Revenue Department Announcement No. 35/2020 June 9, 2020
The Cabinet has proposed an amendment of the Revenue Code to the House of Representatives regarding VAT collection from foreign e-Service providers and digital platforms. The amendment, drafted by the Revenue Department of the Ministry of Finance, aims to promote fairness and consistency in the application of VAT and upgrade the Thai tax system to meet international standards.
The draft amendment to the Revenue Code stipulates the following:
1. VAT registration will be compulsory for foreign e-Service providers and digital platforms with incomes exceeding 1.8 million baht per annum.
2. Foreign businesses who provide e-Services through a digital platform to customers who are not VAT registrants in Thailand are responsible for remitting VAT to the Revenue Department through the registration service and Simplified VAT system.
The amendment is intended to promote fair competition between businesses in Thailand and businesses based abroad who provide their services in Thailand. It will also reduce inconsistencies in the application of VAT in cross-border transactions and bring Thai tax law in line with international standards. The Revenue Department expects the amendment to increase tax revenue by 3 billion baht.
One group that can expect to be impacted by the new regulation are foreign companies providing digital media and entertainment services to customers who are not VAT registrants in Thailand. Such companies will be required to register for VAT and remit VAT to the Revenue Department.
In preparation for drafting the legislation, the Revenue Department studied data compiled by the Organization for Economic Cooperation and Development (OECD) in order to increase the efficiency of VAT collection from foreign e-Service providers. The OECD’s research on consumption taxes indicates that foreign businesses and digital platforms are VAT registered entrepreneurs, and therefore should be responsible for remitting VAT to tax authorities. More than 60 countries have adopted the OECD’s “International VAT/GST Guidelines” to address the problem of VAT collection in international transactions, including Australia, New Zealand, Japan, Taiwan, and South Korea.