Why is the tax on wine in Thailand 250% on average? In most cases, duties constitute a state’s primary protection against products imported from other countries in direct competition with local production.
Does Thailand produce wine? Yes, local production is approximately one million liters per year and is concentrated in three areas of the country: Loei, Hua Hin, and Khao Yai. These projects are relatively recent, and the quality of the wine produced is rather low, with a high price. This is not surprising, given that the production cycle of the vines was entirely altered, as September, the traditional harvest month, falls in the middle of the rainy season.
Therefore, taxes on wine imports into Thailand do not seem to be a protectionist measure. Against a production of one million liters, imports account for 18.5 million liters per year, for a market worth 4 billion THB before customs, thus estimated at (at least) 20 billion in turnover on the retail market (source: Thai Customs, December 2022).
The major importing countries are Australia (33% of the market), France (32%), Italy (9.5%), the United States (9%), Chile (7.5%), and New Zealand (3%). France contributes 270,000 liters of Champagne to the luxury market.
Wine consumer market in Thailand
Until 2019, red wine dominated (85-90% of total consumption). Since the country’s reopening in 2022, white wine has gained ground, now comprising around 30% of total consumption.
The market prioritizes internationally recognized brand/vine varieties. Niche products have limited presence, with 65% of the market controlled by France and Australia, unlike Italy, which offers a vast array of grape varieties. Boutique wines have room to establish niches based on quality and timing.
Thai consumers prefer red wines with high alcohol content (13-14%), full-bodied, and low acidity. Fruity and light white wines are favored, and Prosecco-style sparkling wines are gaining popularity.
Wine is primarily consumed in large hotels and international restaurants, with average prices ranging from 1,300 to 2,500 THB per bottle. The collector’s market is rapidly expanding, with private individuals importing fine wines, especially from Italy, through professional operators.
How to calculate Wine taxes in Thailand
As mentioned earlier, wine taxes in Thailand are not designed to safeguard local production but rather serve as a revenue source for the Thai government. The Excise Department, one of the most efficient authorities, holds a prominent financial position, even surpassing the Revenue Department in budgetary terms.
Wine taxation in Thailand considers several factors:
Ad Valorem duty, based on country of origin
The standard tax rate is 54%, calculated based on the DDU value (including purchase, freight, and customs operations). Countries with Free Trade Agreements (China, Japan, Korea, Australia, New Zealand, Chile, Brazil, and ASEAN) enjoy duty exemptions. There are ongoing discussions and rumors about FTAs with EU countries, as elaborated at the end of this article.
The tax on the alcohol content of wines poses a significant challenge for importers. The actual excise duty amounts to 1,500 THB per liter of alcohol. To calculate the excise on wine, use the following formula: [(volume in liters X alcohol percentage X 1,500)/100]. For instance, a 0.75-liter bottle of 12% alcohol wine incurs a tax of [(0.75X12X1,500)/100], totaling 135 THB.
Each label undergoes laboratory analysis upon registration, with a key focus on alcohol percentage. The maximum tolerance allowed is ± 0.5%.
These taxes are intended to fund various social initiatives. Online sources often contain outdated and confusing information about these five different rates, leading to incorrect conclusions. It’s essential to note that the total excise duty calculated earlier is subject to a 17.5% increase in total. For example, if you pay 135 THB in excise duty on your wine, you’ll need to add 135 X 0.175, which equals 23.625 THB, resulting in a total of 158.625 THB.
When registering labels for import and with each wine import into Thailand, you are required to declare the retail price to the final consumer (RRP) to the Excise Department. This requirement may seem unconventional, and indeed it is. Importers must specify the price at which their wine will be sold in stores or large-scale distribution. If this price exceeds THB 1,000, including VAT, a 10% tax on the declared price is levied.
Market controls are relatively lenient, focusing mainly on major retail outlets and supermarkets. Hotels, bars, and clubs often go unmonitored, leading to the phenomenon of some wines being sold in these establishments at prices seemingly below cost.
Value Added Tax (VAT) is imposed on the cumulative total of all the previously mentioned taxes. In Thailand, the standard rate of VAT is a flat 7% applicable to all products.
How to import wine to Thailand
Only Thai entities, whether individuals or juristic persons, are eligible to obtain the licenses required for importing wines into Thailand. Let’s examine these licenses in detail:
To acquire the import license, you must furnish a registered address serving as a fiscal warehouse (the entry point for the product into the country). It’s important to note that this address cannot be located near schools and temples. The import license typically takes around 30 days to obtain. However, it’s crucial to be aware that companies must meet specific requirements to operate in the alcoholic beverages sector. If you need to establish a company for importing wines, it’s advisable to consult a knowledgeable professional. Silklegal.com, with its extensive expertise in this area, can provide valuable assistance.
Wholesale License (Type 1)
Wholesale activities are defined as the sale of quantities exceeding 10 liters. The corresponding license can be secured in approximately 20 days. The registered address for wholesale operations is not in proximity to temples or schools
The license, also referred to as Type 2, is necessary for selling single bottles or serving wine by the glass. This license is typically used in shops and public establishments. It’s important to ensure that the location is situated at a suitable distance from temples and schools to comply with regulations.
There are four additional types of sales licenses dedicated to private clubs and entertainment venues.
After obtaining the necessary licenses, it’s crucial to register the labels with the Excise Department. This step holds significant importance because, during the importation process, the product will be categorized at customs based on the information you have previously provided. Any discrepancies can lead to delays, fines, and potentially even the confiscation of the product. It’s advisable to seek assistance from a professional with expertise in regulatory and customs matters, such as our partner at siamdevelopment.com.
Once the labels have received approval, one bottle per label is sent to the laboratory for microbiological analysis and to determine the alcohol content. Once this process is completed, you can proceed to ship the initial batch of wine.
At customs, your broker will be responsible for affixing the labels in the Thai language and attaching the excise duty payment stamps to each bottle.
Free Trade Agreement between Thailand and Europe: reality or legend?
Concluding this overview of how to import wine into Thailand, we should mention the ongoing discussions surrounding Free Trade Agreements between Thailand and Europe. These discussions have been ongoing since 2013 and have seen interruptions at various points. If an agreement were reached between these two parties, it could potentially reduce or even eliminate duties on imports. This would put European and Australian wines on equal footing, which could significantly impact market shares.
During the “High Level Dialogue on ASEAN Italy Economic Relations” conference organized by the Ambrosetti Forum in Bangkok on October 4, 2023, interesting insights were gathered behind the scenes.
It’s evident that such agreements are essential for both parties. Europe imports more from ASEAN than it exports to ASEAN. Signing these agreements would be mutually advantageous, especially considering the loss of critical markets due to recent geopolitical decisions.
The situation has shifted since 2014 when Europe withdrew from negotiations because Thailand didn’t meet democratic standards following a coup d’état. Now, it’s Thailand that seeks a peaceful environment from the Europeans. Currently, both sides are culturally and politically distant. While the intention is not to proceed with the agreements, a strong mutual need is emerging, with the Asian side growing stronger and more united. It’s likely that the Free Trade Agreement between Europe and Thailand will materialize in 2024, although it may come with various limitations if geopolitical strategies remain unchanged.
To learn more about wine taxes and other licensing requirements for importing wine into Thailand, we highly recommend getting in touch with our specialists. Please contact us at [email protected] or by using the contact form provided. You can also learn more about our corporate and commercial practice here.