Thailand approves VAT plan for digital sales included in draft legislation

Thailand looks set to become the latest South-East Asian nation to extend the scope of its VAT legislation to cover the supply of digital services.

Jun 10, 2020

Thailand looks set to become the latest South-East Asian nation to extend the scope of its VAT legislation to cover digital sales provided by non-resident businesses or platforms to customers based in Thailand. The Thailand VAT legislation was approved – according to this Reuters article – on June 9 and the next step in the process is a Thailand government vote and the announcement of a start date for the new legislation.

Affected non-resident businesses or platforms earning more than 1.8 million Thai baht (circa USD57,750 or EUR50,800) per annum will have to apply, collect and remit 7% VAT on their digital sales to customers in Thailand.

An estimated 3 billion Thai baht (USD96 million or EUR85 million) will be raised by this VAT rule change. The affected digital services will – as is now common for such rules globally – include music and video streaming, gaming, and online hotel booking platforms.

A South-East Asia tax trend

Thailand’s move follows a now familiar path in South-East Asia since the turn of the year. In January, Malaysia and Singapore both implemented new rules relating to digital sales from non-residents. In July, Indonesia is expected to follow suit while a new bill has recently been introduced for debate in the Philippines.

In Vietnam, meanwhile, a draft law was originally introduced with a provisional go-live date of July 1, 2020, but the implementation date is unlikely to be any time soon.

Thailand VAT discussions background

Thailand has been moving closer to taxing e-commerce throughout 2020. Thailand's Council of State and Revenue Department had been deliberating over a new e-commerce tax bill for some months now with no exact introduction date confirmed. It was previously expected to come into effect on January 1, 2020. Previous estimates when discussing this e-commerce tax bill were that the Thailand Revenue Department would recoup between 3 billion and 4 billion baht (circa USD$98m to $131m) per annum.

An August 2019 Reuters report quoted Ekniti Nitithanprapas, the Director-General of Thailand's Revenue Department, that a VAT on electronic businesses would be introduced in 2020. There was no elaboration back then on the exact date of such an introduction.

According to a previous report - in The Bangkok Post back in April 2019 - a draft bill aimed at taxing "digital platform operators" had been deliberated on by the Thai Council of State and the Revenue Department.

It was back in April 2018 when the Thailand Revenue Department first started the process of communicating with stakeholders who provided important feedback to a public hearing held in relation to the proposed legislative change.

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