New VAT law expected to bring Bt3 bn from foreign e-commerce platforms

[webfact]

New VAT law expected to bring Bt3 bn from foreign e-commerce platforms

By THE NATION

 

 

The Revenue Department expects global e-commerce and digital platforms to agree to abide by Thailand’s new tax bill when it becomes law.

 

The department estimated that Thailand would earn over Bt3 billion from the value-added tax collected from international digital platforms, such as Facebook, Uber or Netflix.

 

Department director-general Ekniti Nitithanprapas added that the revenue from those platforms would be more during the Covid-19 crisis, as more people consumed more products and services from those platforms.

 

A Cabinet meeting on Tuesday (June 9) gave the green light to amend the Revenue Code to collect a value-added ‘E-Service’ tax from foreign digital platforms that do not have a subsidiary company in Thailand. The next procedure is to propose the draft bill to the House of Representatives for its consideration.

 

Ekniti explained that the law could allow his department to collect tax from all foreign services of those platforms, such as movie watching, video games downloading, or taxi booking. Moreover, the law will allow the Revenue Department to collect VAT from those businesses earning revenue from advertising on each platform.

 

The law will, mainly, order those foreign entrepreneurs providing the services in Thailand to register and disburse the VAT similar to Thai businesses. The foreign businesses in this case, he added, must earn over Bt1.8 billion a year.

 

“To advertise some product or service, Thai platforms must pay the VAT, but foreign platforms did not have to. This is inequality,” he said.

 

Ekniti explained that his department would authorise foreign corporations to pay the VAT through the electronic system. “The entrepreneurs are ready to pay the VAT legally, and around 60 countries have enforced this kind of law, for instance, Indonesia,” he added.

 

“If the foreign corporations do not register in the system after the law comes into effect in Thailand, the Revenue Department cannot use other laws to force them to close their website or service, but it can use international mechanisms or international collaborations to deal with the platforms” the director-general said.

 

Source: https://www.nationthailand.com/news/30389439

 

-- © Copyright The Nation Thailand 2020-06-11

 

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[Laughing Gravy]

I can't wait for facebook to say no. They get shutdown ad all those Thais who can't help themselves who post everything from their lunch to their handbag on it will 'possibly die'. Or use a VPN like in China.

 

Why don't they have a tax on passengers who leave the country. Oops they and that and look how popular that was.

[Titan1962]

This is just the beginning,they have to get their money back from somewhere. But I see this happening in most of the countries affected by the virus. The VAT will be added to most things but in small amounts as not to anger the locals. A few satang here a baht or two there,but starting  with the big companies like they are is a good thing. But when those companies pay it will only get passed onto the consumer.

[robblok]

44 minutes ago, Laughing Gravy said:

I can't wait for facebook to say no. They get shutdown ad all those Thais who can't help themselves who post everything from their lunch to their handbag on it will 'possibly die'. Or use a VPN like in China.

 

Why don't they have a tax on passengers who leave the country. Oops they and that and look how popular that was.

Your quite uninformed and anti Thai.. not suprising on this forum.

 

In Europe they already tax electronic services this way. If someone from the Netherlands provides an electronic service in France or whatever country. French VAT is added to the invoice. They only ad tax on private persons (companies can get vat back anyway). So this is a system that is already in use in other countries and is fair too.

Otherwise there is no VAT on a service from an electronic supplier or a lower vat and there is no level playing field. This way all services pay the same VAT percentage and you cant compete with the VAT rate. Sounds good to me to have a level playing field.

 

Just to add only for small providers who stay below a certain amount can still use the tax from the country they are registered in. 

 

So not a Thai invention but a thought out system to level the playing field. 

 

 

[smedly]

1 hour ago, Laughing Gravy said:

hey get shutdown ad all those Thais who can't help themselves who post everything from their lunch to their handbag

it would improve road safety 30% just by banning facebook 

[robblok]

Just for the record this has nothing to do with shutting down Facebook at all. It might mean that those who pay for likes or advertisement on Facebook will pay VAT. Normal users pay nothing for Facebook so nobody will pay anything. So no huge protest. 

