Last year the Thai Cabinet approved an initial draft of an amendment to Thailand’s Revenue Code to make foreign e-commerce businesses liable for VAT on services provided to customers in Thailand.

The government has indicated that it is likely that the law will come into effect in 2020, in an effort to boost VAT collections.

On line businesses expected to be affected include:

• Online hotel reservations
• Subscription to online movies, music and e-books
• Online gaming services
• Online advertising
• Sticker downloads
• Websites, applications and online market places

Current legislation

At the moment, the responsibility for remitting VAT on online services from foreign service providers rests with the customer, commonly known as a reverse charge mechanism. The customer is meant to pay the VAT to the Revenue Department themselves.

A large number of individuals use the services of foreign online service providers and in practice only a limited number of individuals would actually remit the VAT to the Revenue Department.

In contrast, domestic entities would have to add VAT to the price of their services. For individuals this means the service from a domestic supplier could end up costing more compared to the same service from a foreign service provider, assuming an individual adopts the usual practice of not remitting VAT for the foreign service provider.

Proposed new legislation

The new law puts the onus for paying VAT on the foreign services provider. If the service provider has annual income of at least Baht 1.8 million they are required to register for VAT and pay online on a monthly basis, similar to domestic businesses.

The law divides persons liable to remit VAT into two categories:

• Foreign entities providing services through electronic media in Thailand to non-VAT registered recipients that use such services in Thailand.
• Digital platform owners, who are liable to VAT instead of foreign suppliers, providing services electronically to non-VAT registered recipients that use such services in Thailand.

In addition to boosting VAT collections, the draft law aims to create a level playing field for domestic and foreign entities providing services online to Thai customers.