VAT on export services
EXPORT SERVICES HAVE A ZERO VAT RATE IN THAILAND – GENERALLY
Yes, generally, export services are VATable at a tax rate of 0% (Sect. 80/1(2) VAT Law). This covers consulting, administration, management, engineering, etc. provided from Thailand abroad. However, this general rule has three important exceptions:
(1) Partly consumption by service provider in Thailand: The normal tax rate of 7% applies if the service is not fully consumed outside of Thailand. Even a very small portion of consumption in Thailand prevents the benefits of a 0% tax rate. If a law firm advises foreign clients and – to a small portion – persons in Thailand, or carries out tasks in Thailand (formation of a Co. Ltd., litigation, etc.) the whole scope of services is deemed to be subject to 7% VAT.
(2) (Partly) consumption by service recipient in Thailand: Under the (very questionable) jurisdiction of the Supreme Court of Thailand as of April 2012 (Case No. 6710/2554), any utilization of the services by the foreign service recipient in Thailand would prevent the 0% VAT rate. If a law firm advises the foreign client how to acquire real estate as a foreigner, and the foreign client – subsequently – buys land in Thailand even without any help or support by that law firm, its consultancy fees would be fully VATable at 7% as well.
(3) If under one service contract several services are provided, each single service which is under the exceptions (1) or (2) taxable at 7%, will infect all the other services with this (normal) tax rate. If the law firm provides a bundle of services under the consultancy agreement, and just in one small case the service is consumed in Thailand, the whole scope of services are fully taxable at 7%.
In practice, it is in many cases a mission impossible to provide export services at a rate of 0%. To identify the remaining scope of tax flexibility and carry out a comprehensive tax planning structure, consult PUGNATORIUS.