Business2024-03-225 min read
VAT Basics: What Every New Business Owner Should Know
How to calculate 7% VAT, when to register for it, and the crucial difference between Inclusive and Exclusive pricing.
Taxes can be daunting, but for business owners, VAT (Value Added Tax) is an unavoidable reality. Understanding it correctly is essential for both legal compliance and maintaining your profit margins.
What is 7% VAT?
VAT is a consumption tax. In Thailand, the standard rate is 7%. Any business with an annual revenue exceeding 1.8 million THB is legally required to register for VAT.
Inclusive vs. Exclusive Pricing
This is where most confusion occurs:
- Exclusive VAT: You quote the price and add 7% on top (e.g., 100 + 7 = 107 THB).
- Inclusive VAT: The quoted price already includes the tax (e.g., you quote 100 THB, which contains roughly 6.54 THB in tax).
The Math
To find the tax amount from an inclusive price, use this formula:
Total Price x 7 / 107 = VAT Amount
Using a VAT Calculator tool saves you time and prevents costly errors when issuing invoices or planning your pricing strategy.
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