E-commerce is the sale of goods or the provision of services through computer networks and telecommunication systems or electronic media.
Keywords: Mazars, Thailand, Tax, E-commerce, VAT, Corporate income tax, Revenue code
7 July 2021
Those engaging in e-commerce have the same rights and duties to pay taxes as other operators. Those conducting such a business while residing in Thailand, regardless of whether they are individuals or legal entities registered in Thailand, and which have income from the sale of goods or the provision of services, must include such income in the income tax calculation and have a duty to register for VAT in accordance with the law.
We set out below some Revenue Department’s rulings on e-commerce.
1. Advertising foreign websites on the website of a company in Thailand (Ruling No. KorKhor 0706/Por./6172 dated 2 July 2003)
A company operates on the internet and has a website to provide information as well as to advertise foreign websites. If users click on the links to the foreign websites, the owner of the foreign website pays compensation to the company based on the number of users referred by the company. What percentage of VAT does the company have to pay?
The company is obliged to pay 7% VAT under Section 80 of the Revenue Code, as the advertisement of foreign websites on the company's website is considered to be provided in Thailand under Section 77/1 (10) and Section 77/2, paragraph 2, of the Revenue Code. Although it is a service that is performed in Thailand for a service recipient abroad, it does not result in the service being entirely used in foreign countries, because customers in Thailand may view information on foreign websites due to the advertisement.
2. Corporate income tax and VAT implications of paying for web address registration and renting space on a server (Ruling No. KorKhor 0706/(KorMor.09)/026 dated 7 January 2003)
A company engages in the tin smelting business and sells tin both domestically and internationally. It requested registering a web address under the name of thai.com with Company V located in the United States in order to have a contact place on the internet. The company also rents space on the server from Company E located in the United States to collect information through the name thai.com. What are the corporate income tax and VAT implications of payments made to those foreign companies, as they are not conducting business in Thailand?
Payments for web address registration and server space rental to foreign companies located in the United States are compensation for services provided using modern technology and having a relatively high investment cost. Therefore, such compensation is considered assessable income under Section 40 (8) of the Revenue Code. The payer is not obliged to withhold tax from such income under Section 70 of the Revenue Code. In addition, as those foreign companies provide services in foreign countries which are used in Thailand, the payer of the service fees to those foreign companies is obliged to remit 7% VAT in accordance with Section 77/1(5), Section 83/6(2), and Section 85/3(2) of the Revenue Code.
3. VAT implications of the provision of services email (Ruling No. 0702/Por./4070 dated 27 May 2009)
A company conduct a consulting business, and searches for information in Thailand, such as government information, legal information, and also prepares market trend analyses. The company provides information in English and sends it to customers abroad by email. Customers use the information entirely in foreign countries. No information is used in Thailand. The company charges a service fee based on the number of working hours spent or on a monthly basis, as specified in the contract. The copyright to the information belongs jointly to the company and the customers. The company has no right to sell the information or let other people use the information. What is the rate of VAT that should be applied to service fees charged by the company?
If the company sends government or legal information regarding Thailand, and performs market trend analyses for customers abroad by email, and the customers use this information entirely outside Thailand, it is considered a service performed in Thailand and used in a foreign country. Therefore, the company is entitled to apply 0% VAT under Section 80/1(2) of the Revenue Code, in conjunction with clause 2(1) of the Notification of the Director-General of the Revenue Department regarding VAT No. 105.
4. VAT on services performed in Thailand (Ruling No. KorKhor 0702/Por.8679 dated 19 December 2008)
Company T, which was established under Thai law, conducts business creating a website about economic, trade, and investment news in the ASEAN area. Company T sells the news to Company C, a company in the United Kingdom which has a branch in Thailand, by linking its website with Company C's website. Company C can access Company T’s website, but Company T is unable to connect to Company C's website. Those who wish to use the information on Company C's website must subscribe to it. Company C's website can be used worldwide, including Thailand. Company T charges a fee monthly for selling the news or a fee for connecting to its website from Company C’s. What is the rate of VAT that should be applied to the service fees that Company T charges to Company C?
The provision of news services by Company T to Company C is considered a service provided in Thailand, which is subject to 7% VAT under Section 77/2 and Section 80 of the Revenue Code.