Thai Tax Update: VAT May Soon Apply to Businesses Under 1.8M Baht Revenue
- Thanuwat Khumkainam
- 5 days ago
- 2 min read
The Ministry of Finance is considering revising the Value Added Tax (VAT) policy to include small businesses with annual revenue below 1.8 million baht, which were previously tax-exempt. This measure aims to increase government revenue and create a more equitable tax system.
Currently, businesses with annual revenue below 1.8 million baht are exempt from VAT.
Under current law, businesses with annual revenue not exceeding 1.8 million baht are neither required to register for VAT nor collect it from customers. This results in billions of baht in annual lost tax revenue for the government and creates an uneven competitive landscape between small and large enterprises.
Tax Reform: Broadening VAT Coverage for Fairer System
A Ministry of Finance source revealed that VAT reform proposals are under study, potentially including lowering the tax exemption threshold or eliminating it entirely. This aims to ensure all businesses contribute taxes according to their capacity while improving transparency in tax collection.
Key Motivations Behind the Tax Adjustment
1. Boost State Revenue
Currently, VAT contributes 30% of Thailand's tax revenue, but loopholes exist due to unregistered businesses operating outside the formal system.
2. Level the Playing Field for Small Businesses
Large enterprises demand fairer competition as they're mandated to collect VAT while smaller competitors remain exempt.
3. Adapt to the Digital Economy
Online businesses are growing rapidly, yet most fall below the 1.8 million baht revenue threshold [for VAT registration].
Concerns from Small Business Owners
Representatives from the SME Association argue that expanded VAT collection will impose additional paperwork and accounting costs, particularly on newly established businesses. However, the Ministry of Finance may introduce relief measures such as tax rebates or digital tax system training programs.
Progress and Next Steps
The revised VAT bill is expected to be submitted to the Cabinet by Q4 2024, alongside a public consultation process with stakeholders to design balanced criteria that weigh state revenue needs against impacts on SMEs.
Extending VAT coverage to businesses earning below 1.8 million baht annually presents a policy challenge requiring careful multi-stakeholder negotiation. This balancing act aims to safeguard grassroots economic growth while ensuring the long-term sustainability of Thailand's tax system.
