We will continue our discussion of the value added tax. Last week, we said that if you have a business that has sales of 1.8 million baht or more per year you have to register and you have to collect and pay the VAT to the government. The rate is 7%.
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The next thing we have to explain is the VAT invoice.
Every time your business enters into a transaction you have to issue what is called a VAT invoice, which shows the nature of the goods or services sold and the amount of VAT due. It must be used by your customers for claiming tax credit, as explained below.
A VAT invoice must contain the following elements:
''Tax invoice'' must appear prominently.
The date of the transaction.
The invoice number.
The name, address and tax registration number of the business issuing the invoice.
A description, value and quantity of the goods or services.
The amount of VAT charged.
As we mentioned last week, every month your business must file a VAT 30 form with tax authorities.
Each month you must show on the VAT 30 form whether you owe money, or are due a refund in connection with the VAT. First, you figure out what is called your output tax, all of the VAT you have collected from your customers. Then you calculate the total VAT that has been collected from your business plus taxes charged on imported goods. This is called the input tax. Now compare the output tax to the input tax for the month:
If the output tax is greater than the input tax, you have to pay the difference to the tax authorities with the form VAT 30.
If the input tax is greater than the output tax you can claim a refund or a credit on the difference.
Let's look at an example. Let's say your wife owns a restaurant. In April she bought all of the food she sold from three suppliers, a large food warehouse where she has an account, a beverage supplier and a greengrocer. During the same month a professional decorator recommend that one of the dining rooms in the restaurant be remodelled. Your wife bought new furniture for that room, had the floor refinished by a floor service and the walls painted by a professional painter.
These goods and services cost your wife 120,000 baht and she received a tax invoice for each. In total these invoices showed 7% of the 120,000 baht, or 8,400 baht, was charged to her and paid by all of these suppliers to the government.
Your wife's restaurant had a good month for April. Total sales were 210,000 baht. A a 7% charge for VAT was added to every customer's bill. In total this amount was 14,700 baht.
So your wife's output tax for April was 14,700 baht and her input tax was 8,400 baht. She must pay the difference, 6,300 baht, to the government when she files her VAT 30 form.
What if your wife's input tax had been greater than her output tax for April? In that instance she would have been entitled to a refund for the difference. She can offset this as a credit for later months in which her output tax is greater than her input tax, but this must be done within six months of April. Otherwise, she must claim a refund within three years of April.
James Finch of Chavalit Finch and Partners (email@example.com)
and Nilobon Tangprasit of Siam City Law Offices Ltd (firstname.lastname@example.org).
Researchers: Arnon Rungthanakarn and Sitra Horsinchai.
For more information visit www.chavalitfinchlaw.com.
Questions? Contact us at theemail addresses above.
About the author
Writer: James Finch & Nilobon Tangprasit