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Overview of Import Taxation in Thailand and Its Legal Framework
The framework of import taxes in Thailand regulates goods entering the kingdom to safeguard local industries, boost revenue streams, and honor worldwide pacts. Chief import taxes include customs charges, a 7% VAT, and excise taxes, varying according to item character and classification.
Several pivotal ordinances govern the legal framework for import taxes: the Customs Act of 2017 oversees customs duties as pegged to import values and classifications. The 1984 Excise Tax Act applies excise taxes on luxury items like automobiles, alcohol, and tobacco. The 1992 Value-Added Tax Act administers the 7% VAT for goods and services at the border. The 2017 Customs Decree outlines customs procedures and tariff rates in intricate detail.
Moreover, as a WTO member, Thailand adheres to the Most-Favored-Nation principle, ensuring preferential treatment for fellow members. This framework ensures adherence to domestic and global trade rules while tendering preferential terms through Free Trade Agreements.
Table of Contents
The Three Types of Import Taxes in Thailand
Custom Duties and Their Role in Import Taxes in Thailand
Customs duties in Thailand are a critical aspect of the country’s trade policy, regulating the flow of imported goods and protecting domestic industries. Thailand’s tariff structure is governed by the Customs Act B.E. 2560 (2017) and the Customs Decree B.E. 2560 (2017), which outline the regulations for determining the rates of duty on imported goods. Thailand, as a member of the World Trade Organization (WTO), adheres to the Most-Favored-Nation (MFN) principle, ensuring that it provides preferential tariff rates to other WTO members.
In 2021, Thailand’s typically imposed tariff rate was 11.5%, with agricultural items subject to significantly higher levies at an average of 31.2%, whereas non-agricultural products faced a reduced typical tariff of 8.4%. In spite of these relatively elevated levy rates, the MFN principle ensures that Thailand’s taxes are comparable to those of additional nations in the universal trading system.
Thailand has restricted 75.2% of its tariff lines in the WTO, with an average restricted tariff of 28.0%, significance that these tariff rates will not exceed the agreed upper boundaries. However, steep levies continue to pose difficulties for access to the Thai market, especially for particular U.S. products, with specific sectors like vehicles, bikes, beef, pork, chicken, textiles, and alcoholic drinks facing particularly high import obligations. For example, wine imports are subject to a sizable 54% tariff, along with six alternate taxes, leading to a real obligation and tax burden of nearly 400%.
Thailand’s customs responsibilities are notably rigorous when it comes to goods that compete with locally made items. The administration has additionally taken steps to govern imports of biofuels, such as ethanol, as portion of its Alternative Energy Development Plan (2018-2037), although the country has yet to fully execute its transition to ethanol-based fuel due to ongoing issues relating to feedstock accessibility.
Determination of Customs Responsibilities
To calculate customs responsibilities, the whole value of the goods must be decided, such as the cost of goods, shipping, and insurance coverage. The following formula used to calculate the payable customs responsibilities is based on guidelines from DHL’s guide on importing to Thailand.
Custom Duty= CIF Value x Duty Rate
Where:
- CIF Value = Cost of Goods + Freight + Insurance
- Duty Rate = The ad valorem or specific rate applied based on the product classification.
For example, if a shipment of 2,000 umbrellas, each valued at BHT 100, is being imported with a duty rate of 100%, the customs duty can be calculated as follows:
CIF Value= (2,000 umbrellas x 100 THB) + 1,000 THB (freight and insurance)=201,000 THB
Custom Duty= 201,000 THB x 100%= 201,000 THB
Thus, the customs duty payable on this shipment would be BHT 201,000.
Calculating Value-Added Tax (VAT) as Part of Import Taxes in Thailand
Value-added tax (VAT) is a consumption tax levied on the sale of goods and services within Thailand, as well as imported goods. The standard VAT rate in Thailand is currently 7%, applied to the value of imported goods which incorporates the cost of goods, customs duties, and additional charges such as freight or insurance. As of July 2024, Thailand altered VAT exemption regulations. Previously, imported goods valued under 1,500 Baht were VAT exempt. However, starting in July 2024, all imported goods regardless of worth are subject to 7% VAT.
To calculate the VAT due on imported goods, the following formula outlined in DHL’s guide to importing to Thailand is used:
VAT Payable = Value of Goods x VAT Rate
For example, for 2,000 umbrellas valued at BHT 100 each, the VAT payable would be calculated as follows:
Value of Goods = 2,000 x 100= 200,000 THB
VAT Payable = 200,000 x 7% = 14,000 THB
Thus, the VAT payable on this shipment would be BHT 14,000.
Excise tax
Excise tax is imposed on certain imported goods in addition to customs duties and VAT. The tax rate varies depending on the type of goods.
