On June 9th, 2020, the Thai Cabinet approved a draft amendment to the Thai Revenue Code which would impose a value-added tax (VAT) on foreign E-service providers and E-platform operators (with no permanent establishments in Thailand) that received payments from users located in Thailand. The new VAT requirement is expected to apply to all forms of qualifying international e-service providers and e-platform operators. These include but are not limited to websites, smartphone applications, and social media. The new amendment will apply to a variety of businesses, from hotel booking sites to streaming media platforms.

The new legislation aims to update Thailand's tax guidelines to be in accordance with guidelines from the Organization for Economic Cooperation and Development (OECD) titled Mechanisms for the Effective Collection of VAT/GST where the supplier is not located in the jurisdiction of taxation, which has already been adopted by many countries. In addition to this, the amendment would allow Thais to see how much they spend on e-services and e-platforms provided by foreign operators.

According to this amendment, foreign e-service providers and e-platform operators which are not located in Thailand but receive more than THB 1.8 million in any given tax year from non-VAT registrant customers or users in Thailand, and that provide paid-for services within Thailand, must register for VAT with the Thai Revenue Department. This is the same rule that already applies to Thai operators of VAT-paying businesses. VAT registration (which can be done electronically) will result in foreign operators having to remit 7% VAT on income received from non-VAT registrant customers or users in Thailand, together with VAT returns, to the Revenue Department on a monthly basis. However, unlike ordinary Thai VAT registrants, foreign e-service providers and e-platform operators must not deduct output tax from the 7% VAT payable or issue tax invoices to Thai customers. Operators of e-platforms whose members provide e-services will have to pay VAT on behalf of those members.

The new amendment should not create any tax burdens for Thai consumers who purchase services from the offshore operators. Most Thai consumers are unaware that they must currently pay 7% VAT to the Revenue Department, and file the relevant VAT form, each time they pay foreign operators for services, on a self-assessed basis.

The amendment to the revenue Code will be sent to be approved by the parliament before it is published in the Government Gazette, and the Revenue Department is subsequently expected to issue ministerial implementing regulations and informational guides to the public. This should provide more clarity on specific unanswered questions such as the types of exempted e-services, enforcement mechanisms, penalties for non-compliance, and other issues.

Originally published June 26, 2020.

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