VAT on foreign e-commerce business

In January 2018, the Revenue Department published a draft VAT bill on its website for public discussion. The bill proposes imposing VAT on foreign-based operators that provide services to customers not registered for VAT in Thailand through an electronic media or digital platform.

Keywords: Mazars, Thailand, Tax, VAT, E-Commerce, Revenue Department, NLA

05 March 2018

We summarize below the key features of the bill:

  • Entities subject to VAT under the bill

1. An overseas e-business operator that provides services electronically through other overseas suppliers’ digital platforms for use in Thailand to customers not registered for VAT, and that earns annual revenue of more than 1.8 million baht from such a business.

2. An overseas owner of a digital platform used by overseas suppliers to provide services electronically for use in Thailand to customers not registered for VAT.

  • VAT registration requirement

Overseas e-business operators and overseas digital platform owners that are subject to VAT under the new bill are required to register and pay VAT.

  • VAT base

The VAT tax base for the foreign e-business would be the total amount of service fees derived by overseas e-business operators or overseas digital platform owners. However, even if these entities were registered for VAT under the bill, they would be prohibited from collecting VAT or issuing tax invoices to customers. In addition, no input VAT credit or refund for VAT paid on expenses would be available to these entities.

  • VAT rate

The VAT rate imposed on a foreign e-business would be 10%. This statutory rate could be reduced by a royal decree. We believe that the government would apply the VAT rate for the sale of goods or the provision of services domestically (currently, 7%) to a foreign e-business.

  • E-filing obligation

Overseas e-business operators and overseas digital platform owners would be required to file VAT returns monthly through the Revenue Department’s e-filing system.

Please note that the proposed bill must first be submitted to the Cabinet for approval, then forwarded to the Council of State for a legal review. If passed, it would have to be submitted to the Cabinet again for approval before being submitted to the National Legislative Assembly (NLA) to begin the legislative process. Once the NLA approved the bill, it would then be submitted to the King for his signature, then published in the Royal Gazette in order to become effective. This entire process can take months, or even years. If the bill cannot be passed while the current government is in office, it will be invalid.