Complete Guide for Tour Operators, Hotel Booking Agents and BSP Agents (2026 Update)
Introduction: Why Travel Business Taxation Is More Complex Than Other Industries
The travel industry is not simply about “selling services.” It involves acting as an intermediary, collecting money on behalf of others, passing payments through, calculating commissions, splitting revenue, and in many cases operating purely as an agent rather than the principal service provider.
This creates complex tax questions that do not arise in ordinary businesses.
Key tax questions include:
- Is VAT calculated on the full selling price or only on commission?
- When must 7% VAT be applied?
- Is 3% withholding tax required?
- Are cancellation fees considered income or damages?
- How should tour packages be structured for tax compliance?
This guide explains VAT and withholding tax treatment for travel businesses in Thailand in detail, with practical examples and real calculations.
Part 1: VAT (Value Added Tax) in the Travel Industry
1. General VAT Rule in Thailand
Under Section 77/2 of the Thai Revenue Code, any service rendered in Thailand is subject to 7% VAT.
The critical question in travel businesses is:
Who is the actual service provider, and whose revenue is being taxed?
In many cases, the travel company is merely an agent. In other cases, it acts as the principal. This distinction determines the VAT base.
Part 2: Hotel Booking Agents
2.1 Net Rate Model
Example:
- Room price charged to customer: 100 THB
- Hotel charges agent: 95 THB
- Agent sells to customer: 100 THB
- Difference: 5 THB (commission)
Tax Analysis
- The hotel issues a tax invoice for 95 THB + VAT.
- The agent’s income is 5 THB (commission).
- The agent must charge 7% VAT on the 5 THB commission.
- If the agent is a Thai juristic entity, the hotel must withhold 3% withholding tax on the commission payment.
👉 VAT is calculated only on the commission amount, not the full room price.
2.2 Commission Percentage Model
Example:
- Hotel sells room for 100 THB.
- Commission agreed at 5%.
Tax Treatment
- Hotel issues VAT invoice for full 100 THB.
- Hotel pays 5 THB commission to agent.
- Hotel must withhold 3% withholding tax on 5 THB.
- Agent must charge 7% VAT on the 5 THB commission.
The commission is considered a service fee subject to VAT and withholding tax.
2.3 Agent Collects Payment Directly
Example:
- Agent collects 100 THB from customer.
- Agent pays 97 THB to hotel.
- Commission: 3 THB.
VAT is calculated only on the 3 THB commission.
However, documentation must clearly support the agent structure. Otherwise, the Revenue Department may treat the agent as principal and assess VAT on the full 100 THB.
Part 3: Tour Operators in Thailand
Tour operators are subject to VAT regardless of whether the tour is domestic or international, because the service is organized and managed within Thailand.
3.1 Outbound Tours
Even if tourists travel abroad, the organization, marketing, and contract formation occur in Thailand.
Therefore:
- The service is considered rendered in Thailand.
- 7% VAT applies.
3.2 Inbound Tours
Services provided to foreign tourists visiting Thailand are also subject to 7% VAT.
There is no automatic VAT exemption simply because customers are foreigners.
3.3 Package Tour (All-Inclusive)
Example:
Package price: 30,000 THB including:
- Air tickets
- Hotel accommodation
- Transfers
- Meals
Tax Treatment
VAT must be calculated on the full 30,000 THB.
If the customer is a company:
- 3% withholding tax applies.
This is because the tour operator is treated as the principal selling a bundled service.
3.4 Cost Plus Model
Example:
- Service fee: 5,000 THB
- Hotel and airfare charged at actual cost
If the contract clearly separates:
- Management fee (5,000 THB)
- Reimbursable expenses (at cost)
Then:
- VAT applies only to 5,000 THB.
- Reimbursed expenses are excluded from VAT base.
⚠️ Important: Documentation must clearly show agency structure and reimbursement arrangement. Otherwise, the Revenue Department may treat the entire amount as taxable revenue.
Part 4: BSP Agents (Airline Ticket Agents)
4.1 Commission from Airlines
When BSP agents receive commission from airlines:
- 7% VAT applies to commission.
- Airlines must withhold 3% withholding tax.
- Agent must issue tax invoice to airline.
4.2 Sub-Agents
If a sub-agent provides ticketing services directly to customers:
- VAT applies to the sub-agent’s service fee.
- Withholding tax applies if paid by a juristic person.
4.3 Ticket Cancellation Fees
If a cancellation fee represents genuine damages:
- It is not subject to VAT.
- No withholding tax applies.
However, if the cancellation fee is shared as commission:
- The commission portion is subject to 7% VAT.
- 3% withholding tax applies.
Part 5: Summary of Common Tax Rates
| Item | VAT | Withholding Tax |
| Commission | 7% | 3% |
| Package Tour | 7% | 3% |
| Cost Plus (service fee only) | 7% | 3% |
| True damages | Not applicable | Not applicable |
Part 6: Common Tax Risks in Travel Businesses
Many travel companies face tax assessments due to:
- Charging VAT on incorrect base
- Failing to distinguish agent vs principal
- Not withholding 3% when required
- Poor documentation for Cost Plus structure
- Mixing commission and reimbursement revenue
The Revenue Department frequently audits travel agencies due to the complexity of revenue flows.
Part 7: Foreign-Owned Travel Businesses in Thailand
If your company involves:
- Foreign shareholders
- BOI promotion
- Foreign Business License (FBL)
- Cross-border payments
Additional tax considerations apply:
- VAT reverse charge on imported services
- Permanent establishment risk
- Transfer pricing rules
- Withholding tax on overseas payments
- Double tax treaty analysis
Foreign-owned travel companies require careful structuring to avoid unnecessary VAT exposure or tax reassessment.
Final Conclusion
The travel industry in Thailand involves multi-layered tax implications that go beyond ordinary service businesses.
Incorrect structuring can result in:
- Overpayment of VAT
- Under-withholding penalties
- Tax reassessments
- Administrative fines
Proper classification between agent and principal, clear contractual terms, and accurate VAT base calculation are essential for compliance.
If you operate a travel agency, tour operator, hotel booking platform, or BSP agent in Thailand, professional tax structuring is strongly recommended to avoid future tax risks.
