Guidance issued by the Thai Revenue Department on 5 February 2025 (Departmental Instruction (DI) No. Paw 164/2568) makes critical changes to the treatment of input VAT for VAT-registered taxpayers engaged in the sale of goods outside Thailand (i.e., transactions that fall outside the scope of Thai VAT). The DI, which applies as from the date of issuance and supersedes previous guidance, provides updated procedures and examples for allocating input tax by affected VAT payers.
Under the rules in effect before the DI was released, VAT-registered taxpayers that sold goods outside Thailand were not able to deduct input VAT when calculating their VAT liability. The DI requires VAT-registered taxpayers engaged in out-of-VAT scope transactions to apply a two-step allocation process:
The rules for VAT-registered taxpayers engaging in “mixed” activities, i.e., both VATable and out-of-scope VAT supplies, have changed significantly. The taxpayer must apportion input tax based on the revenue derived from out-of-scope activities on a monthly basis (previously annually), with the remaining input tax deducted from output tax. For example, assume a Thai VAT-registered taxpayer has THB 20 million in sales for a particular month, THB 16 million of which is in domestic VATable sales, THB 4 million in sales outside Thailand and THB 1 million which cannot be attributed to a specific business activity. The allocation of input VAT is as follows:
Input tax allocation
1 The remaining input tax of THB 800,000 was allocated proportionally based on the revenue percentage from the previous year (50:50 for fiscal year 20X1).
Input tax allocation
Pakamon Charubhakti
BDO in Thailand
Under the rules in effect before the DI was released, VAT-registered taxpayers that sold goods outside Thailand were not able to deduct input VAT when calculating their VAT liability. The DI requires VAT-registered taxpayers engaged in out-of-VAT scope transactions to apply a two-step allocation process:
- Initial exclusion: Input tax must be excluded in proportion to revenue derived from activities that are not subject to VAT; and
- Subsequent allocation: The remaining input tax is allocated between VATable and non-VAT businesses.
Mixed Business Activities
The rules for VAT-registered taxpayers engaging in “mixed” activities, i.e., both VATable and out-of-scope VAT supplies, have changed significantly. The taxpayer must apportion input tax based on the revenue derived from out-of-scope activities on a monthly basis (previously annually), with the remaining input tax deducted from output tax. For example, assume a Thai VAT-registered taxpayer has THB 20 million in sales for a particular month, THB 16 million of which is in domestic VATable sales, THB 4 million in sales outside Thailand and THB 1 million which cannot be attributed to a specific business activity. The allocation of input VAT is as follows:| Category | Out-of-Scope | Subject to VAT | Total |
| Revenue breakdown | THB 4 million | THB 16 million | THB 20 million |
| Revenue percentage | 20% | 80% | 100% |
| Input tax that cannot be directly attributed to a specific business activity: | THB 1 million | ||
| Input tax allocation | Step1: THB 200,000 (THB 1M × 20%) |
Step 2: THB 800,000 (THB 1M × 80%) |
THB 1 million |
Input tax allocation
- Step 1: THB 200,000 (THB 1 million × 20%) excluded for out of VAT scope activity
- Step 2: THB 800,000 (THB 1 million × 80%) deductible against output tax
Multiple Business Categories
New rules also apply to VAT-registered taxpayers engaged in VATable transactions, transactions that are not subject to VAT (e.g., VAT-exempt, specific business tax (SBT) liable or SBT-exempt) and transactions that are outside the scope of VAT and uses goods and services for all three businesses. In this case, the taxpayer must allocate input tax monthly based on the out-of-scope activities and then apportion the remaining input tax between the VAT and non-VAT businesses using the method prescribed under the Thai Revenue Code. For example:| Category | Out-of-Scope | Subject to VAT | Not Subject to VAT | Total |
| Revenue breakdown (Fiscal year 20X1) |
N/A | 50% | 50% | 100% |
| Revenue breakdown (Fiscal year 20X2) |
THB 4 million | THB 6 million | THB 10 million | THB 20 million |
| Revenue percentage | 20% | 30% | 50% | 100% |
| Input tax that cannot be directly attributed to a specific business activity: | THB 1 million | |||
| Input tax allocation | Step 1: THB 200,000 (THB 1M × 20%) |
Step 2: THB 400,000 (THB 800,000 × 50%1) |
Step 2: THB 400,000 (THB 800,000 × 50%1) |
THB 1 million |
Input tax allocation
- Step 1: THB 200,000 (THB 1M × 20%) excluded for out-of-scope activity
- Step 2: Remaining THB 800,000 allocated based on prior year’s revenue ratio (50:50):
- THB 400,000 to VAT-liable business
- THB 400,000 to non-VAT business
BDO Insight
The revised input tax allocation basis creates new compliance obligations for affected taxpayers and may limit the amount of input tax that can be recovered in certain circumstances. However, the rule enhance compliance accuracy and mitigates the risk of over-claiming input tax. Businesses should ensure they are tracking revenue on a monthly basis and preparing proper documentation to support their VAT filings.Pakamon Charubhakti
BDO in Thailand