which is when I provide the receipt now).

[sas_cars]

Welcome. You can't do any under invoicing if you ship by DHL and you need to do the export customs formality for the sale at 0 % . So that's your decision to make.