Apportionment of Purchase Tax

Apportionment of Purchase Tax

What is Apportionment of Purchase Tax ?

        The apportionment of purchase tax for business owners who are registered for Value Added Tax (VAT) and engage in both VAT and non-VAT activities, which involves purchase taxes incurred from acquiring goods or services used for their own business operations or for use in both VAT and non-VAT activities, where it is not possible to clearly distinguish their usage in the respective activities.

Why do we need to Apportionment of Purchase Tax

          When a business owner registered for Value Added Tax (VAT) conducts operations in both VAT-taxable and non-VAT-taxable categories, without the clear ability to differentiate whether the goods or services they use fall under VAT-taxable or non-VAT-taxable categories, they must apportion the purchase tax incurred based on the proportion of their own business activities where they apply the right to claim VAT. If they do not apportion the purchase tax, the entire amount of that purchase tax is considered ‘prohibited tax.’ This means that the business owner is obligated to pay that specific purchase tax, irrespective of whether the goods or services are used in both types of business activities. In all cases, even if it is not possible to distinguish whether the goods or services are VAT or non-VAT related.

Section 82/6 Apportionment of Purchase Tax

          In cases where a business operator is registered for both VAT and NOT VAT categories and the business operator has used or intends to use goods or services acquired or received for their business operations or for both categories, the registered business operator shall apportion the purchase tax that will be deducted from the sales tax in calculating Value Added Tax according to Section 82/3.

Which businesses are required to Apportion Purchase Tax ?

          The need to ‘apportion purchase tax’ may depend on the nature and usage of goods or services within each specific business. The following are examples of situations where apportioning purchase tax may be necessary:

  1. Construction contracting business (VAT) + Real estate leasing business (NON VAT)
  2. Real estate leasing business (NON VAT) + Various service provision (VAT)
  3. Agricultural crop sales business (NON VAT) + Agricultural crop export business (VAT)

How is Purchase Tax Apportioned ?

          Apportioning purchase tax according to Section 82/6 of the Thai Revenue Code and the announcement by the Director-General of the Revenue Department regarding Value Added Tax (Version 29) sets forth conditions and criteria for accurate purchase tax apportionment as follows:

  1. General or Income-based Apportionment of Purchase Tax:

    • Estimate the proportion of income generated throughout the year from both VAT-taxable and non-VAT-taxable business activities.
    • Use this proportion to apportion the purchase tax according to the proportions that occur with both VAT and non-VAT.
  2. Apportionment of Purchase Tax from Building Construction:

    • Estimate the proportion of building space used between VAT-taxable and non-VAT-taxable business activities.
    • Use this proportion to apportion the purchase tax according to the proportions that occur with both VAT and non-VAT.
  3. Apportionment of Purchase Tax According to Criteria Set by the Director-General:

    • If it is not possible to use income or proportional criteria, the Director-General of the Revenue Department has the authority to establish suitable criteria for apportioning purchase tax.
    • Businesses must adhere to the criteria set by the Director-General (Clause 5 (7) of the announcement by the Director-General regarding Value Added Tax (Version 29)).

The challenges of Apportioning Purchase Tax

          Apportioning purchase tax can be challenging, as the criteria for apportionment are relatively complex. Business owners who are required to apportion purchase tax must exercise caution to avoid errors, as mistakes can lead to penalties and additional payments. Some common problems that arise when apportioning purchase tax include:

  1. Estimating income for businesses that have just started or have no income from the previous year: In such cases, business owners need to estimate the income for the upcoming year to apportion purchase tax. However, they are only eligible for a tax credit of up to half of the purchase tax to be apportioned. This can lead to issues when business owners overestimate their income, resulting in excess purchase tax being reported and, subsequently, penalties and additional payments.

  2. Using the wrong income base for apportionment: The income base for apportioning purchase tax is defined under Section 79 of the VAT Act and includes specific and exempt business income that needs to be reported on forms such as P.P.30 or P.T.40. Business owners sometimes mistakenly use the income base for calculating corporate income tax (P.N.D.50) instead.

  3. Apportioning tax for construction activities: Apportioning purchase tax for construction activities, especially when determining which parts of a building are used for VAT-liable activities and which are not, can be challenging. It requires a clear separation of areas within the building in accordance with the Revenue Department’s guidelines.

The accounting office plays a crucial role in managing the finances and accounts of a business. Understanding the responsibilities and roles of the accounting office helps you realize why you should hire accounting services from ACC Consulting Co., Ltd. for the efficient financial management of your business. Whether you are a small or large business, we have a high-quality team ready to assist you at every step of your financial management.

