As from 1 September 2021, nonresidents and electronic platforms deriving revenue from the provision of electronic services to non-VAT-registered customers in Thailand are required to register for VAT and account for the 7% VAT if their annual revenue from the provision of such services exceeds THB 1.8 million. The Thai Revenue Department issued guidance on the new rules on 30 June.
In a separate development, on 24 August, the Thai cabinet extended the 7% standard VAT rate for another two years through 30 September 2023. The rate was due to revert to the normal 10% rate on 1 October 2021.
Overview of the new VAT rules
The guidance released by the Revenue Department on the new VAT rules for nonresident suppliers of digital services and electronic platforms includes definitions of relevant terms, comprehensive information on VAT registration, filing and payment obligations, VAT refunds and consequences of failure to comply, as well as useful examples and FAQs.
The guidance clarifies that the reverse charge applies to services provided to VAT-registered customers, but where electronic services are provided to non-VAT-registered customers, a service provider or electronic platform that meets the THB 1.8 million annual income threshold must register, charge and remit VAT. In the case of corporations, the income will be calculated from the first day of the accounting period not ending before 1 September 2021 and for individuals, the income will be calculated from 1 January 2021.
Electronic services provided from abroad means services provided by a juristic person incorporated and operating its business in another jurisdiction and that does not have a permanent establishment in Thailand, or electronic services provided by an individual who is not a resident of Thailand.
Electronic services include incorporeal property delivered via the internet or other networks where the nature of the services is essentially automated and cannot be provided without information technology. Examples of electronic services include mobile applications, software programs, online music, films and games, electronic data management and online advertising services. An electronic platform is a marketplace, channel or other process used by several service providers to provide electronic services to a service recipient.
Nonresident electronic service providers and electronic platforms that provide taxable electronic services to non-VAT-registered customers in Thailand must register for VAT on the Revenue Department website within 30 days from the day their annual revenue exceeds THB 1.8 million. Voluntary registration is permitted where the nonresident electronic service provider/electronic platform’s annual income from providing electronic services does not exceed THB 1.8 million. The guidance clarifies that VAT registration in Thailand—in and of itself—will not be a determining factor for the nonresident to be deemed to have a permanent establishment in Thailand.
The VAT registration portal opened on 16 August 2021 and the list of registered providers will be available to the public.
To determine whether electronic services are used in Thailand, a nonresident electronic services provider or electronic platform must collect customer information, such as payment information (e.g., credit card information, bank account details), residence information (e.g., home and/or billing address) and access information (e.g., mobile country code, IP address).
Interestingly, nonresident service providers are not required to issue tax invoices for supplies of electronic services.
VAT registrants are required to file monthly VAT returns within the first 23 days of the following month, even if no income is earned during the month. VAT payments can be made online by wire transfer or credit card. The VAT remitted to Thai Revenue Department can be refunded if there has been a miscalculation, over-payment, etc. A refund request must be submitted within three years from the date VAT is paid and must be accompanied by supporting documentation that proves that the excess VAT was paid. VAT registrants must keep reports and supporting records of VAT filings for at least five years from the date of filing. Civil and criminal penalties apply for noncompliance.
Thailand is the fourth country in Southeast Asia (following Indonesia, Malaysia and Singapore) to levy VAT on nonresident electronic service providers and electronic platforms.
The Thai digital service VAT has been introduced to level the playing field for domestic and foreign businesses and not to impose an additional cost on foreign business operators.
While the Revenue Department guidance is welcomed, there are issues that require further clarification, such as the online sale of coupons for dining, shopping, travel, etc. and the sale by an electronic service provider of vouchers, credits or codes on an electronic platform that customers can use on the service provider’s website.