 

Would be nice if people knew what they were talking about. 

 

They are talking about things like dropbox (if you pay for it) that VAT is applied for all people inside Thailand. Because a company in Thailand (if there were) who would offer a similar service would be 7% more expensive. That is unfair competition. 

 

This is not about free services but paid for services where the foreign providers are not charging VAT (they don't have to because of rules int heir home country). So foreign providers have an edge price wise.

 

I wish some people on Thaivisa had a bit more brains and would understand these things a bit better instead of ranting. But many have absolutely no idea how VAT in international transactions work.

 

Again this system is already in place in Europe for a few years. I know because I do accounting for people who provide services over the Dutch border to the UK and Germany and so on. Its unfair if companies could offer a lower price because they are providing it from a low VAT country and so win from companies in for instance the UK who have to charge more VAT. (ok UK is going to leave Europe so things will change but was just an example) also

 

Also before the VAT of UK customers would have gone to the Dutch states coffers (if provided from the Netherlands )and because of this rule now go to the UK state coffers. (sounds totally unfair does it not ? ????)

 

Al lil knowledge goes a long way.

[Laughing Gravy]

1 hour ago, robblok said:

Your quite uninformed and anti Thai.. not suprising on this forum.

So where is your evidence for this or have you just made it up. Not anti Thai at all. Anti stupid ideas and Anti Hub claims that get bounced around, guilty as charged.

 

3 minutes ago, robblok said:

Al lil knowledge goes a long way

And it also can be very dangerous.

 

So lets wait and see what happens.

[robblok]

3 minutes ago, Laughing Gravy said:

So where is your evidence for this or have you just made it up. Not anti Thai at all. Anti stupid ideas and Anti Hub claims that get bounced around, guilty as charged.

 

And it also can be very dangerous.

 

So lets wait and see what happens.

You had no idea what this was about your Facebook comment showed as much. But you felt the need to call it a stupid idea. 

Facebook would not care about this at all as they are not the one paying the VAT. You have no idea how things work. 

[Laughing Gravy]

26 minutes ago, robblok said:

You had no idea what this was about your Facebook comment showed as much. But you felt the need to call it a stupid idea. 

Facebook would not care about this at all as they are not the one paying the VAT. You have no idea how things work. 

I am anti stupid ideas yes. Its my opinion and the last time I looked opinions are still allowed on this board. You seem to believe you know everything. Well I disagree.

 

So where are my anti Thai whatever that you have claimed I am?

[robblok]

2 minutes ago, Laughing Gravy said:

I am anti stupid ideas yes. Its my opinion and the last time I looked opinions are still allowed on this board. You seem to believe you know everything. Well I disagree.

 

So where are my anti Thai whatever that you have claimed I am?

How can you call something a stupid idea if you don't even know how VAT works. You thinking that Facebook would make a problem out of this (while they are not the one paying the VAT) shows as much. 

That just shows you wanted to rant against a Thai government idea. 

[robblok]

8 minutes ago, rob63 said:

Finally, somebody with common sense has posted. It's a pleasant change from reading the usual nonsense posted by semi literate posters. Why they would post comments on VAT from a perspective of ignorance is beyond me?

Most people have no idea how taxes work. They decided to go the VAT way. It would be different if they wanted to introduce some company tax over profit gained in Thailand. That would be something that would hit Facebook, the VAT only hits paying customers. VAT is (almost) never an issue as it does not influence profits. 

[Laughing Gravy]

28 minutes ago, robblok said:

How can you call something a stupid idea if you don't even know how VAT works. You thinking that Facebook would make a problem out of this (while they are not the one paying the VAT) shows as much. 

That just shows you wanted to rant against a Thai government idea. 

So you cant show or prove my anti Thai as you boldly put it. Pointless continuing but when making such sweeping statements, you should back it up or retract it.

