Corporate Outlook July2021
Starting from September this year, foreign e-commerce businesses will be liable for 7% VAT on services provided to customers in Thailand. In addition to boosting VAT collections, the law aims to create a level playing field for domestic and foreign operators providing services online to Thai customers.
WHAT IS E-SERVICE TAX?
e-Service Tax or Electronic Service Provider Act abroad for domestic service recipients. It is an Act approved by the Cabinet and announced in the Government Gazette on February 10, 2021 but this new tax law shall be enforced on September 1, 2021 and onwards.
According to the Amendment of Revenue Code (Issue No. 53) 2021, the overseas entrepreneurs/service providers who provide e-service via internet network, including any medium providing an online platform between entrepreneurs/service providers and customers, who have a revenue derived from e-service in Thailand more than THB 1,800,000.00 per annum, must register VAT and submit the monthly VAT to the Revenue Department (RD) under the pay-only system (no claiming of input tax) which is not allowed to issue a tax receipt but does not have to submit a report of input tax to the RD.
The Revenue Department has aimed to develop taxation practices in line with international standards set by the Organization for Economic Cooperation and Development (“OECD”), with more than 60 countries including Australia, New Zealand, Japan, Taiwan, and South Korea already adopting similar practices in accordance with the OECD’s recommendations.
This amendment to E-VAT rules redefined the meaning of e-Service as follows:
- The definition of goods is excluded from intangible property transferred through an electronic network.
- e-Services are defined as any service, including intangible property which is automatically transferred via the internet or other electronic networks, and such service cannot be rendered without information technology, for instance, online downloading of game, music, movie, or sticker.
- e-Platform is defined as any of marketplaces, channels or any other methods used by several operators to provide e-Service to its service recipients,
On its Facebook page, the Revenue Department provides examples (in Thai language) of electronic services that fall under the e-Service Tax Law to include online downloading of games, music or movies; stickers sold in chat applications; streaming services; and advertising services on webspace or applications.
e-Service businesses expected to be affected include:
- Online streaming music, movies, series, games.
- Online shopping platform, marketplaces, channels.
- Online investments, finances.
- Online reservation of airlines, hotels, tourisms.
- Online media, advertising, applications and websites
- Sticker downloads
The Revenue Department also provided examples of the affected “electronic platforms” which included include Apple, Google, Facebook, YouTube, Line, Joox, Netflix and TikTok.