One of our accounting clients has asked us about issuing invoice to reimburse the expenses that they initially paid on behalf of their clients and whether they need to charge VAT on top of the amounts.

As our response, we advised our client that there are two ways to issue invoice for reimbursement of expenses. One is that they need to keep all the receipts of expenses paid on behalf of their client and as their accountant, they should let us know about it before we prepare the monthly accounting so that we will not claim back the VAT for them and we will book them as accounts receivable and not as expense, then when they invoice their client to reimburse the amounts, they do not have to charge VAT.

Another way is that if it is not practical to get all the receipts of the expenses paid on behalf of their clients, they need to charge VAT when they invoice for the reimbursement.

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Today, one of our accounting clients asked us some questions about tax refund.

We have some VAT receivables for this month. We would appreciate if you could advise us when we can get back the VAT refund from the Thai Revenue Department. We also need to know how you calculate VAT payable and whether all VAT that we paid for are refundable. Thanks.

Answer:

VAT payable is derived from Output VAT (Sales VAT) minus Input VAT (Purchase VAT).

You can claim a refund but usually, the process will take time before the Revenue Department decides to give it back to you. Normally they will need to see every supporting details, receipts, tax invoices, etc. to assess and check whether those taxes are real and you are applicable for a refund. In general, instead of applying for refund, most companies can also use this VAT receivable to offset with the VAT payable in the following months. In short, each month that your input VAT exceeds output VAT, you can claim a refund either by cash or tax credits to be used within the next months.

VAT refund can only be claimed within three years of the filing date. However, not all VAT receivables can be claimed back. Certain Input VAT such as VAT in entertainment expenses and petrol for company (4-door vehicles) cars cannot be used to get a VAT refund but can instead be used as deductible expenses against Corporate Income Tax (CIT).

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