The legal division of the Thai Revenue Department (“TRD”) recently addressed whether a virtual office can be registered as a place of business for Value Added Tax (“VAT”) purposes. This update is critical for companies leveraging virtual offices to understand the implications of VAT registration. 


Understanding Virtual Offices

A Virtual Office, also known as a service office, is part of the flexible workspace industry. It provides businesses with various services, space and technology combinations without requiring them to incur the capital expenses associated with owning or leasing a traditional office. 


VAT registration requirements

In Thailand, you pay VAT on the sale of goods and services. According to the Thai Revenue Code (TRC), businesses must register for VAT if their annual revenue exceeds 1.8 million THB. To register, business operators must provide supporting documents demonstrating ownership or the right to use the premises as a place of business. These documents typically include a lease agreement, a house registration book, a consent letter from the property owner, a picture, and a map showing the business address.


Defining a Place of Business? 

The TRC defines a “place of business” as a location regularly used by a business for its operations, including manufacturing or storage. If a business does not have a designated place of business, the business operator’s permanent residence in Thailand is considered the place of business. VAT registrars usually request pictures of the business premises to verify their existence, typically requiring the premises to have a four-wall basis.


Issues arising from using Virtual Office as a place of business

The main issue that arises when using virtual offices as a place of business is the unique nature of the legal relationship between virtual office operators and their customers. Unlike traditional lease agreements, virtual office customers do not have the right to exclusive use of a specific space. This particular arrangement has led to complications with VAT registration.


The TRD has often rejected VAT applications for businesses registered with a virtual office address. The TRD has determined that virtual offices do not meet the definition of a place of business for VAT purposes due to the lack of specific access times and restricted spaces for each member.


Our observation

Given the TRD’s stance, businesses using and engaging in virtual offices face significant challenges when registering for VAT. The lack of traditional lease agreements and exclusive space usage undermines the virtual office’s acceptance as a place of business. 


At Grant Thornton, our team of experts across tax and legal services is ready to support your business needs. We are committed to helping you navigate the complexities of regulatory challenges, ensuring a smooth and successful process. Contact us for comprehensive and tailored assistance, designed specifically to meet your unique requirements.