3. Managing Input and Output VAT Reports

 

As part of VAT compliance, Vicky Burmese Amber & Gems Co., Ltd. is required to maintain and submit two key VAT reports every month: Output VAT and Input VAT. These reports ensure that the company accurately tracks and declares VAT on both sales (output) and business expenses (input), helping to calculate the correct amount of VAT payable to the Revenue Department. Below is a comprehensive and informative guide to managing these reports, including challenges unique to your business and strategies to maximize tax efficiency.

 

Output VAT: The VAT You Charge Customers

 

Output VAT is the VAT that you collect from your customers when you sell goods or services. This VAT is charged at 7% on the sales price of the product or service. Each month, you are required to track and report the total amount of Output VAT to the Revenue Department using Form Phor Por 30.

 

It’s important to note that Output VAT is considered a liability—since you are holding the tax on behalf of the government, it must be paid back to the Revenue Department by the 15th of the following month.

 

Example of Output VAT:

 

• If your company sells a piece of amber jewelry for 100,000 THB, the Output VAT is 7,000 THB (7% of the sale price).

• This means that the total price the customer pays is 107,000 THB, and the 7,000 THB VAT portion must be reported as Output VAT in your monthly VAT filing.

 

Input VAT: The VAT You Pay on Business Purchases

 

Input VAT is the VAT that your company pays on business-related purchases (e.g., office supplies, equipment, services) within Thailand. Generally, you can claim this VAT back and use it to offset your Output VAT liability, thereby reducing the total amount of VAT payable to the Revenue Department.

 

For example, if you pay VAT on advertising or office rent, you can claim that VAT as Input VAT. Input VAT helps reduce your overall VAT burden by deducting the amount of VAT paid on purchases from the amount you owe on sales.

 

Example of Input VAT:

 

• If you purchase office supplies for 50,000 THB and pay 3,500 THB in VAT (7%), you can claim that 3,500 THB as Input VAT.

• If your Output VAT for the same month is 7,000 THB, you can offset the Input VAT against the Output VAT, leaving you with a VAT payable of 3,500 THB (7,000 - 3,500).

 

Challenges with Input VAT for Vicky Burmese Amber & Gems Co., Ltd.

 

One of the key challenges for Vicky Burmese Amber & Gems Co., Ltd. arises from the fact that your gemstones are imported from Myanmar without VAT invoices. This creates a situation where you cannot claim Input VAT on the cost of these imports. As a result, your VAT liability will be based entirely on the Output VAT from your sales, without the benefit of offsetting it with Input VAT from your imports.

 

Key Challenge: No Input VAT from Myanmar

 

• Since Myanmar does not provide VAT invoices on the gemstones you import, you have no Input VAT to claim from these purchases.

• This lack of Input VAT increases your tax burden because your Output VAT cannot be offset, making it necessary to pay the full VAT amount on your sales to the Revenue Department.

 

Effect on VAT Liability:

 

• No Input VAT = Higher VAT Payable: Without Input VAT from the imported gemstones, your company must pay the full amount of Output VAT collected from sales. For instance, if you collect 100,000 THB in Output VAT from your sales over the month, you cannot reduce this liability by offsetting it with Input VAT from imports, meaning you must pay the full 100,000 THB to the government.

 

How to Manage Input VAT Efficiently: Maximizing Your VAT Credits

 

While the lack of Input VAT from imports is a challenge, Vicky Burmese Amber & Gems Co., Ltd. can still reduce its VAT liability by carefully managing Input VAT on other business-related purchases made in Thailand. The key is to claim Input VAT wherever possible on legitimate business expenses. Here are strategies to help you manage Input VAT efficiently:

 

1. Claim Input VAT on Other Expenses in Thailand

 

Though you cannot claim Input VAT on imported gemstones, you can still claim it on other business-related expenses, such as:

 

• Office Supplies and Equipment: Computers, furniture, and stationery purchased for the business, as long as VAT is included on the supplier’s invoice.

• Advertising and Marketing: If you are running marketing campaigns in Thailand, you can claim the VAT paid to advertising agencies.

• Business Services: Professional services such as accounting, legal consultations, or even repair and maintenance services, provided they come with valid VAT invoices.

• Office Rent: If you lease an office space and the landlord charges VAT, this can also be claimed as Input VAT.

 

Example of Input VAT on Thai Business Expenses:

 

• Suppose you spend 30,000 THB on office furniture and pay 2,100 THB in VAT (7%).

• This 2,100 THB can be claimed as Input VAT, which you can use to reduce your VAT payable for that month.

 

2. Regularly Review Business Expenses for VAT Eligibility

 

It’s essential to periodically review your business purchases and expenses to ensure you are claiming all eligible Input VAT. Be sure to request VAT invoices from suppliers and service providers for any purchases made within Thailand.

 

Tip: Keep a checklist of expenses that are VAT-eligible and ensure that all purchases come with valid VAT invoices that meet the criteria set by the Revenue Department (i.e., containing the correct company name, address, and VAT registration number).

 

3. Track and Document VAT Accurately

 

To maximize your Input VAT claims, you must keep accurate records of all business purchases where VAT is charged. Use accounting software that allows you to record and track both Output and Input VAT seamlessly. Ensure that:

 

• All VAT invoices are properly filed and recorded.

• Input VAT is carefully matched to the corresponding Output VAT periods for accurate reporting.

 

4. Consider Timing of Purchases

 

If you know that a particular month will have higher sales and therefore higher Output VAT, consider timing large business purchases in the same period. This way, the Input VAT from your purchases can offset the higher Output VAT for that month, reducing your overall VAT payable.

 

Example of Timing VAT-Eligible Purchases:

 

• If you expect high sales of amber jewelry in December, you may want to purchase new office equipment or prepay for advertising services in the same month. The Input VAT from these purchases can reduce the Output VAT from your sales, lowering your overall tax liability for that month.

 

Reporting and Filing: Practical Steps

 

Managing Input and Output VAT reports is not only about recording transactions but also about ensuring accurate and timely filing with the Revenue Department. To avoid penalties, your monthly VAT reports must be submitted by the 15th of the following month. Here’s a checklist to help ensure you’re prepared:

 

1. Collect VAT Invoices: Gather all VAT invoices from the month, both for sales and eligible purchases.

2. Prepare Output VAT Report: Summarize all the sales made in the month and calculate the total Output VAT.

3. Prepare Input VAT Report: Summarize all the VAT paid on business purchases for the month.

4. Calculate VAT Payable: Subtract Input VAT from Output VAT to determine how much VAT you owe.

5. File Phor Por 30 Form: Submit the monthly VAT report (Form Phor Por 30) to the Revenue Department and pay the calculated VAT by the 15th of the following month.

 

Conclusion

 

Managing Input and Output VAT reports efficiently is key to ensuring that Vicky Burmese Amber & Gems Co., Ltd. remains VAT-compliant while minimizing tax liability. Although the inability to claim Input VAT on Myanmar imports presents a challenge, you can mitigate this by carefully managing Input VAT on other business-related purchases made within Thailand. By strategically timing purchases, maintaining accurate records, and optimizing expenses that allow for Input VAT claims, your company can reduce its overall VAT burden and maintain financial health.

 

Regular consultations with your accountant and proactive financial planning will ensure that your VAT reports are both accurate and efficient, safeguarding your business from costly errors and penalties while maximizing savings.

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