Tax collectors to set sights on e-commerce operators
The increase in e-commerce has caused the Revenue Department to pay greater attention to whether operators in this type of business have paid their taxes properly, especially value-added tax.
Per the requirements for all business operators, if an e-commerce operator’s gross revenue is over Bt1.8 million per year, he or she is required to register for VAT.
Generally, if VAT is not exempted, it will be imposed on the sale of products when they are delivered to the customers. In e-commerce, however, operators normally ask their customers to pay for the products before they are delivered. In this regard, the VAT liability arises upon the receipt of money from the customers, at which point the e-commerce operator is required to issue a tax invoice to the customers.
In the case of an export sale, VAT shall be at the rate of zero per cent, provided that the products are actually exported out of Thailand. The e-commerce operator must process the customs clearance document upon export in order to be eligible for the zero rate of VAT.
The zero rate does not apply if the products are sold to a foreign customer but delivered within Thailand.
On the other hand, if a customer in Thailand buys products from a foreign e-commerce operator, VAT will be imposed upon the goods that are imported into Thailand. A foreign e-commerce operator that is not a VAT registrant in Thailand cannot collect Thai VAT from its Thai customers but it is the responsibility of the Thai customers to pay VAT upon all products arriving in Thailand.
In this regard, if you buy products online, you should be aware that the cost of products includes the import duty and the VAT assessed on the value of the imported products, which will be collected upon clearance by the customs department. This VAT will be your additional cost if you are not a VAT registrant and the products are not bought for the purpose of your VAT business.
VAT collection is difficult for the movement of digital products, where it is boundless. A digital transaction is subject to VAT in Thailand if it is utilised in Thailand.
Digital commerce operators in Thailand who are VAT registrants would normally collect VAT from their customers. However, foreign digital commerce operators who do not have a taxable presence in Thailand are not required to register for VAT in Thailand. It is the responsibility of the payer of income in Thailand to self-assess and remit the VAT to the Revenue Department.
In a digital economy, businesses have to adjust to respond to the lifestyle of customers who spend greater amounts of time with digital media. There has been an increase in the sale of electronic books, for which customers install an application and download the contents of books for a fee.
Under Section 81 of the Thai Revenue Code, the sale of newspapers, magazines or books is a VAT-exempt business. However, this exemption does not extend to e-books. In fact, the department has ruled on various occasions that the sale of digital books, regardless of their type or nature, is regarded as a “service” that is subject to VAT.
Arguably, there should be no difference in the tax treatment of a sale of a book, regardless of whether it is in printed or digital form. In response to the digital economy, the director-general recently suggested that the Revenue Department exempt the sale of e-books from VAT in order to encourage reading.
This exemption, if the proposal is accepted, should eliminate the differing tax treatments. Please note, however, that no such law has yet been issued.
Benjamas Kullakattimas is tax partner in charge, KPMG in Thailand.
