Tax Ruling on IT Services by an Overseas Company

Company A is incorporated under Thai law and engages in the business of advertising. Company A entered into a service agreement with Company B, which is a company incorporated under Singapore law. Under the terms of the agreement, Company B provided services related to Information Technology such as internet access service, data network service, firewall management and others.

Keywords: Mazars, Thailand, Tax, VAT, WHT, IT, Revenue Department

20 November 2013

In order to provide such services, the two parties communicated and coordinated with each other via telephone and e-mail. Company B did not send any of its employees to Company A and the payment of the service fees was made directly to Singapore.

According to the facts as stated above, the Revenue Department ruled that the service fee derived by Company B was categorised as a business profit. Therefore, this amount of income was not subject to corporate income tax. Company A was not required to withhold tax on this payment.

In respect of VAT, the Revenue Department rules that payment in respect of such services was paid to a company incorporated outside Thailand which has no active business operations in Thailand. The services are provided outside Thailand but used in Thailand. Therefore, Company A was required by law to remit the VAT on such payment to the Revenue Department.