What a digital service tax is and how to register for it
Thailand has approved a draft bill which will require foreign digital service providers to remit value-added tax (VAT). This new tax law would require non-resident platforms and companies that generate more than THB 1.8 million per annum from the provision of digital services in the country to pay a 7% VAT on sales.
If passed, the new tax law will affect services such as e-books, music sales, video streaming, gaming, advertising, and hotel & tourism booking.
VAT on e-Services will be collected from the following operators who receive a minimum of THB 1.8 million per year from services in Thailand:
- E-Commerce groups such as eBay, Alibaba and Amazon
- Media and advertising groups such as Google, Facebook and Line
- Service groups such as Marketing and Evernote
- Transport groups such as airlines
- Travel & tourism groups such as Booking and Airbnb
- Digital content groups such as Netflix, iFlix, JOOX and Spotify
- Software groups such as Apple
- Game groups such as Stream and PlayStation Store
- Structure groups such as Cloud services
- Financial service groups such as PayPal
- Forex Investment groups
- Online gambling groups
Expected to generate over THB 3 billion in the first year, the Thai legislation is a significant move to provide fair treatment for local digital service operators which must fully comply with the local tax laws.
Thailand’s digital VAT basis
VAT is a consumption tax, meaning that VAT will be paid to the country where the services or products are consumed. Because e-Services are commonly and frequently used, the Thai government aims to develop a tax law of the year 2020 (BC 2563) or The bill of Value Added Tax Act for operators who provide electronic services from foreign countries and the services are used in the Kingdom of Thailand.
To be fair and treated similarly for digital services provided by Thai suppliers, a proposal to revise the law for the VAT collection from foreign digital service (e-Services) providers in Thailand who are not VAT registrants are as follows:
1. Dealings with the Thailand revenue department
The addition for the new provision proposed is:
- All filings of VAT returns, payment of VAT, notices, letters, reports, records and documents that are required to be delivered to the Revenue Department must be submitted via electronic processes.
Three new provisions added to the existing definitions for goods, digital services and electronic platforms are:
- Goods refer to tangible objects with a shape or form that is sold or used for any purpose, which includes tangible objects that are imported but not those sold via internet or electronic platforms
- Digital services or e-Services refer to services that are delivered through the internet or electronic platforms, and cannot be provided or received without using technology
- Electronic platforms are the channels, electronic marketplaces or processes that providers use to deliver digital services
3. Liability and responsibility for remittance of VAT
Two new provisions that are specified:
- Foreign suppliers who provide digital e-Services directly to consumers who are not VAT registrants in Thailand shall be liable for VAT calculated on the sale price but without credit for the input VAT. The supplier must submit a VAT return and remit VAT to the Revenue Department
- For foreign suppliers of digital e-Services through an electronic platform for service offering, payment, delivery and other activities, the operator of the platform is liable for VAT, VAT submissions and the VAT remittance to the Revenue Department
4. VAT registrations
Two new provisions appointed:
- Foreign suppliers who provide digital e-Services to consumers who are not VAT registrants in Thailand must register for VAT
- VAT registration can be done via electronic processes
5. Tax invoices
The new provision prescribed:
- Foreign suppliers who provide digital e-Services to consumers who are not VAT registrants in Thailand shall not issue tax invoices
Thailand digital tax VAT registration process
To facilitate the foreign service operators, the Thai Revenue Department will accept VAT registration through online platforms of the Thai Revenue Department. The online registration will require fewer documents, fewer registrations with other departments and less complication of the registration process. The details, rules and regulations are to be advised. Furthermore, the cabinet has approved the law and will be proposed to the council and the Ministry of Finance.
The details, rules and regulations are to be advised.