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1. Revenue Department Order No. POR 164/2568 – VAT on Sales of Goods outside Thailand by Registered Businesses

This notice stipulates the treatment of VAT in the case of sales and service outside Thailand, particularly with regard to input VAT. The “sales outside Thailand” referred to here mean what is commonly called Triangular trade. Specifically, this refers to transactions where goods are purchased from a third country and sold directly to a third-country purchaser without involving an import into Thailand. For example, a Thai business purchasing goods from Japan and having them directly exported to an Indian business for sale is a case of sales outside Thailand.

Thai VAT, like VAT in other countries, is generally applicable only to domestic sales and service within Thailand. Therefore, for sales and service outside Thailand. These are not considered “exports” but rather transactions that is out of scope from Thai VAT. Accordingly, even if a Thai business operator pays VAT on expenses related to sales outside Thailand, the Thai business operator should be prohibited from deducting the input VAT from its monthly output VAT.

Since sales outside Thailand do not involve any purchases within Thailand, the Thai business operator normally does not incur input VAT in Thailand on the products purchased for resale. However, when a Thai business operator is engaged in both VAT taxable transactions and transaction our of scope from VAT (like the sales and service outside Thailand mentioned here)/VAT-exempt transactions, a problem arises regarding how to deduct the input VAT associated with common expenses (e.g., office expenses that relate to both types of transactions). Previously, under Notice No. Paw. 89/2542, it was stipulated that in such cases, input VAT could be deducted based on the proportion of sales from VAT taxable transactions (①) to sales from VAT-exempt and out of scope from VAT transactions (②), following the method defined in Revenue Department Notification No. 29 on VAT. Under this regulation, the ratio of taxable to exempt sales was initially estimated in the first year and then calculated based on the actual ratio from the previous year in subsequent years. If the ratio of VAT taxable sales exceeded 90% in the previous year, full input VAT deduction would be allowed.

However, especially in cases of transactions outside Thailand, some tax officers have instructed that the monthly actual sales ratio of ① and ② should be used to determine the deductible amount of input VAT from common expenses.

In response, this new notice stipulates that for out of scope from VAT transactions like sales and services outside Thailand, the deductible input VAT should be calculated based on the monthly actual sales ratio. If there are also VAT exempt transactions, the deduction should follow the method outlined in Revenue Department Notification No. 29.

Calculation Example:

• Sales ratio for the fiscal year 2024: 50% of domestic sales of agricultural products (VAT-exempt business), 50% of export sales of agricultural products (0% VAT taxable business)
• Sales for April 2025:
  • Domestic sales of agricultural products (VAT-exempt business): 6,000,000 Baht
  • Export sales of agricultural products (0% VAT taxable business): 10,000,000 Baht
  • Sales of agricultural products produced in a third country and directly delivered to a purchaser in that third country: 4,000,000 Baht
• Input VAT related to common expenses in April 2025: 1,000,000 Baht

The deductible amount of input VAT related to common expenses in the VAT declaration for April 2025 is calculated as follows:

1. Sales ratio of out of scope from VAT transactions for April 2024:
   4,000,000 Baht÷(6,000,000 Baht+10,000,000 Baht+4,000,000 Baht)=20%
2. Deductible input VAT related to common expenses for April 2024:
   (1,000,000 Baht−(1,000,000 Baht×20%))×50%=400,000 Baht

Here, VAT-exempt transactions refer to VAT-exempt sales, specific business tax taxable transactions, and specific business tax exempt transactions. These are determined by the Revenue Code and Royal Decrees. For actual transactions, we recommend to ask your professional. Additionally, regarding out of scope from VAT transactions, some businesses operator applying export exemptions may make incorrect treatments, and services may be subject to VAT depending on the location of provision and use. Therefore, we recommend to confirm the classification of each of actual transactions with your professional.

Finally, this regulation is just a guideline, directing tax officers to handle matters consistently. It is not a legislative amendment.

2. Smart Visa for Startup Entrepreneurs

Notification of the Board of Investment No. Por 5/2568 on Qualifications, Criteria, and Conditions for the Special Temporary Stay Visa (Smart Visa) for Startup Entrepreneurs, summarized as follows:

• 1) Cancellation of Previous Announcement
  • The Announcement No. 12/2561 regarding the qualifications and conditions for Smart Visa is hereby cancelled.
• 2) Eligibility for Smart Visa
  • Startup Entrepreneurs: Must have established a business in Thailand in a targeted industry and received certification from relevant government agencies, such as the National Innovation Agency.
  • Spouse and legal children: Can apply along with the entrepreneur.
• 3) Qualifications for Smart Visa Applicants
  • Must hold at least 25% of the shares or be a director of a certified company.
  • Must have a bank account balance of at least 600,000 THB, with additional funds required for spouses and children.
  • Must have health insurance coverage and must not have any prohibited characteristics under immigration law.
• 4) Work Rights
  • Entrepreneurs and their spouses may work in Thailand without needing a work permit if working in a certified business and not engaged in work prohibited for foreigners.

