The Thai Revenue Department is considering ways to improve and increase revenue collection from businesses operating in e-commerce. In the context of international ecomฌmerce transactions, the current Thai tax reguฌlations do not provide the Department with an adequate basis to impose Thai taxes since the foreign operators may not have a presence in Thailand under domestic rules. In June, the draft legislation to collect tax from foreign e-commerce operators was released.
This draft will impact many foreign ecommerce players that are available to the Thai market either through Thai corporate income tax, withholding tax and/or VAT. The key highlights in the draft legislation are summarised below:
1 A foreign company that operates a business by using electronic media and either has (1) a local domain in Thailand, (2) a payment in Thai currency or money is transferred from Thailand, or (3) meets any other conditions as prescribed by the director general [the details of which have not yet been released], will be regarded as having a taxable presence in Thailand and will be subject to Thai corporate income tax.
2 A foreign company that operates its business by using electronic media, but does not meet the requirements of creating a “permanent establishment” in Thailand, will be subฌject to 15 per cent withฌholding tax on income derived in Thailand from online advertising, providing space on a webpage or other income specified by the Ministerial Regulations [the details of which have not yet been released].
3 A foreign company that sells intangible goods or renders services through electronic media to a non-VAT registered person in Thailand will be required to register for VAT and will be subject to VAT on the Thai sales it concludes if the income earned is more than Bt1.8 million per year.
4 In the case of a foreign company that sells intangible goods or renders services through a website or application of another provider, the owner of the website or application will be treated as an agent of the foreign company seller. In that instance, the owner of the website or application will be responsible to register for Thai VAT and administer the VAT liabilities on behalf of the foreign company.
Currently the import of tangible goods with a customs value of less than Bt1,500 is exempt from VAT. The draft legislation removes this exemption threshold.
It appears that the draft legislation raises several unanswered questions. It is not clear how the expanded definition of a “permanent establishment” and the 15 per cent withholding tax will be considered in the context of foreign company operating in a jurisdiction that has a Double Tax Agreement (DTA) with Thailand.
In addition, it can be extremely burdensome for a foreign website owner to act as a VAT agent for numerous foreign sellers and to comply with monthly VAT filling obligations for each such foreign seller. Hopefully the questions will be addressed before enactment, in order to provide industry operators with more certainty on its application.
Contributed by Benjamas Kullakattimas, Tax Partner, KPMG in Thailand