 

Like the other things you mention, there are al lot of presumptions that are like your statement, baseless.

[Morty T]

3 hours ago, robblok said:

You had no idea what this was about your Facebook comment showed as much. But you felt the need to call it a stupid idea. 

Facebook would not care about this at all as they are not the one paying the VAT. You have no idea how things work. 

Interestingly enough, 100's of Thais live stream products and services on Facebook, Line & Instagram. All now, without VAT collection. So who is the government going to go after, when the host platforms refuse to participate, as Facebook for example has a history of doing so. 

[Scott Tracy]

Ah, Robblok, the famous EU level playing field...The UK has left the EU already.The

 

VAT is a stupid idea. As with any tax, the consumer pays.

[robblok]

20 minutes ago, Morty T said:

Interestingly enough, 100's of Thais live stream products and services on Facebook, Line & Instagram. All now, without VAT collection. So who is the government going to go after, when the host platforms refuse to participate, as Facebook for example has a history of doing so. 

Its still without vat collection.. an other one that does not understand the concept of VAT.

 

As long as you dont pay for the service you don't pay VAT. Vat is only on services you pay for. 

 

I wonder about the tax knowledge of the average Thaivisa user. 

 

*unless you pay for life stream then vat will be added*

 

Anyway its quite easy to force companies to pay VAT and as i said before companies dont feel VAT so they wont protest much. A tax on their activities would make them protest. Vat not so much.

[robblok]

5 minutes ago, Scott Tracy said:

Ah, Robblok, the famous EU level playing field...The UK has left the EU already.The

 

VAT is a stupid idea. As with any tax, the consumer pays.

Yet it exist in every country. ????????

 

Yes the UK has left the EU and now its making China angry and will suffer the consequences as there is no longer an EU to protect her. Smart move leaving the EU and then pissing one of the largest economies off. Will do them a lot of good. 

[Matzzon]

Expecting something, has never even been close to the reality.

[timendres]

5 hours ago, Morty T said:

Interestingly enough, 100's of Thais live stream products and services on Facebook, Line & Instagram. All now, without VAT collection. So who is the government going to go after, when the host platforms refuse to participate, as Facebook for example has a history of doing so. 

Since there is no charge for the streaming, there is no tax involved. Taxes will eventually be paid when the product or service being advertised is sold. The only possible complaint here, say by FB or IG, would be the additional effort to administer the VAT collection and payment. But I suspect their systems are already programmed for this, so no major issue.

[Captor]

And Lazada? Untouchable or?

[impulse]

7 hours ago, robblok said:

Anyway its quite easy to force companies to pay VAT and as i said before companies dont feel VAT so they wont protest much. A tax on their activities would make them protest. Vat not so much.

 

You're thinking along the old business model, where "stuff" is the product.  These companies make $billions selling services, information and advertising.  They'll squeal like stuck pigs when they have to pay VAT on their total in country revenue and can't just shift their income taxes to low tax countries like Ireland.

 

For example (and this is very oversimplified), if Google has revenues of $10 million in Thailand from Thai companies buying advertising, today they pay no VAT on that $10 million.  And then they get an invoice from their Irish subsidiary for $9.999 million for "licensing and consulting fees", so their taxable profit in Thailand is $1,000.  They'll do that because Ireland has set corporate income taxes at 1-2% to attract foreign companies and their admin jobs who wouldn't normally bother setting up in Ireland.  To Ireland, a tiny percent of a big number is better than nothing, and a few of their citizens get jobs they wouldn't have otherwise gotten under fair international tax laws.

 

Charging them VAT on all Thailand revenue is the way to make sure they're paying at least some taxes in Thailand.  In this case (5% VAT), they'd pay $500,000 in VAT on their $10,000,000 in revenue.  They'll still shift their profit to their Irish subsidiary to pay 1 or 2% in Irish corporate income tax instead of 25-50% Thai corporate income tax rates.  But at least they'll pay something reasonable.

