A third draft of the proposed tax legislative amendments on Value Added Tax (VAT) regulations has been issued by the Thai Revenue Department (TRD), and the most affected entities will be foreign companies and electronic platforms on the Thai market. On January 14, 2020, the draft VAT bill to the current VAT provisions of the Revenue Code was issued and was kept open for public consultation until the January 29, 2020.
Scope of the Revised Draft Bill
The fundamental points of the revised draft bill are:
✓ The definition of “goods” will include both tangible and intangible goods, but intangible goods transferred through the Internet or other electronic networks will be excluded;
✓ “Electronic platform” refers to a channel used by business operators to provide electronic services to their customers;
✓ “Electronic service” refers to services delivered through electronic channels, with a considerable automated nature in which provision of such services cannot occur without the information technology. The channel operator is obliged to pay VAT on behalf of all foreign e-businesses on its platform.
✓ A person registered to pay VAT in Thailand who remunerates a foreign company for its electronic services, is required to provide a self-assessment for this fee for VAT purposes and submit this value to the TRD (although the company that provided the services will not be required to register for VAT in Thailand);
✓ The Minister of Finance will further consider the introduction of an electronic VAT registration system. Further details are expected to be released later;
✓ A foreign company who has registered for Thai VAT for providing electronic services outside of Thailand, and where such services are used in Thailand by a non-VAT registered person, is not allowed to issue Thai tax invoices. Effectively, the foreign company will not be able to pass the VAT cost as tax to consumers;
✓ The amendments will be made on the day after the law is published in the Royal Gazette. However, the provisions regarding VAT payment will be enforced in respect of income received or payments made from the first day of the seventh month from the month the proposed VAT amendments are published in the Royal Gazette.
There is uncertainty as to when the proposed VAT amendments will be published in the Royal Gazette following the public hearing process.
It has been suggested that despite the third draft providing clarity on issues not addressed in previous drafts, there is need of further clarification on unclear aspects including practical issues.
Market Fragmentation
E-commerce in Thailand is fragmented into three market channels comprising: 40% by social media to communicate with sellers, 35% through e-markets such as Shopee, and 25% via e-commerce channels for brick-and-mortar businesses such as Tesco Lotus. Thus it can be seen that e-commerce is significant to multiple types of businesses and will promote economic growth.
99% of consumers use smartphones to purchase products and services, and 77% conduct research for product information. The products with the highest demand are “mom and baby” and “health and beauty” with a respective 24.36% and 20.98%. The introduction of e-commerce will, therefore, be beneficial to the Thai market because it promotes convenience as products can be purchased online, and customers have access to additional information relating to the product on the e-commerce website.
The face of retail has changed as e-commerce has revolutionized the way business is conducted. Despite these benefits, businesses must have the proper resources and policies before operating online. In the long run, e-commerce will improve the economy of Thailand.