You can contact our company through the channels provided below.

         ✅ Call 📞 02-114-7715
         ✅ Web 🌐 https://www.accconsultingservice.com/
         ✅ Inbox 📩 http://m.me/100581915340875
         ✅ Line 📱 https://lin.ee/PhD3G7F
         ✅ Mail 📧 [email protected]
Facebook
Twitter
Pinterest

ความรู้/ข่าวสารที่คุณอาจสนใจ

How to Start a Business in Thailand

🚀 How to Start a Business in Thailand: Company Registration, Tax & Accounting Essentials

📌 Why Foreign Entrepreneurs Should Read This         Thailand remains a top destination for foreign investment thanks to its strategic location, friendly visa policies, and growing industries like tech and wellness . However, the path to opening a business here involves careful planning—from choosing the right company structure to ensuring tax compliance and accounting systems are in place.         Our guide walks you through legal, financial, and practical steps to confidently launch your venture. 📝 1. Choose the Right Company Structure Private Limited Company (PLC): The most common form, requiring at least 2 shareholders and 1 director. Minimum paid-up capital is generally THB  1 million  but smoothing for foreign directors requires THB 2 million BOI‑Promoted Company: Offers benefits including 100% foreign ownership, tax exemptions, and easier work permits Representative or Branch Office: Allows testing the market without full registration—ideal for non-revenue-generating activities . ⏳ 2. Reserve Your Company Name File 3 proposed names with the DBD. Approval typically takes 1–2 days and is valid for 30 days. Names must be submitted and approved in Thai, even if English

อ่านต่อ »
phuket-tax-accounting-risks

5 Accounting & Tax Risks Every Phuket Business Owner Should Know (And How to Avoid Them)

Title: 5 Accounting & Tax Risks Every Phuket Business Owner Should Be Aware Of (And How to Mitigate Them) In the realm of business ownership in Phuket, it is imperative for entrepreneurs to be well-versed in the potential accounting and tax risks they might encounter. Being proactive and informed about these challenges is key to avoiding detrimental financial consequences. By understanding and addressing these risks head-on, Phuket business owners can safeguard their financial integrity and ensure compliance with relevant laws and regulations. 📍 Operating a business in Phuket?           Whether you’re running a café in Old Town, managing a resort near Patong, or launching a new real estate venture—staying compliant with Thai tax and accounting laws is crucial.           Here are 5 common accounting and tax risks we’ve seen in Phuket-based businesses, and how you can protect your company from unnecessary penalties or investigations. 🔻 1. Mixing Personal and Business Finances Risk: Failing to separate business and personal expenses can lead to inaccurate books and potential tax issues.Solution: Open a dedicated business

อ่านต่อ »

Accounting, Tax, and Audit Services for Businesses in Phuket

📍 Supporting Businesses in Phuket with Professional Financial Services           Phuket is one of Thailand’s most dynamic business destinations, especially in hospitality, real estate, F&B, and tourism. At ACC CONSULTING CO., LTD, we understand the specific challenges and compliance needs of businesses operating in Phuket. Our expert team of CPAs, accountants, and tax advisors is ready to support your operations with reliable and secure online services—no matter where you are in the province. 💼 Our Key Services ✅ Company Registration & Business Structuring Incorporation of Limited Companies / Partnerships / Sole Proprietors VAT registration, social security setup, DBD documentation Shareholder agreements and legal consulting ✅ Monthly & Annual Accounting Services Thai GAAP-compliant bookkeeping (TFRS for NPAEs) Monthly PND/VAT submissions (PND.1, 3, 53, 50, 51, PP.30) Digital reports and e-document submission ✅ Professional Tax Planning Strategic structuring to minimize tax liability Income tax optimization, expense classification Advisory for property/investment transactions ✅ Certified Audit by Thai CPAs Annual audit reports for DBD & Revenue Department Financial statements with explanatory notes Audit-ready for companies exceeding threshold 🏨 Industry Focus

อ่านต่อ »

By clicking “Accept”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. Privacy Policy

Privacy Preferences

คุณสามารถเลือกการตั้งค่าคุกกี้โดยเปิด/ปิด คุกกี้ในแต่ละประเภทได้ตามความต้องการ ยกเว้น คุกกี้ที่จำเป็น

Allow All
Manage Consent Preferences
  • Always Active

Save