Regulatory updates - Thailand

On 17 September 2024, the Thai Revenue Department announced that the Cabinet (the Council of Ministers of Thailand) had extended the reduction of the standard VAT rate to 7% for another year until 30 September 2025.

The reasons for the continued reduction of the VAT rate are to relieve the tax burden on businesses and consumers and to ensure the Thai economy's targeted expansion.

The full press release is available here (in Thai).

Early this month, the Revenue Department published Ministerial Regulation No. 389 to encourage the use of e-Tax and e-withholding systems.

Businesses choosing to implement and continuously utilize those systems can have the following:

• Double deduction of cost on the investment in the e-Tax and e-withholding tax systems, including the fees paid to service providers;
• Withholding tax rate reduction of 1%.

The measures above apply from 1 January 2023 until 31 December 2025.

The Thai e-invoicing programs were launched in 2017 and have become a mature system. Last December, the Cabinet approved the draft Ministerial Regulation to support the issuance of electronic tax invoices or electronic receipts proposed by the Ministry of Finance. The draft is currently under the Council of State for consideration.

Currently, Thai VAT payers can issue e-Tax invoices voluntarily, i.e., in an agreed format based on their business agreement.

What is an e-Tax invoice?

Electronic tax invoices include regular invoices under section 86/4 of the Revenue Code, debit notes under section 86/9, and credit notes under section 86/10, which have been prepared in an electronic format, signed with a Digital Signature or a time stamp.

E-invoicing model, systems and electronic tax invoice issuance

E-invoicing in Thailand is similar to the model in South Korea and the Philippines, where VAT registrants need to report e-invoices to the government in near real-time.

These are the two e-invoicing systems operating in Thailand:

• e-Tax Invoice & e-Receipt RTIR System;
• e-Tax Invoice by E-mail System (for small entities with an annual turnover less than THB 30 million, ca. EUR 800 000).

Taxpayers opting to use the e-Tax Invoice & e-Receipt RTIR System shall send invoices with a Digital Signature to the recipients. After distributing the invoice to the buyer, the supplier must report the invoice to the Revenue Department in an XML format (ขมธอ.3-2560) by the 15th day of the following tax month.

Alternatively, taxpayers can report invoices to the government while e-mailing the invoice to the recipient. The supplier needs to prepare an invoice in a PDF/A-3 file and put the central system (csemail@etax.teda.th) of the Electronic Transactions Development Agency (ETDA) in CC when sending the invoice to the buyer. The system will then return an e-Tax invoice with a time stamp to both trading parties.

How to switch to e-Tax invoices?

Entrepreneurs who want to use the e-Tax Invoice & e-Receipt System and e-Tax Invoice by E-mail System must register with the Revenue Department and ETDA, respectively. Additionally, obtaining a certificate from a Certification Authority is required for the taxpayer applying to the e-Tax Invoice & e-Receipt System, which must be valid at the time of creating the digital signature.

Although e-invoicing is not mandatory in Thailand, the government intends to promote e-Tax invoices to help businesses to increase efficiency and save costs. Moreover, Thailand might impose e-Tax invoices as one of the tax obligations.

* For registered entrepreneurs conducting retail business only. VAT registrants cannot issue an abbreviated tax invoice.

VAT rate reduction

The standard VAT rate in Thailand is prescribed in the law as 10%, but the law permits it to be reduced by Royal Decrees. The rate currently sits at 7% due to Thai Royal Decree No. 684, which announced the reduced rate to be in effect from 1 October 2019 until September 2020.

At a cabinet meeting on 25 August 2020, the Thai government approved a new Royal Decree which maintains and extends the current rate of 7% until 30 September 2021. The 7% rate applies to sales of goods and services within Thailand as well as imports of goods and services into Thailand.

Social security contribution rates

The economic forecast for Thailand has been unfavourable this year. Thailand’s economy is expected to contract between 7% and 9% due to the impact of COVID-19 in the country.

The Thai Government had previously approved the following tax measures to help boost the economy during the COVID-19 outbreak:

• Reduction in withholding tax rates from 5% to 2%

   

• Deduction of 1.5x interest expenses

   

• Deduction of 3x wage expenses

   

• Early VAT refunds for goods exporters

   

• Deduction of expenses on donations for COVID-19

   

A three-month extension of social security contributions will continue from September through November 2020.