LEADING THE WAY
Under Thailand's value-added tax (VAT) system, consumers are responsible for the entire VAT amount. However, fractions of the total amount payable are submitted to the Revenue Department all along the supply chain by various value-added suppliers. This is different from the sales tax system used in the United States, in which the entire tax amount is collected only when an end-consumer purchases finished goods or services.
One attractive feature of the VAT system is that it allows exports of goods and services to be tax-free. This is one of the tools the government uses to increase Thailand's competitiveness in world markets. Under the VAT system, "exporters" at the end of the supply chain are entitled to a zero VAT rate. This means that not only are they not required to charge VAT, but they can also get their input VAT refunded. But because the government has to return cash to the exporters, it is typical to find exporters faced with VAT audits.
Complexity arises in many areas with regard to the entitlement for the zero-rate privilege. One such area is whether or not a transaction qualifies as an "export" according to the VAT law.
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