Apportioning Purchase VAT

In general, purchase VAT that is attributable to non-VAT business (i.e. VAT exempt) is not recoverable. The notification of the Director-General of the Revenue Department on VAT (No. 29) sets out the rules for apportioning purchase VAT (input tax).

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When a VAT registered company has both VAT and non-VAT businesses, it may not be possible to directly allocate the input VAT. The prescribed method of apportionment is by revenue.

In the first revenue earning year, the company has to:

  • Apportion the input tax based on the estimated revenue for both VAT and non-VAT businesses. Input tax allocated cannot exceed 50% of the total input tax available for apportionment. Adjust the input tax based on the portion of actual revenue earned in the first tax month after the first revenue-earning year.

When the input tax apportioned by actual revenue is less than the input tax apportioned by estimated revenue, the company will not be liable for any surcharge.

In the following year, the company has a choice:

  • Apportion the input tax using the same basis as the previous year; or
  • Apportion the input tax using the same split of actual VAT and non-VAT revenue as the previous year. Then recalculate the input tax based on the actual revenue earned within the first month of the following tax year.

However, in the case that the non-VAT revenue of preceding year is more than 90% of total revenue, the company has a choice either;

  • Not claiming any input tax; or
  • Claim input tax at the actual percentage of input tax of the previous year.

On the contrary, in the case that the VAT revenue of preceding year is more than 90% of total revenue, the company has a choice either;

  • Claim input tax entirely; or
  • Claim input tax at the actual percentage of input tax of the previous year.

In calculating the revenue earned from non-VAT business, the following should be excluded:

  • Sales of goods abroad (not considered as an export from Thailand); and Services performed and used overseas.

Finally, it is worth noting that if a company constructs a building for which there will be both VAT and non-VAT businesses, the apportionment of input tax shall be base on building area.

For more details (in Thai), please visit The Revenue Department and Sanpakornsarn (Tax Magazine).

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