In Thailand, it is common to hear that the VAT rate is 7%. However, many people may not be aware that the standard VAT rate prescribed under Thai law is actually 10%.
So why is VAT currently charged at 7%?
The reason is that the Thai government has introduced a temporary reduction of the VAT rate through Royal Decrees issued under the Revenue Code. This temporary measure has been extended periodically over the years.
Most recently, on 27 July 2026, the Thai Cabinet approved in principle a draft Royal Decree to extend the VAT reduction for another year. The current measure, which was scheduled to expire on 30 September 2026, is therefore proposed to be extended until 30 September 2027.
Where Does the 7% VAT Rate Come From?
Under the Thai Revenue Code, the standard VAT rate is 10%.
However, the government has periodically issued Royal Decrees to temporarily reduce the VAT rate, taking into consideration economic conditions and the impact on businesses and consumers.
Therefore, the 7% VAT rate that businesses and consumers are familiar with is not a permanent VAT rate under the Revenue Code. Instead, it results from a temporary tax reduction measure introduced by the government.
The current 7% rate consists of:
- VAT: 6.3%
- Local tax: 0.7%
- Total: 7%
Under the extended measure, the 7% rate applies to sales of goods, provision of services, and imports, subject to the applicable conditions.
How Long Will the 7% VAT Rate Be Extended?
The current VAT reduction measure was scheduled to expire on 30 September 2026.
However, on 27 July 2026, the Cabinet approved in principle an extension for another one year.
| Item | Details |
| Standard rate under the Revenue Code | 10% |
| Temporary reduced rate | 7% (including local tax) |
| Current expiry date | 30 September 2026 |
| Extension period | 1 year |
| Proposed new period | 1 October 2026 – 30 September 2027 |
| Sale of goods | VAT 7% |
| Provision of services | VAT 7% |
| Imports | VAT 7% |
It should be noted that the Cabinet’s decision is an in-principle approval of the draft Royal Decree. Businesses should therefore refer to the officially promulgated Royal Decree to confirm the effective date and detailed conditions of the measure.
Why Is the 7% VAT Rate Being Extended Again?
According to the Revenue Department, the extension takes into consideration the current economic situation and ongoing uncertainties in the Middle East.
These circumstances may lead to higher transportation costs and increases in the prices of consumer goods.
Maintaining the VAT rate at 7% is therefore expected to:
- Help slow increases in the prices of goods and services
- Reduce the cost-of-living burden on consumers
- Maintain domestic consumption
- Support continued economic growth in Thailand
- Maintain business and investor confidence in the Thai economy
The 7% VAT Rate Has Been Extended Many Times
The current 7% VAT rate was not originally established as a permanent tax rate.
Instead, the government has periodically extended the temporary VAT reduction based on economic conditions and the impact on businesses and consumers.
In recent years, for example:
- 2024 → Extended until 30 September 2025
- 2025 → Extended until 30 September 2026
- 2026 → Proposed to be extended until 30 September 2027
Therefore, businesses should understand that the 7% VAT rate currently applied in Thailand is a temporary tax reduction measure that has been continuously extended, rather than the permanent VAT rate prescribed under the Revenue Code.
What Do Businesses Need to Do?
For VAT-registered businesses, the extension does not mean that the VAT calculation or Por.Por.30 (VAT return) filing procedure itself will change.
If the new Royal Decree is officially promulgated and takes effect as proposed, businesses will continue to apply the 7% VAT rate to qualifying sales of goods, provision of services, and imports.
However, businesses should pay particular attention to the Tax Point, which determines when VAT becomes chargeable.
The applicable VAT rate should not be determined solely based on the date on which a Tax Invoice is issued. Businesses must also consider when the Tax Point arises based on the nature of each transaction.
In particular, transactions with a Tax Point arising around the transition period between 30 September 2026 and 1 October 2026 should be carefully reviewed to ensure that the correct VAT rate is applied.
Conclusion
The 7% VAT rate is not the permanent VAT rate under Thai law.
The standard VAT rate under the Revenue Code is 10%. However, the government has introduced temporary VAT reduction measures, resulting in an effective rate of 7% including local tax.
On 27 July 2026, the Thai Cabinet approved in principle the extension of the 7% VAT reduction for another year, from 1 October 2026 to 30 September 2027.
The extension aims to reduce the cost-of-living burden, maintain domestic consumption, and support continued economic growth in Thailand.
Note: As of the date of this article, the information above is based on the Cabinet’s in-principle approval of the draft Royal Decree. Businesses should refer to the officially promulgated Royal Decree and the Royal Gazette for confirmation of the effective date and detailed conditions of the measure.
Sources: Information published by the Thailand Revenue Department and the Royal Thai Government.