The second draft of the proposed legislative amendments (“proposed e-commerce law”) that will impact foreign e-commerce operators was issued on 17 January 2018 and is now in the process of public consultation until 9 February 2018.  All interested stakeholders can submit their comments on the second draft of the proposed e-commerce law through the TRD’s website.

 

The second draft contains material changes in relation to the previous version of the proposed law. The TRD has removed the originally proposed corporate income taxation and withholding taxation and focused on bringing e-commerce transactions with non-VAT registered persons into the scope of VAT.  It is proposed to effect the new law by amending the current VAT provisions in the Revenue Code.

 

The key highlights from the second draft of the e-commerce law are summarized below:

• A foreign company that provides services through electronic media to a non-VAT registered person must register and will be subject to VAT in Thailand if its annual VAT-able income exceeds Thai Baht 1.8 million and provided such services are consumed within Thailand.  The registration must be done within 30 days from the date its VAT-able income exceeds the threshold.
• A non-VAT registered person who pays a service fee to a foreign company operating its business through electronic media is not required to administer VAT by way of self-assessment.
• A foreign business operator registered for VAT in Thailand will be required to adhere to certain obligations, such as: 
  - Do not collect VAT from its customers in Thailand;
  - Remit the VAT payable on service fees received from non-VAT registered persons to the TRD; and
  - Submit VAT returns through the TRD’s website.
• No tax invoice is required to be issued by the foreign business operator registered for VAT in Thailand
  
• In addition, the second draft of the proposed e-commerce law established that, where a foreign company provides services through a foreign “platform”, the platform owner may be required to register for VAT if the Thai Baht 1.8 million registration threshold is reached.  The relevant test income for this purpose is the VAT-able income derived by the foreign operator.

 

In conjunction with the draft e-commerce law, the TRD provided some additional guidance:

• The TRD intends to simplify the VAT registration requirements for foreign business operators by offering electronic registration through the TRD’s website.  
• Foreign business operator registered for VAT will not be able to claim input VAT credit or obtain VAT refund.
• Foreign business operator will be required to prepare an output VAT report (to be specified by a notification of the Director-General) and submit online through the TRD’s website.  
• All VAT related compliance and documentation can be prepared and submitted in English language.
• In order to confirm whether the recipient of the services is VAT registered or not, the foreign operator should request its customers to declare their VAT number.
• Non-compliant foreign companies will be subject to similar surcharges, penalties and criminal fines as applicable to regular VAT registrants under the general Thai regulations.
• The TRD defined a “digital platform” to mean an electronic channel that facilitates the business operator’s provision of services to its customers, and provided some examples – website, application and online market place.
• The TRD provided exemption from VAT registration for digital platform owners if all the following conditions are met: 
  - A document is issued to the Thai customer confirming that services are provided by a foreign operator and not the digital platform owner; 
  - The foreign operator and the digital platform owner agree, in a written and signed agreement, that the foreign operator, as opposed to the digital platform owner, will register and administer Thai VAT;
  - The digital platform owner does not have the power to collect payments from customers without authorization from the foreign operator; 
  - The digital platform owner does not have the power to deliver service to customers without authorization from the foreign operator; and
  - The digital platform owner does not determine the terms and conditions of the provision of services.
• A Thai VAT registrant that makes a payment to a foreign e-commerce operator and self-assesses VAT will not be able to claim the self-assessed VAT as input VAT or claim a tax deduction, if the foreign operator is not in compliance with this proposed e-commerce law.
  
• The proposed legislative amendments will be effective 180 days after it is published in the Royal Gazette. 
  

 

Whilst the second draft of the proposed e-commerce law focuses on VAT only, there has been no confirmation from the TRD that further amendments addressing previously raised corporate income tax and withholding tax issues will not be pursued.  

 

In respect of the proposed VAT changes, further clarity and guidance is required on various uncertain aspects as well as how this will apply in practice.  It also remains uncertain whether VAT registration would create a taxable presence for corporate income tax purposes.

 

KPMG is at the forefront of the developments on this subject and welcomes any comments and feedback.