VAT for Electronic Service (“VES”)

As of 1 September 2021, the Thai Revenue Department (“TRD”) has commenced the collection of VAT from digital service platform operators who provide services from abroad, i.e. an e-Service, under Revenue Code Amendment Act (No. 53) B.E. 2564 (2021). An e-Service is defined under Section 77/1 (10/1) of the Thai Revenue Code (“TRC”) as the delivery of incorporeal objects via the internet or other electronic network, where the fundamental nature of such service is that it is rendered automatically and cannot be provided without IT. Consequently,, it does not include the case where a buyer places an order to buy goods online from overseas, because the goods will pass through Customs; it shall thus be the responsibility of the Customs Department to collect VAT. 

This amendment of law has caused many multinational digital platform service providers in businesses related to online advertising, e-Commerce, subscription, Peer to Peer and online travel agencies, such as Facebook, Netflix, Google, Apple, Tiktok and Agoda, which generate income from the client or end user/customer who is not a VAT registrant in Thailand of more than Baht 1.8 million per year, to be subject to the remittal of VAT due to the TRD. In such regard, the expected target to be collected in the whole fiscal year 2022 by the Revenue Department was Baht 5 billion. However, the Revenue Department collected more than Baht 4.2 billion during the first six months of the fiscal year 2022. 

E-Service providers are now required to register as a VAT registrant with the TRD through the online system 'VAT for Electronic Service (“VES”). Currently, almost 200 service providers have registered as e-Service providers with the TRD. Please note that an e-Service provider that provides such services a Thai VAT registrant is not required to register as an e-Service VAT registrant with the TRD (refer to Section 85/3 (2) of the TRC). However, different to a normal VAT registrant, the e-Service VAT provider will remit the output VAT (sales tax) without offsetting it with the input VAT (purchase tax) (refer to Section 82/13, paragraph 2 and paragraph 3 of the TRC) and is NOT required to issue a tax invoice to their client or end user / customer. Nevertheless, both the normal VAT registrant and the e-Service VAT provider must file their VAT return within the 23rd of each and every tax month. 

The TRD has established internal guidelines for assessment of e-Service VAT providers who have not registered under the VES, by summoning the related parties, e.g. a commercial bank, to give statements and evidence in order to assess tax. In addition, the TRD has also cooperated in the exchange of tax information between countries, such as by joining the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (“MAC”), which has provisions covering all forms of information exchange.

If the e-Service VAT provider commits an offence of tax evasion and does not have any assets in Thailand, the Revenue Department may have to seek international cooperation in order to prevent and suppress money laundering. If such e-Service VAT provider has assets or bank account(s) in Thailand, the TRD may use its authority to seize them in accordance with Section 12 of the TRD.

Another interesting law related to the e-Service provider is the adoption of  a framework preventing international tax avoidance of the Organization for Economic Cooperation and Development (“OECD”), which requires multinational enterprises (MNEs) that provide electronic services from a foreign platform to pay income tax due to the distribution of profits of the MNEs to the country of the source of income - regardless of whether or not the MNE has a permanent establishment in the country where they provide the services to. However, the Thai Government appears to have temporarily suspended implementation of this law:  the framework was presented in 2021 and the latest news from the TRD was in 2022 – announcing that the law should finalised in 2023 and enter into forced in 2024. Nevertheless, if and when the law comes into effect, it will have a substantial impact on e-Service providers. 

Areeya Ananworaraks
Counsel
Hatairat Sukprasert
Associate

Authors