Foreign e-service firms liable for VAT

Foreign e-service firms liable for VAT

Measure comes into effect from September for those with annual income above B1.8m

Overseas businesses providing online services in Thailand will be required to register for the 7% VAT liability. (Bangkok Post photo)
Overseas businesses providing online services in Thailand will be required to register for the 7% VAT liability. (Bangkok Post photo)

Starting on Sept 1, overseas businesses providing online services in Thailand will be required to register for the 7% value-added tax (VAT) liability if their annual income exceeds 1.8 million baht, according to a Revenue Department official.

The e-service tax has been approved by parliament and published in the Royal Gazette.

E-service businesses liable for the VAT payment include those offering download services for movies, games, stickers, brokerage services and ads, said a Revenue Department official who requested anonymity.

Overseas e-service platforms such as Apple, Google, Facebook, Netflix, Line, YouTube and TikTok, which all have annual income exceeding 1.8 million baht, are liable for VAT payment, said the source.

Ekniti Nitithanprapas, director-general of the department, said earlier the new tax would help create a level playing field for Thai entrepreneurs who already pay the levy.

The e-service tax is expected to generate revenue of 5 billion baht in the first year after it takes effect, said Mr Ekniti.

The department targets revenue collection of 2.09 trillion baht for fiscal 2021.

Overseas e-service businesses must register online at the Revenue Department's website to submit their VAT filing and remit a monthly VAT payment to the department. The process is available under a pay-only system without having to prepare tax invoices and input tax reports.

The department can issue a subpoena to relevant parties, such as financial institutions, to request information about financial transactions to accompany the audit and assessment process of tax collection, said the source.

The department's website also displays a list of VAT registrants, enabling users or foreign business operators to examine the list, said the source. This feature is considered an international standard or social sanction for operators that refuse to register for VAT liability, said the source.

It was reported that Indonesia passed a law in May 2020 requiring big internet companies to pay VAT on sales of digital products and services from July, and in the Philippines a lawmaker introduced a similar bill in parliament to tax digital services.

In separate news, existing financial liquidity in the economic system is sufficient for a public debt management plan of 2.3 trillion baht under the fiscal 2021 budget, says the Public Debt Management Office (PDMO).

According to the Bank of Thailand, the existing financial liquidity totals 1.5 trillion baht, said PDMO director-general Patricia Mongkhonvanit.

But such liquidity cannot be defined as short-term or long-term liquidity, said Mrs Patricia. If the economic recovery starts picking up, loans will be disbursed to the private sector at a faster pace, causing the scale of liquidity in the public sector to drop, she said.

Fiscal stimulus implemented by several countries may also contribute to capital outflow as investment funds could move to other countries, thus reducing liquidity in the Thai economic system, said Mrs Patricia.

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