In 2017, the Thailand Revenue Department conducted the first public hearing and invited the public and private sectors to provide opinions on the concept proposals to amend the Revenue Code to impose direct and indirect taxation on e-business operations.

The Revenue Department took the opinions submitted into consideration during study and composition of a new draft bill. Contrary to the previous Proposal, the Revenue Department now aims to separate the content into the following three new draft bills:

1. Extraterritorial VAT regime.

2. Corporate income tax particularly on the definition of permanent establishment and the obligations of commercial banks to withhold tax at the maximum rate of 15%.

3. Elimination of the current exemption from VAT for minimal value goods (THB 1,500).

The Revenue Department subsequently launched a second public hearing on the extraterritorial VAT regime - addressing the e-business tax in relation to VAT collection from services provided by foreign operators through electronics means for the service recipients in Thailand. This public hearing ended 9 February 2018.

In this article, we provide a summary of the key elements of the draft bill on VAT collection from foreign operators.

1. Applicable transactions

In a transaction where a service recipient (i) pays service fees to a foreign operator providing services through electronic means in a foreign country and (ii) uses such services in Thailand, the service recipient is not required to remit VAT to the Revenue Department if the service recipient is not a Thai VAT registrant.

2. VAT registration for a foreign operator

In circumstances where a foreign operator provides services through electronic means to a non-VAT registrant and those services are used in Thailand:

  • If the foreign operator receives income from providing the services amounting to more than THB 1.8 million per year, it must apply for a VAT registration.
  • If the foreign operator receives income from providing the services amounting to less than THB 1.8 million per year but wishes to apply for a VAT registration, it may submit an application in accordance with the rules, measures, and conditions to be specified by the Director-General.
  • If the foreign operator provides electronic services to a recipient in Thailand through a foreign digital platform, income generated from those services is the VAT base for the foreign digital platform. If income generated from the foreign digital platform exceeds THB 1.8 million, the foreign digital platform must apply for a VAT registration.

VAT registration for the foreign operator can be made via the Revenue Department's website.

3. Rights and obligations of a foreign VAT registrant

A foreign VAT registrant is:

  • Liable to VAT if services are provided to a service recipient without VAT registration in Thailand and such services are used in Thailand.
  • Unable to charge VAT to such service recipient in Thailand.
  • Required to file VAT return forms through the Revenue Department's website and remit VAT by electronic means (to be prescribed by the Director-General).
  • Unable to claim input tax charged by a Thai VAT operator or refund from the Revenue Department.
  • Not required to issue a tax invoice.
  • Required to prepare output tax reports (details to be prescribed by the Director-General), but not required to prepare input tax report and inventory report.
  • Subject to the same fines, surcharges, and criminal fines as a normal VAT registrant if it fails to register itself as a VAT registrant, file VAT return forms, remit VAT, or remit an incomplete amount of VAT, or commits any other violations.

4. Language of documents

VAT applications, return forms, output tax reports, and other applicable documents can be prepared in English.

5. Treatment on a digital platform

Digital platforms include websites, applications, and online market places.

Apart from the VAT registration requirement set out above, the foreign digital platform will be liable to the VAT on the income received from the service recipient. However, if all of the following requirements are satisfied, the income will be treated as the VAT base of the foreign operator, for which the foreign operator itself is liable:

  • A document provided to a service recipient stating that this service is provided by the foreign entity itself (not by the digital platform).
  • A contract is signed between the foreign operator and the digital platform stating that the foreign operator is responsible for VAT.
  • The digital platform does not approve the charge of service fees to the service recipient.
  • The digital platform does not approve the service provision to the service recipient.
  • The digital platform does not determine the terms and conditions of the services.

6. Non-deductible and non-creditable input tax

Input tax remitted by service recipients under reverse charge mechanism for a service fee charged by a foreign operator (including a digital platform) will not be deductible or creditable by the service recipients from corporate income tax and VAT perspectives, if the foreign operator (including the digital platform) does not comply with the requirements above (eg, failure to apply for VAT registration, VAT return filing or VAT remittance, or payment of incomplete VAT).

7. Effective date of the legislation (grace period)

The law will take effect after 180 days upon published in the Royal Gazette.