3. Notification of the Board of Investment No. Por 6/2568 on Procedure for Applying for Qualification Certification for Foreign Nationals Who Wish to Apply for a Special Temporary Stay Visa (Smart Visa):

• 1) Application Submission: Individuals wishing to apply for Smart Visa qualification certification must submit their application to the One Stop Service Center for Visa and Work Permit (OSS) or the Thai Embassy/Consulate abroad. The relevant agency will forward the application to the OSS for further processing.
• 2) Qualification Certification: The OSS will forward the application to the relevant agencies, such as the National Innovation Agency, the Digital Economy Promotion Agency, the Ministry of Foreign Affairs, etc. These agencies must process the application within 20 working days.
• 3) Decision on the Application: If the qualification certification is approved, the applicant will receive the results from the OSS within 7 working days. The applicant must submit their Smart Visa application within 60 days.
• 4) Spouses and Children: Spouses and legally dependent children may apply together with the main applicant.
• 5) Visa Extension: If an applicant wishes to extend their stay after the expiration of their visa, they must submit their application at least 60 days before the visa expires.
• 6) Status Reporting: Smart Visa holders must report their status annually.
• 7) Processing Time: The qualification certification process must be completed within 30 working days from the date the complete and correct application is submitted.
• 8) Cancellation of Rights: If the applicant wishes to cancel their Smart Visa, they must submit a written request to the OSS.

4. Smart and Sustainable Industry

The measures to elevate the industry are designed to support and stimulate both existing operators and those seeking to apply for investment incentives for businesses in group B (businesses that do not receive corporate income tax exemptions). This initiative encourages investments aimed at improving efficiency or upgrading operations in both production and service sectors to drive towards a smart and sustainable industry.

• 1) All businesses wishing to apply for promotion under this measure must belong to the types listed in the classification provided by the promotion office at the time of application, except for business types with specific policies that are not entitled to rights and benefits as determined by the office.
• 2) For projects that already have investment promotion, applications for promotion under this measure can be submitted once the corporate income tax exemption or reduction period has ended, or if they are projects that do not receive corporate income tax exemptions, excluding business types with specific policies that do not qualify for rights and benefits as defined by the office.

For the scope of activities eligible for investment to apply for promotion, these typically include:

Conditions

• 1) The investment size must be no less than 1 million baht, excluding land costs and working capital. However, for projects of small and medium-sized enterprises (SMEs), the investment size must be at least 500,000 baht, excluding land costs and working capital.
• 2) To qualify as a small and medium-sized enterprise (SME), the following criteria must be met:
  • 1.1 At least 51% of the registered capital must be held by Thai nationals. Additionally, more than half of the authorized signatories must be Thai individuals.
  • 1.2 The applicant’s total business income, both from promoted and non-promoted activities, must not exceed 500 million baht per year during the first 3 years from the date of earning income from the promoted business.

Rights and Benefits

• 1) Exemption from import duties on machinery/equipment for improving efficiency or upgrading the business.
• 2) Exemption from corporate income tax for 3 years at a rate of 50% of the investment amount for improving efficiency or upgrading the business, excluding land costs and working capital.
  • In cases where machinery linked to or supporting the domestic automation machinery manufacturing industry is used, at least 30% of the value of the machinery, automation systems, or robots utilized in the project must be sourced domestically to qualify for a 100% corporate income tax exemption for 3 years on the investment amount, excluding land costs and working capital for the upgrade.
• 3) The period for corporate income tax exemption will be counted from the date of income generation after receiving the promotion certificate, and the investment must be completed within 3 years from the date of issuance of the promotion certificate.

5. New Regulations on Temporary Stay Permission in the Kingdom

The Immigration Bureau has issued a new order regarding temporary stay permission in the Kingdom, with revisions and updates to the criteria to better align with the current situation. This order will take effect from January 23, 2025, onwards.

Key Criteria and Conditions

1. Consideration for Stay Permission
   • In cases where a foreign national has a necessary reason to remain in the Kingdom, the Immigration Bureau or authorized personnel may grant permission for a stay of up to one year per request.
   • The consideration process must follow the criteria outlined in the annexed table of Immigration Bureau Order No. 12/2568.
2. Incomplete Qualifications
   • The individual must leave Thailand within seven days from the expiration of their permitted stay.
   • If the individual overstays beyond the permitted period, they will be subject to a fine imposed by the immigration officer.
3. Termination of Stay Permission
   • If the reason for staying in Thailand no longer aligns with the permitted necessity.
   • If the foreign national no longer meets the required qualifications due to changes in criteria or conditions, or if those conditions cease to exist for any reason.
4. Amended clause
   • Change the definition of “spouse” from requiring a male-female marriage to a gender-neutral definition to align with the newly amended marriage equality law.

Summary of the Impact of the New Order

The revised order emphasizes a more thorough review of temporary stay permissions, ensuring that approvals are based on legitimate necessity. It also reinforces adherence to legal requirements and immigration policies by closely evaluating the status and qualifications of foreign nationals to maintain compliance with the country’s regulations.