Tax Questions

[kohtao]

Hi all,

A couple of questions regarding tax liability in Thailand.

1. If the treshold for being liable to vat taxation is 1,8 mill THB per year, does it not make sense to establish two companies, to keep the income below this treshold?

2. In the travel business it is in my cases customary for agents to be required to take 100% payment from guests and then pay the hotel directly less the commission earned. So my companies have a lot of money coming in but also a lot of money going out. I assume the 1,8 million is the income after this has been paid?

3. For some areas, where the resorts are very small and not well managed, it is simply not possible to get a proper tax invoice/receipt. My account tells me that cash bills are just as good. Does anyone have any input regarding this.

[smartecosse]

3. For some areas, where the resorts are very small and not well managed, it is simply not possible to get a proper tax invoice/receipt. My account tells me that cash bills are just as good. Does anyone have any input regarding this.

and you think this is the case only in small and not well run resorts

you want invoice mr? 30,000 baht

you no want invoice 28,000

[Wekhin]

Hi all,

A couple of questions regarding tax liability in Thailand.

1. If the treshold for being liable to vat taxation is 1,8 mill THB per year, does it not make sense to establish two companies, to keep the income below this treshold?

2. In the travel business it is in my cases customary for agents to be required to take 100% payment from guests and then pay the hotel directly less the commission earned. So my companies have a lot of money coming in but also a lot of money going out. I assume the 1,8 million is the income after this has been paid?

3. For some areas, where the resorts are very small and not well managed, it is simply not possible to get a proper tax invoice/receipt. My account tells me that cash bills are just as good. Does anyone have any input regarding this.

1. ฺฺTo have two companies, you will double pay some expenses such as settingup expenses, audit fees, and bookeepings. Besides, concept of VAT is buyer pays it. It is not seller's tax liabilities in a liable sense. A seller is just responsible to collect it from buyers and give it to the Revenue Dept.

2. In you case, 100% payments from quests are your sales. What you pay out to hotels and others are your costs. The 1.8 million treshold means sales, not the difference between sales and costs.

3. Cash bill is as good but it must have name, address, tax ID of the owner and other requirements such as name and address of payer, transaction description, unit price, amount.

[kohtao]

I see. But in your example that does not make sense. Example: we are paid 100000 THB by a guest for a stay at hotel X. We have to pay 7% of that to the revenue department but the resort invoices us for the full amount less our 10% commission (or whatever it might be). Surely it is the resort that should collect it from the guest out of the funds we pass on to them and we simply pay a 7% vat on the part which is our "sale".

[~G~]

Kohtao, it is simple:

1. A Guest pays you - you need to Issue a Tax Invoice that includes VAT and collect it from the Guest.

2. You pay the Hotel - the Hotel has to issue you a Tax Invoice that includes VAT and collect it from you.

3. Then you deduct the amount of VAT you paid (to the hotel) from the amount of VAT you charged (from the guest), and pay the difference to the Revenue Department:

VAT to Revenue Department = VAT charged - VAT paid

[Wekhin]

I see. But in your example that does not make sense. Example: we are paid 100000 THB by a guest for a stay at hotel X. We have to pay 7% of that to the revenue department but the resort invoices us for the full amount less our 10% commission (or whatever it might be). Surely it is the resort that should collect it from the guest out of the funds we pass on to them and we simply pay a 7% vat on the part which is our "sale".

If 100,000 baht paid by your guest already includes VAT, then 93,457.94 baht will be your sales and 6,542.06 baht will be VAT (some countries call it sales tax) paid by the guest.

If the resort invoices you for 90,000 baht tax included, 84,112.15 baht will be their service and 5,887.85 baht will be VAT (some countries call it purchase tax) paid by you. You must obtain a receipt/tax invoice that show 5,887.85 baht of VAT.

Then, you can use your purchase tax to offset sales tax. Therefore, you will need to file only the difference between sales tax and purchase tax which is only 654.21 baht (6,542.06-5,887.85).

The way you do business and call what you get as commission is not commission in its sense. Your business looks like a travel service that sells travel package to customers and then arrange accommodations, transportation, sightseeing, etc. for customers.

If you are an agent of the resort, guest must pay for room to the resort. The resort must issue receipt/tax invoice to the guest and then pays you commission.

[Chang_paarp]

~G~ has explained VAT very simply. VAT is one of the easier concepts to understand as part of running a business. Some of the other regulations and taxes are even more obtuse (this is not country specific).

If you have trouble getting your head around the idea, you want to review your business plan. I would definitely look for different accounting advise if you are not getting the basic mechanics explained to you in a manner you can grasp. On the other hand you may more comfortable being a sales person rather than a business person.

[siriratc]

~G~ has explained VAT very simply. VAT is one of the easier concepts to understand as part of running a business. Some of the other regulations and taxes are even more obtuse (this is not country specific).

If you have trouble getting your head around the idea, you want to review your business plan. I would definitely look for different accounting advise if you are not getting the basic mechanics explained to you in a manner you can grasp. On the other hand you may more comfortable being a sales person rather than a business person.

1.You can book as commission if your profit margin is only the commission without any mark up

2.Cash bill can not use as claimable expenses evident.

[Wekhin]

2.Cash bill can not use as claimable expenses evident.

Cash bill can be used as expense as long as it has all required informations on it. In other words, it is the same as a receipt. Purpose of cash bill is to record cash sales only. This is the case when a business wants to separate documents of cash sales from receipts of credit sales. A company who does not want to separate them can simply issues receipts for both cash and credit sales. This is the case for a non-VAT-registered company.

A VAT-registered company must issue receipt/tax invoice or invoice/tax invoice depending on type of transaction. If she refuses to issue it and instead issues a cash bill, that will be tax evasion.

Edited November 22, 2006 by Wekhin