Second draft of tax law on e-commerce business

Second draft of tax law on e-commerce business

Last week the Revenue Department (RD) released a second draft of the proposed tax legislative amendments that will impact foreign e-commerce operators available to the Thai market.



Tatiana Bespalova

Partner, Tax

KPMG in Thailand

Second draft of tax law on e-commerce business

The initial proposal for the legislative amendments was issued in June 2017 and went through the process of public consultation in early July.  The current draft contains material changes from the previous version.  Of most significance is the omission of the original proposal to impose corporate income tax and withholding tax on foreign e-commerce operators.  Instead, the focus now is on bringing e-commerce transactions with non-VAT registered persons into the scope of Thai VAT by amending the current VAT provisions in the Revenue Code.  Whilst this would be welcomed by industry players, there has been no confirmation from the government that further amendments addressing previously raised corporate income tax and withholding tax issues will not be pursued.


The current draft of the proposed VAT amendments requires a foreign company that provides services through electronic media to a non-VAT registered person to register and pay VAT if its annual VAT-able income exceed the registration threshold of 1.8 million baht.  To be a VAT-able transaction in this context, the service must be consumed within Thailand.


Where a foreign company provides services through a foreign  ‘platform’, the platform owner is required to register for and administer VAT once the income derived by the foreign operator exceed the registration threshold.


A VAT registered foreign company will be required to remit the VAT payable on service fees received from non-VAT registered persons to the TRD but is not allowed to collect VAT from its customers in Thailand.  If unable to pass the cost of VAT to its customers through a price increase, the foreign e-commerce company will have to bear the cost of VAT thus eroding its profit margin.  No input VAT credit or VAT refund will be available to the foreign company in respect of VAT paid on expenses.


In order to confirm whether the recipient of the services is VAT registered, the foreign company will need to request its customers to declare their VAT number.  It is unclear whether a mere declaration will be sufficient or further burden of proof will be placed on foreign companies.


A simplified on-line registration process and compliance obligations, including no requirement to issue tax invoices, will be introduced.


Non-compliant foreign companies will be subject to regular surcharges, penalties and fines.  In addition, to encourage compliance by foreign operators, the TRD proposed to penalize Thai VAT registrants that self-assesses VAT on transactions with foreign e-commerce operators by not allowing input VAT for the self-assessed VAT paid, if the foreign operator is not in compliance with this proposed e-commerce law.


The proposed amendments are now in the process of public consultation until 9 February 2018, which will hopefully result in further clarifications and guidance on various uncertain aspects and practical application of this new law.


The proposed legislation will be effective 180 days after it is published in the Royal Gazette.


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