Tax costs for online advertising to a foreign firm
Many companies currently use online advertising to promote their business. Advertisements may be shown in a search engine or the website of a company residing outside of Thailand. There are several rulings issued by the Revenue Department on the Thai tax implications of a Thai company paying advertising fees to an offshore advertising company.
Keywords: Mazars, Thailand, Tax, Revenue Department, Revenue Code, Online Advertising, VAT
17 February 2020
One of those rulings is Ruling No. KorKhor 0706(KorMor.05)/1022 dated 8 December 2004. The background to this ruling is as follows: A Thai company advertised its products on the website of a Singaporean company which did not have an entity in Thailand. The Thai company asked the Revenue Department for an opinion on the VAT implications of the adverting fee that it paid to the Singaporean company. In this case, the Revenue Department stated that, if the website can be accessed in Thailand, the advertising is considered a service provided outside of Thailand but used in Thailand. Therefore, the fee for such advertising is subject to Thai VAT. The Thai company, as the payer, must remit VAT on the advertising fee paid to the Singaporean company to the Revenue Department using Form Por.Phor. 36.
Another example is Ruling No. KorKhor 0706/Por./9322 dated 10 November 2006. The background to this ruling is as follows: A Thai company operated a jewellery business. It opened an account with a company in Switzerland (“the Swiss company”) which did not operate in Thailand. The purpose of opening the account with the Swiss company was to advertise, sell, and auction its jewellery through the Swiss company’s website, which could be seen by users around the world, including Thailand. The Swiss company’s server used for advertising was located outside of Thailand. In this case, the Revenue Department stated that, as the Swiss company’s website could be accessed by users around the world, including Thailand, the Swiss company’s advertising service was considered to be provided outside of Thailand but used in Thailand, even though the Swiss company’s server was located outside of Thailand. When the Thai company paid service fees to the Swiss company, it was required to remit VAT on the service fee to the Revenue Department.
The advertising fee paid by a Thai company to a foreign advertising company is assessable income under Section 40(8) of the Revenue Code. Therefore, it does not fall under Section 70 of the Revenue Code, which sets out the withholding tax treatment of a payment made from or in Thailand to a foreign company not conducting business in Thailand. Accordingly, the Thai company is not required to deduct withholding tax from the advertising fee paid to the foreign advertising company.