Excise taxation is levied upon particular merchandise deemed luxuries for consumption, including motor vehicles, alcohol, and tobacco. Excise tax amount is contingent on either a percentage of the advised retail price or a exact rate subject to the quantity or mass of the goods.
Excise tax applies to a selection of merchandise, most notably:
- Petroleum and its derivatives: Precise rate founded on the volume or mass of the product.
- Non-alcoholic beverages: Percentage rate fluctuating from nil to 14 percent.
- Motor vehicles and motorcycles: Percentage rate fluctuating from nil to 40 percent.
- Alcoholic beverages: Percentage rate fluctuating from nil to 22 percent, with extra exact rates founded on the degree of alcohol.
Calculation of Excise Taxation
The excise tax calculation varies by commodity category. For example, for an alcoholic beverage, the excise tax can be calculated employing the following formula, as clarified in DHL’s guide to importing to Thailand:
Excise Tax = (Suggested Retail Price x Excise Tax Rate)+ (Specific Rate x Quantity)
For other products like motor vehicles, the excise tax would be calculated based on the percentage rate or a exact rate decided by the relevant authorities.
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Exemptions for import taxes in Thailand and the Most-Favored-Nation Principle
Under Thailand’s membership in the World Trade Organization (WTO), the Most-Favored-Nation (MFN) principle applies, meaning that goods imported from WTO member countries receive the most favorable tariff treatment available. This benefits companies involved in trade with Thailand, as they are subject to the lowest possible tariff rates.
While there are no formal free trade agreements between Malaysia and Thailand, both countries have benefited from the most favored nation principle, which aims to ensure equitable tariff treatment for imports. Additionally, imports valued under 1,500 Thai baht are exempted from customs duties, though value-added tax still applies to purchases.
Certain goods imported into Thailand may qualify for exemption from import duties under specific conditions outlined in the Customs Tariff Decree. Businesses stand to gain from reduced costs on imports that meet the eligibility standards defined in this legal framework. It is prudent for companies to familiarize themselves with available exemptions since they can considerably lessen the overall tax burden associated with imports.
Free Trade Agreements and Preferential rates for import taxes in Thailand
Thailand has inked several preferential trade agreements that facilitate commerce, such as free trade agreements allowing favorable tariff handling of imports from partner states meeting deal terms. Currently, such agreements link Thailand with the other ASEAN members as part of a regional bloc plus China, Japan, South Korea, Australia, and New Zealand under the Regional Comprehensive Economic Partnership. Bilateral free trade agreements also exist with Australia, Chile, India, Japan, New Zealand, and Peru. Moreover, Thailand benefits from preferential trade terms with Australia, New Zealand, China, Hong Kong, and India by virtue of ASEAN membership.
Payment Methods for Import Taxes in Thailand
There are several ways for importers to pay the duties and taxes required by Thai Customs, including in-person payments, bank transfers, and online options. Payments can be made directly at the cashier located at ports of entry, accepting cash, checks, or drafts. Remittance can also be sent electronically to the designated bank account of the Customs Department. In some instances, taxes may be paid on the Thai Customs website. Upon receipt of payment, the agency will provide documentation for cargo review and release.
Conclusion
The import taxes in Thailand constitute an integral part of the nation’s trade and border operations framework. Companies dealing in goods entering the country must comply with applicable customs duties, VAT, and excise taxes regulations. By comprehending the legal guidelines and specific methods for calculating and rendering these payments, businesses can ensure conformity with Thai law and avoid potential penalties. Furthermore, it is important to monitor legislative changes impacting tax policies and remain updated on regulations governing imports.
For enterprises associated with international commerce with Thailand, consultation with licensed experts focused on import levies and customs rules is advisable. They can furnish comprehensive advice on tariff classifications, VAT exemptions, and excise tax obligations, confirming your operations remain within legal boundaries and take advantage of any tax relief under trade agreements.
FAQ
The primary import taxes in Thailand include customs duties, a 7% value-added tax (VAT), and excise taxes. These taxes vary based on the classification and nature of the imported goods.
Customs duties are calculated based on the customs value of the goods, which includes the cost of goods, freight, and insurance. The duty rate is then applied to this value to determine the amount payable.
As of July 2024, all imported goods, regardless of their value, are subject to the 7% VAT. Previously, goods valued under 1,500 Baht were exempt from VAT.
Excise taxes are imposed on certain luxury goods such as automobiles, alcohol, tobacco, and petroleum products. The tax rate varies depending on the type of good and its classification.
Businesses can pay import taxes in Thailand through various methods, including in-person payments at customs offices, bank transfers, and online payments through the Thai Customs Department’s website.
For more detailed information, check out our comprehensive guide on import taxes in Thailand.