Thailand: Guidance Regarding Zero Percent Value Added Tax

In principle, the Thai value-added tax (VAT) system should only apply to the sale of goods and services that occur within Thailand. However, going strictly according to legal principles, the Thai Revenue Code applies VAT to sale of goods and services outside of Thailand, but applies a tax rate of zero percent, rather than exempting them altogether. The significance of this is that since such transactions are technically not exempt, the Revenue Department could later adjust the rate at a later time. For the time being, Section 80/1 of the Revenue applies a zero percent rate to the export of goods and services (with certain exceptions) and the provision of services performed in Thailand, but utilized in a foreign country (i.e. “export of services”).  In regards to the export of services, the Revenue Department has issued guidance that the following types of services will be considered to be those utilized overseas and therefore subject to a zero percent value added tax:

  • Where the use of services has some parts that are utilized in Thailand, in addition to being used in a foreign country;
  • Services that are offered to international carriers that operate by sea or by air. “International carriers” include those whose vessels enter and do not pass through Thailand, including those who also have routes operating within Thailand;
  • Insurance policies for property that is overseas or for goods that are exported;
  • Services that are offered in free-trade zones in Thailand that are meant for the manufacturing of goods that will be exported, including goods manufactured by another party or the business operator itself
  • “Services” within the meaning of Section 80/1 refers to any actions that result in the acquisition of value, except for the sale of goods, and the provision of travel services overseas.

In order to claim zero percent VAT according to the above mentioned rules, a business operator must have the following evidence:

  • Evidence of payment of the services fees according to the invoice issued in the name of the business operator, such as an L/C (Letter of Credit), T/T (telex transfer) or T/P (term of payment), a receipt, a document evidence payment according to the L/C (Letter of Credit)
  • or a bank statement in the form of a bank book that indicates a transfer of payment, evidence of receiving payment by credit card or evidence of payment by E-Money or E-Cash.

The rules regarding zero percent VAT are complex. Business operators in Thailand are advised to consult with competent legal counsel.


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Category: Administrative Law


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