 

[robblok]

5 hours ago, impulse said:

 

You're thinking along the old business model, where "stuff" is the product.  These companies make $billions selling services, information and advertising.  They'll squeal like stuck pigs when they have to pay VAT on their total in country revenue and can't just shift their income taxes to low tax countries like Ireland.

 

For example (and this is very oversimplified), if Google has revenues of $10 million in Thailand from Thai companies buying advertising, today they pay no VAT on that $10 million.  And then they get an invoice from their Irish subsidiary for $9.999 million for "licensing and consulting fees", so their taxable profit in Thailand is $1,000.  They'll do that because Ireland has set corporate income taxes at 1-2% to attract foreign companies and their admin jobs who wouldn't normally bother setting up in Ireland.  To Ireland, a tiny percent of a big number is better than nothing, and a few of their citizens get jobs they wouldn't have otherwise gotten under fair international tax laws.

 

Charging them VAT on all Thailand revenue is the way to make sure they're paying at least some taxes in Thailand.  In this case (5% VAT), they'd pay $500,000 in VAT on their $10,000,000 in revenue.  They'll still shift their profit to their Irish subsidiary to pay 1 or 2% in Irish corporate income tax instead of 25-50% Thai corporate income tax rates.  But at least they'll pay something reasonable.

 

Not thinking old business, i see the services of amazon and google and dropbox being taxed in Europe. That was not the case before. It works perfectly they did not scream. 

 

This is not about company tax, this shows you have no clue how it works. Sorry mate again like so many others you are not well informed. I work with this stuff on a day to day base. The company stays in Ireland just ads the VAT of the country they provide the service in pay it and nothing more.

Its not the company that is paying the VAT but they customer. So you can pay tax in other countries without having to have your profit there.

 

This is what i see on a day to day base in the Netherlands and Europe. US companies paying Dutch vat without having to have a Dutch subsidiary. That is the beauty of electronic services. That is also what my clients do. Some companies dont like it as their services gets a bit more expensive for the private person (not businesses no VAT there).

 

So what your thinking is not correct. Though your last paragraph shows a bit of knowledge. However VAT is not a company cost its always paid by the customer. So there will be no extra tax on google. They might lose a few $ on private persons that spend less but run a non legit business as for them tax is a cost. But that is peanuts.

 

They don't have to shift the profit to the Irish subsidary they can invoice Thai customers from there and pay the Thai tax from there. Depends a bit how they do it but this is how they do it currently.

 

I know so because i see both the invoices of google from private persons and businesses. Also i have worked with this rule for clients who do digital services. They don't get taxed for company tax in the other country or have to have a subsidiary but just collect (better word as pay when we are talking about VAT) for an other country.

[impulse]

2 hours ago, robblok said:

Its not the company that is paying the VAT but they customer. So you can pay tax in other countries without having to have your profit there.

 

The problem with that statement is that companies price their products according to what their customers will pay.  If a non-Thai company suddenly has to add VAT to their invoice, they may need to drop their prices by that same amount to stay competitive with Thai companies who had to charge VAT all along.   That's the fairness part of the VAT argument.

 

You seem to think that a lot of us who've been doing business in Thailand and Asia for decades don't understand the taxes we've been paying...  You're looking at it strictly from a ledger book standpoint.  We also have to look at marketing and competitive pricing.  Paying VAT drives up the customer's cost of our products or service by 5%.  True, the customer pays it.  Just like they ultimately pay every tax that goes into costing our products and services.  (just for an example, if our corporate income taxes suddenly went up to 95%, we'd have to jack up our prices so we could return the expected ROI to our investors.  Or they'll invest in another company or country that did give them the ROI.) 

 

Or the customers go elsewhere...if that price increase makes our products no longer competitive, or our services unattractive.

 

[Sydebolle]

Well, someone pays for the submarines, the Chinese railway, the Thai Airways disaster and many other little and bigger shopping results to no use of the general public ...............