VAT Imposed on Imported Goods in Thailand in 2024

From May 2024 onwards, the Thai government plans to introduce a 7% value-added tax (VAT) on all imported goods valued at one baht or more, regardless of their origin. However, imported goods priced below 1,500 THB per parcel will be exempted from this tax initiative to alleviate the burden on smaller transactions.

Protecting local businesses

This policy is to ensure fairness and improve the competitiveness of local small and medium-sized enterprises (SMEs) in Thailand, as many are at a disadvantage with low-priced Chinese imports being sold to consumers through e-commerce platforms such as Lazada and Shopee, all with VAT exemption. As a result, local sellers have found it difficult to compete and many have been forced to shut down.

The import of Chinese goods has also significantly reduced the production of local manufacturers by 50%, according to Kriengkrai Thiennukul, Chairman of the Federation of Thai Industries (FTI). Therefore, it is also hoped that this new tax policy update will also help Thailand’s local manufacturing industry by preventing offshoring production to China, which so famously created the USA’s “Rust Belt.”

Another reason for collecting increased VAT from these inexpensive imported goods is the Thai government’s efforts to mitigate the trade deficit with China, which currently stands at a staggering 1 trillion THB per year. Reducing this deficit will help make local Thai businesses more competitive and strengthen the nation’s international standing. 

Furthermore, the policy is intended to promote fair trade and combat the smuggling of goods into Thailand from neighboring countries. It is a well-documented fact that there are sellers who attempt to avoid customs duties by mislabeling them as non-taxable goods. Now that there will be more in-depth checks for nearly all imports, there will theoretically be fewer places to hide smuggled goods.

Risks as well as benefits

Under this new system, the government tax revenue will also be expected to significantly increase, given that e-commerce accounts for 15% of retail today. However, the new tax is not without its risks. This new duty will require a great deal of enforcement processes to work effectively, which may slow down the overall customs process and hamper the supply chains for other goods and Thai manufacturing. The VAT may also cool down spending on platforms that rely on low-cost imports, including Lazada, Shopee, and TikTok Shop.

While these are legitimate concerns, officials and experts believe that the benefits of the new tax scheme far outweigh any of the potential drawbacks. Data and technology-driven customs processes can help mitigate any slowdowns if implemented properly, and the increase in tax spending will be of greater benefit to the country than the purchase of untaxed goods, even if they are cheaper.

Category: Administrative Law, Thailand Tax