Thailand moves to apply 7% VAT to foreign digital services
Last week the Thailand cabinet approved a draft bill to introduce a 7% VAT levy on digital services provided by non resident companies to local consumers in Thailand.
The measure is being accelerated to help raise finances to fund extra spend during the COVID-19 crisis.
This new VAT levy could boost the country’s revenue by 3 billion Baht (over €100million) hence why the measure is being fast-tracked to help raise finances during the pandemic.
Non-resident companies that provide services such as streaming, download platforms for media and apps and advertising services on social platforms, gaming and online hotel booking services. There will be a VAT registration threshold of 1.8m Baht (over €60,000) per annum.
Deputy government spokeswoman Ratchada Thanadirek told reporters last week: “These businesses would’ve had to pay VAT if they had been Thai, which is unfair,” Ratchada said.
Thailand, Southeast Asia’s second-largest economy, has mulled taxing digital businesses for years, hoping to tap the country’s internet economy, one of the fastest-growing in the region.
Thanawat Malabuppha, president of the Thai e-Commerce Association, told Reuters he welcomed the move, as it will help level the playing field for rival Thai businesses.
“Anyone who makes money from Thai people should pay taxes to the country,” he said. (source)
CEO of vatglobal Gareth Kobrin has been watching global governments’ uptakes of VAT on digital services closely and says many will follow.
“Just this year we’ve seen over 5 countries introduce a VAt levy on digital services. The pandemic will only accelerate other governments to do the same as consumers continue to remain in isolation and turn to digital platforms for entertainment and purchases.”
Kobrin says VAT on digital services is a sound way for governments to increase revenue but also puts pressure on foreign businesses to remain compliant.
“It’s never been more important for businesses offering digital services to make sure they’re compliant and correctly VAT registered where they need to be. It’s not just your own tax man you need to worry about. There are many who are going to come calling and businesses need to be prepared if they want to avoid penalties.”