Thailand Extends 7% VAT Rate Until 2026

October 5, 2025

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The Thai Cabinet announced its decision to maintain the standard and reduced VAT rates at the current levels until the end of September 2026. The standard VAT rate was initially set to revert to 10%, but the government decided to extend the application of the lowered standard VAT rate for an additional year.

Considering the historical reasons for reducing the standard VAT rate, the decision underscores the difficulty of restoring higher tax rates once the economy has adjusted to lower ones, particularly when growth and public sentiment remain fragile.

Reasons For Extending the Measure

Thailand introduced the VAT in 1992 and set the standard VAT rate at 10%. However, due to the 1997 financial crisis, the government decided to lower the standard VAT rate to 7%, with the measure subject to mandatory annual review. Since the purpose of the measure was to ease economic pressures and sustain domestic consumption, the 7% standard VAT rate has been extended ever since.

In recent times, there has been a debate on whether the standard VAT rate should be reverted to its original 10%. However, with the latest announcement, the Thai Cabinet removed any doubts and extended the application of the lowered standard VAT rate until October 1, 2026.

Simultaneously with extending this measure, the government also extended the application of the 6.3% temporarily reduced VAT rate until September 30, 2026. The reduced VAT rate will continue to be applied at the same rate for specified sales of goods, services, and imports.

Conclusion

The Thai government's decision to maintain its lowered VAT rate until October 2026 highlights the delicate balance between fiscal responsibility and economic stability. For taxable persons and consumers, this decision marks continuity and predictability, offering reassurance to households, investors, and businesses navigating uncertain economic conditions.

However, the extension of the measure also shows how temporary measures can evolve into long-term strategies when governments prioritize consumer spending, business resilience, and competitiveness over immediate revenue gains.

Source: The Thai Cabinet Announcement, Bloomberg

What decision did the Thai Cabinet make about VAT rates?

The Thai Cabinet decided to maintain both the standard VAT rate of 7% and the reduced VAT rate of 6.3% until the end of September 2026.

Why did Thailand lower its standard VAT rate from 10% to 7%?

Thailand lowered its VAT rate to 7% during the 1997 financial crisis to ease economic pressures and support domestic consumption, and the reduced rate has been extended annually ever since.

When will Thailand’s current VAT rates remain in effect until?

The current VAT rates will remain in effect until September 30, 2026, with the standard 7% rate and the reduced 6.3% rate continuing until that date.

What does the extension of the 7% VAT rate mean for businesses and consumers?

The extension provides stability and predictability for businesses and consumers, helping households, investors, and companies plan with greater confidence.

What is the reduced VAT rate in Thailand and what does it cover?

The reduced VAT rate is 6.3%, and it applies to certain specified sales of goods, services, and imports, supporting economic activity in targeted areas.

Why is it difficult for Thailand to restore the 10% VAT rate?

It is difficult to restore the 10% VAT rate because the economy and consumers have adjusted to the lower rate, and raising it could risk growth and public sentiment during fragile economic conditions.

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