As Thailand is transitioning towards a digital economy amid the increasing role of technologies in the business sector and our everyday life, including trading, entering into business agreements, and conducting financial transactions via digital platforms at home and abroad, plus the fact that such digital transactions have increasingly replaced traditional transactions, the government has sought new methods to assess related taxes and design appropriate tax policies. On September 1, 2021, the Revenue Code Amendment Act (No.53), B.E. 2564 (2021) (value-added tax (VAT) collected from foreign e-service providers) was enforced. The Act shall pave the way for the collection of VAT from foreign e-service providers in Thailand that do not register to be VAT registered entities, and receive annual income of at least THB1.8 million at the rate of 7 percent of service value. Based on the government’s estimate, the country is expected to add at least THB5 billion to its coffers during the 2022 fiscal year.
The VAT collection shall cover providers of foreign e-services: 1) Membership applications such as online music and film streaming; 2) Online advertising; 3) Intermediary platforms for buyers and sellers who do not have their own applications and P2P networks; 4) E-commerce platforms; and, 5) Online service platforms (mainly travel agents). Such foreign e-service providers are obliged to register for VAT, file VAT returns, and pay the corresponding VAT on a monthly basis, without deducting any output tax (VAT pay-only), and preparing tax invoices and tax reports.
KResearch assesses that the use of digital service platforms in Thailand will thrive ahead. Over the next three years or by 2024, the value in using the above-mentioned foreign digital platforms in Thailand is projected to approach THB100 billion, or grow roughly 10-15 percent p.a. (GAGR)[1] . The VAT collection on foreign e-service providers is intended to create fairness between related Thai and foreign service providers, and increase tax income for the country. The impact on those in the supply chain may vary. Passing on the tax costs to service users may be one of the options that foreign e-service providers may consider. However, it may not happen at any time soon due to complexity in the business and the fact that foreign e-service providers must assess all factors before deciding to do so; otherwise, it may have serious repercussions on their profitability and competitiveness, especially when technologies and consumer behavior are bound to change rapidly in the future.
[1] Preliminary assessment under the current business and technological contexts.
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