Thailand considers lowering VAT registration threshold amidst concerns from small businesses
The Thai Revenue Department has proposed lowering the THB 1.8 million (approx €83,400)VAT registration annual sales threshold. It may introduce a 1% flat-rate scheme for micro businesses.
This could imposed significant compliance and administrative burdens on micro and small enterprises (MSEs). Under Thailand’s VAT-inclusive pricing mechanism, registered suppliers are required to embed VAT within the final sale price of goods and services. For small-scale, family-operated businesses, this change would entail reconfiguring pricing structures, adapting accounting systems, and maintaining input-output VAT reconciliation—a task many of these businesses are ill-equipped to manage due to limited tax literacy.
Potential 1% flat rate scheme for micro-businesses
The Ministry of Finance is considering implementing a special VAT system for businesses with incomes below 1.8 million baht. This system would allow these businesses to pay VAT at a lower rate, potentially around 1% of their annual income, similar to models used in various European countries. If successfully enacted, this plan is expected to generate an additional 200 billion baht in annual revenue for the government.
Current mandatory and voluntary VAT registration rules
Under current Thai VAT legislation, any person or entity conducting taxable supplies (i.e., the supply of goods or provision of services) within the Kingdom is required to register for VAT if their annual taxable turnover exceeds THB 1.8 million, or THB 300,000 in any single month.
This mandatory registration obligation applies to both domestic and foreign entities carrying on taxable activities in Thailand, including the importation of goods and provision of services deemed to be performed in Thailand, regardless of where they are consumed.
The Thai Revenue Department permits voluntary VAT registration for businesses below the statutory threshold. However, a proposed legislative amendment aims to lower the compulsory registration threshold, thereby bringing small enterprises with annual turnover below THB 1.8 million into the VAT regime.
