Thailand is one of the best avenues to attract Foreign Direct Investment from all across the world. The Royal Thai Government always poses a welcoming attitude to foreign businesses in Thailand. To serve foreign business persons and units with business opportunities and growth, amending laws and regulations becomes necessary sometimes. This article intends to discuss some updates on Foreign Business in Thailand in the limelight of some new announcements.
The Thai Government Gazette declares a similar amendment on February 10, 2021. It relates to the imposition of VAT on foreign e-services, e-platforms and goods. Publication of the Act Amending the Revenue Code (No.53) B.E. 2564 (2021) was in the Gazette. It will be applicable from September 01, 2021. By this, all foreign e-services and e-platforms providers and companies dealing with foreign goods will have to pay VAT to the government. Till now there was exemption from this tax.
Now let us make the “amendment” more clear to you. We will do so by defining the key elements of the act to help you understand the Gazette declaration more closely.
What are e-services, e-platforms and goods defined in the Amendment?
By “e-service”, the act defines the services whose delivery is not possible without the involvement of information technology in the process. In fact, its delivery is possible only through the internet or other electronic means. These services are taken to be intangible and incorporeal in nature. Moreover, they may or may not have the existence of any physical office in Thailand. Additionally, control and governance of such services are possible by business units outside Thailand.
“e-platforms” are the online marketing channels or mediums for the e-service providers to deliver their services. More prominently, e-platforms can be a market, channel or any other process or method for multiple e-service providers.
The amendment targets “Goods” for VAT purposes to explicitly exclude “e-services”. After the implementation of the Act gets from September 01, 2021, the definition of Goods will be “any tangible or intangible good which holds a commercial or financial or utility value, whether intended to or suitable for sell, use or purchase, and should include every imported item as well.” New wording added to the Revenue Code by the act is “Goods shall not include incorporeal property that is delivered through internet system or other electronic means.”
How VAT will be imposed on e-service providers and e-platform operators (Foreign Business in Thailand)?
E-service providers operating from abroad must register themselves for VAT who to date were not VAT registrants. They will be liable to pay VAT on a pay-only basis without the deduction of any output tax. The VAT return must be filed and paid on monthly basis.
In case any e-platform facilitates continuity of any service providing process including service proposal, service payment, service delivery and other processes as prescribed by the Director-General of Revenue Department, the e-platform operator would be liable to pay VAT. Such e-platform operators would be paying VAT on behalf of every foreign e-service provider it facilitates. The duty and liability of an e-Platform operator will be the same as that of the foreign provider of e-Services.
Both the e-service providers and e-platform operators are not having legal rights to issue tax invoices to their users. The methods by which foreign e-Service providers and e-Platform operators must register for VAT, file VAT returns, and pay VAT under this new act are yet to be prescribed.
How Taxpayers can communicate with the Thailand Revenue Department?
Communication between the taxpayers and the revenue department is very crucial as it involves the transfer and addressing of summons, tax assessment letters, forms, tax invoices, reports, documents and various other documents essential for VAT registration and payment activities. The new Revenue Code clarifies the provision of an electronic mode of communication. Additionally, it facilitates communication between the taxpayers and the revenue department.
The exact criterion and process of electronic communication for this purpose is yet awaiting a declaration of the ministerial regulations. We can expect that the new regulations will be coherent with the laws regulating electronic transactions. Any notification in the meanwhile under the current law which prohibits the use of electronic communication means would be put into effect as long as it is not contradictory to the new law.
How is the announcement good for Foreign Business in Thailand?
On February 10, 2021, the Thailand Revenue Code Amendment Act (No. 53) BE 2564 enables the enactment of Thailand VAT laws. Enactment of the gazette will be upon foreign e-services and e-platform providers to recipients in Thailand. The purpose of enactment of the new law intends to fair and comparable VAT treatment. It is for both Thai digital services and foreign digital services that are not VAT registrants.
The law is applicable to foreign e-service providers. Additionally, it is also applicable to Thailand e-platform operators. Moreover, it will be applicable for those who are facilitating the foreign e-service providers in the conveyance of their business.
To conduct and practice any type of business activity in any country, there are certain local rules and regulations to be adhered to. It is also obvious that to facilitate foreign business units to conduct their trade in Thailand, the region must be able to extend better infrastructure, transport facilities and city amenities.
To enhance such features, the government needs revenue from citizens and businesses in the country in form of taxes and tolls. The foreign direct investment (FDI) in Thailand holds a good share and contributes heavily to its GDP. Therefore, the imposition of VAT on foreign e-services and e-platforms is a good initiative of the Royal Thai Government.
For all types of legal assistance in order to upgrade your firm in accordance with the latest laws, mail us at [email protected].
