Executive summary

After Thailand's Revenue Department proposed a draft bill in relation to the Value Added Tax (VAT) rules for nonresident e-commerce, it invited the public to provide comments on the draft bill in early February 2018. The results of this public consultation were reported during the week of 2 April 2018.

Of the 23 comments received, 17 expressed disagreement with the proposed draft bill while 6 were in agreement.

This Alert summarizes the Revenue Department's clarifications following the public consultation.

Detailed discussion

Scope of e-business

E-commerce includes online hotel reservations, e-booking services, subscription to online movies and music, online advertising and gaming, provision of software and digital content, among others, while platforms include websites, applications and online marketplaces.

The Revenue Department clarified that a provider of internet payment system services is not considered to own a platform under this draft bill.

Results of services used in Thailand

Nonresident e-commerce operators will be liable to VAT under this bill if they provide services in foreign countries and the results of such services are used in Thailand, regardless of the tax residency of the service recipient. For example, the location of use should be taken into account.

VAT obligations of Thai VAT registrant foreign e-commerce operators

Nonresident e-commerce operators liable for VAT under this bill will be required to register for VAT in Thailand. Based on the Revenue Department's clarification, it seems that VAT registration under this draft bill will not automatically create a permanent establishment (PE) of the nonresident business. However, the issue of whether a PE exists still needs to be separately considered on the basis of local corporate income tax rules and the relevant double tax treaty.

As a VAT operator, the nonresident e-commerce operators/foreign-based digital platform owners have to absorb the VAT cost because it is neither allowed to issue output tax invoices nor to collect VAT from Thai service recipients. They may therefore need to consider compensating for these VAT costs by including them as a component of their service fees.

Checking the status of Thai VAT registrant service recipients

Nonresident e-commerce operators can preliminarily check the Thai VAT registration status of service recipients in the following ways:

• Service recipients provide their tax identification number
• Service recipient confirm whether they are VAT operators

The Revenue Department will facilitate this for nonresident operators by providing VAT registration information of local VAT operators in English through the Revenue Department's website.

Recoverability of input tax by Thai VAT registrant nonresident e-commerce operators

As Thai VAT registrants under this bill, nonresident e-commerce operators will be liable for payment of VAT but will not be able to recover any input tax charged by a local VAT registrant. At the same time, they will not be required to carry out normal VAT compliance tasks such as issuing tax invoices or preparing input tax reports.

Any overpayments of VAT to the Revenue Department (such as VAT paid on fees received from Thai VAT customers) can be refunded.

If a nonresident e-commerce operator wants to claim the input tax incurred in Thailand, it is entitled to register under the Thai VAT system. However, full VAT compliance obligations will apply in such case.

Non-recoverable self-assessed VAT by Thai VAT registrant service recipients

According to the proposed draft bill, any self-assessed VAT remitted by Thai VAT registrant service recipients cannot be claimed as input tax if the nonresident e-commerce or digital platform operators are not compliant with the proposed VAT rules in this bill.

The Revenue Department plans to post a list of nonresident e-commerce operators and digital platform operators who have registered for Thai VAT, as well as those who have not complied with VAT rules, on its website for public information and reference.

Next steps

The Revenue Department will take the comments received from the public into consideration for further amendment of the draft bill.

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CONTACTS

For additional information with respect to this Alert, please contact the following:

EY Corporate Services Ltd., Bangkok

• William Chea
  william.chea@th.ey.com
• Thitima Tangprasert
  thitima.tangprasert@th.ey.com

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ATTACHMENT

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