The Thai Government has been trying to appropriately conceptualize an e-commerce tax to efficiently capture the percentage of revenue generated by the e-commerce sector which has seen large volume and strong growth recently. Prior to e-commerce, tax collection has relied solely on principles based on the physical presence of the taxpayer and conventional sources of income, thus making the e-commerce tax issue a controversial one across the globe. Recently, the Thai Revenue Department has published the main concepts of its draft e-commerce tax law on its website (without publishing the draft law in full) and has offered an online comment survey form in order to gauge the private sector’s view.

The Revenue Department’s e-commerce tax main principles as published by the Revenue Department

E-commerce tax principles


a. An entity incorporated under the laws of a foreign country that conducts trade or business through electronic methods, if it falls into one of the following categories and as a result receives income or profits in Thailand, shall be deemed to be carrying on business in Thailand and subject to income tax in Thailand, only with respect to such income or profits:

(1) having a Thai internet domain;

(2) having created a payment system in Thai Baht or that requires a money transfer from Thailand; and

(3) any other cases as further prescribed by the Director-General.

Under Thai domestic tax law, a foreign entity is regarded as carrying on business in Thailand and subject to corporate income tax in Thailand if it:

(a) carries on business in Thailand by itself, e.g. opens branch office in Thailand; or

(b) is deemed to carry on business in Thailand, e.g. has an employee, go-between, or an agent generating income in Thailand.

However, the foreign entity may be entitled to benefits under an applicable tax treaty. Under the general rule of tax treaty, the foreign entity will be taxed under the domestic tax law only if it carries on business in Thailand through a permanent establishment (PE).

In some cases, a foreign entity is considered to be carrying on business in Thailand under Thai domestic tax law, but is not regarded as having a PE in Thailand, and therefore it will not be taxed in Thailand by virtue of tax treaty protections.

This proposal is to amend the domestic tax law to expand the meaning of “carrying on business in Thailand”, in order to make foreign e-commerce operators subject to Thai corporate income tax. However, the Revenue Department’s proposal still does not cover how the e-commerce tax proposal will interact with the applicable tax treaty.

b. If an entity incorporated under the laws of a foreign country conducts trade or business using electronic methods and does not carry on business in Thailand but receives taxable income from such trade or business in the form of online advertising fees, web hosting fees, or any other types of income prescribed in a Ministerial Regulation, the payer of such taxable income shall withhold income tax from the taxable income at the rate of 15 percent and remit it to the Revenue Department. It is still unclear whether the mechanism to impose withholding tax on the payment related to online advertisement or web hosting fees will be through a re-categorization of such fees as royalties or the imposition of a new type of withholding tax under the Revenue Code.

In addition, the Revenue Department is still silent about possible relief under the DTAs for to the withholding tax.

c. Entrepreneurs outside the Kingdom of Thailand that sell intangible assets or provide services by using electronic methods to a purchaser or client who is not a value added tax registrant, if its income from selling intangible assets or providing services exceeds Baht 1.8 million per year, shall register as a value added tax registrant and be subject to the value added tax pursuant to the rules, procedures, and conditions prescribed by the Director-General.
d. If an entrepreneur outside the Kingdom of Thailand sells intangible assets or provides services through a website or application owned by a third party, the owner of the website or application shall be deemed to be the representative of the entrepreneur and shall apply for value added tax registration for the entrepreneur. If a foreign operator provides a marketing platform to sellers or service providers it may be deemed as a VAT agent having obligations to register for VAT in Thailand for the sellers or service providers, there is still questions about the mechanism to enforce such VAT agent system.
e. The exemption of VAT on the importation of goods with a value less than Baht 1,500 will be repealed.

The Revenue Department allowed the private sector to express its views on the draft e-commerce tax law on its website until 11 July 2017. The Revenue Department expects to propose a draft of the e-commerce tax law to the Cabinet for consideration by the end of July and it is expected that the legislation will take effect by the end of this year. After the Revenue Department has gathered the public’s comments on the e-commerce tax law, we hope to see that the e-commerce tax law develops more clarity and practicality.

For additional information, please contact Aek Tantisattamo of our Bangkok office.