Tax Judgment EP4 Value-Added Tax Credit

Q : Is the value-added tax (“VAT”) registrant entitled to use the remaining VAT credit for the VAT payment in the month that is not the following month? If not, what liability will a VAT registrant receive?

A : The VAT registrant is not entitled to use the carried forward remaining tax credit to pay VAT in any other tax month other than the following tax month. If the VAT registrant wrongly utilizes the remaining tax credit to pay VAT in the month that is not the following month, insufficient tax payment in such tax month can result. Consequently, the VAT registrant shall be liable for the remaining amount of tax payable together with a surcharge of 1.5 percent of the payable tax per month or fraction thereof, excluding fine, in accordance with Sections 84 and 89/1 of the Thai Revenue Code (“TRC”), in conjunction with the Royal Decree (No. 242), B.E. 2534.

The Supreme Court Judgment No. 3412/2541

In the event that the VAT registrant has the remaining tax credit from the tax calculation in any month, the VAT registrant is entitled to carry the remaining tax credit for the VAT payment in the following month from the month in which the tax was calculated. If there is still a tax credit remaining, the VAT registrant is entitled to use the carried forward remaining tax credit to pay VAT in the following month.

The plaintiff, who had a tax credit of 7,946,661.69 Baht in June 1992, was entitled to use the remaining tax credit to pay VAT in July 1992. If the tax credit still remains, the Plaintiff is entitled to use the carried forward remaining tax credit to pay VAT in August 1992, and if there is still the remaining of the aforesaid tax credit, the Plaintiff is entitled to use the carried forward remaining tax credit to pay VAT in September 1992, and so on. This compulsory process is prescribed by law. Therefore, the Plaintiff was not entitled to skip the process by requesting to use the remaining tax credit in June 1992 to pay the VAT in December 1992.

In December 1992, the Plaintiff had an output VAT of 1,372,986.16 Baht and an input VAT of 906,767.58 Baht. The Plaintiff then shall pay VAT in December totalling 466,218.58 Baht. As the Plaintiff was not entitled to use the tax credit in June 1992 to pay the VAT payable in December 1992, the difference of 466,218.58 Baht represents the final result of the tax payable that the Plaintiff was obliged to pay. Nonetheless, the Plaintiff did not pay for the VAT in due course. The Plaintiff shall be liable to pay the surcharge at a rate of 1.5 percent of the payable or remittable tax per month or fraction thereof, excluding the fine, in accordance with Section 89/1 of the TRC.