VAT in Thailand to Remain at 7% for an Additional Year

In response to persistent economic problems in Thailand, the government has decided to delay any changes to Thailand’s Value-Added Tax (VAT) rate, currently set at 7%. Despite recent calls to raise this rate and increase government revenue, Thai finance officials have declined to change it. To increase consumer spending and mitigate the impact of current conditions on the public, this rate will remain unchanged until late 2026.

What Are Value-Added Taxes in Thailand?

Value-Added Tax (VAT) is a type of tax applied to the sale of goods and services during each stage of the supply chain. Consumers pay this tax on top of the actual price of the goods and services they purchase, after which the vendor sends the collected tax to the government. In this way, VAT is similar to sales taxes in other countries, though it is applied to fewer types of purchases.

Why is Thailand’s Current VAT Rate Being Extended?

In light of Thailand’s consistently sluggish economy, voices in the government proposed an increase in the VAT rate to 10%, which was the original rate when VAT was first introduced to Thailand back in 1992. This 3% increase would generate more revenue, which would, proponents claim, result in lower public debt, further investment support, and more jobs for businesses, especially smaller-scale enterprises. It would also make Thailand more competitive with other Southeast Asian countries in this area, as they have higher VAT rates.

Due to shifting economic circumstances, the Thai cabinet did not block the proposal, but instead made the decision to put a moratorium on raising the VAT rate. Thailand’s 7% VAT rate will see an extension from October 1, 2025, until September 30, 2026. This is not the first time the government has delayed a VAT hike, as back in 2024, a proposed increase was also postponed until September 30, 2025.

Benefits of a Lower VAT Rate in Thailand

The current caretaker cabinet made the decision to keep the VAT at 7% so as not to increase prices for tourists and local low-income consumers. While increasing government revenue offered many benefits, it would do so at the expense of further burdening the public and harming tourism, a vital component of the Thai economy. Recent economic struggles have already placed business owners and the general public at a disadvantage, and, according to opponents of the rate hike, maintaining the current rate would protect households and businesses in Thailand, which are already holding record debt.

Were the VAT rate to increase to 10%, the government predicts an increase in living costs, which would result in lower spending. Additionally, maintaining a lower VAT rate would also result in higher business confidence and lead to more investments in the country. In a time of local and global uncertainty, the government hopes that keeping the current rate unchanged will stabilize Thailand’s economy.

Professional Assistance from a Thai Tax Lawyer

With the lower VAT rate of 7% guaranteed for another year, this is an ideal time to travel to Thailand to visit, relocate, or open a business. However, the postponement of the VAT increase is only temporary, and you may find yourself spending more money on select goods and services if the rate moves to 10% next year. If you have any questions about VAT or your local or international income taxes, reach out to the professional tax advisors at Siam Legal.

As a full-service law firm with over 20 years of experience helping foreigners with their legal matters, our tax lawyers have the expertise to help you minimize your tax burden and avoid issues with tax collectors here in Thailand and abroad. We can assist with filing your individual Thai tax return, getting a Tax Identification Number (TIN), and, if you are a business owner, advise you on your corporate tax responsibilities.

Contact Siam Legal and book a consultation today to alleviate your tax concerns and keep as much of your money as possible.

Category: Thailand Tax