New law for foreign firms in the works

If you buy, sell or do business in any way in Thailand, the new tax man Ekniti Nitithanprapas wants you paying taxes even if you never set foot here. (Photo by Pawat Laopaisarntaksin) 


The Revenue Department plans to propose a law stipulating that foreign entities with no physical presence which earn income in Thailand must report their transactions here to be inspected for value-added tax (VAT) payment.

The reporting requirement will help sharpen the department’s tax collection efficiency and curb tax leakage amid booming online trade, said director-general Ekniti Nitithanprapas.

Large foreign firms are believed to be in compliance with the requirement, but some foreign companies earning income in Thailand might not be making VAT payments and the Revenue Department does not have a mandate to force them, he said.

There will be tax data exchanges between countries under a global forum exchange in the future, Mr Ekniti said.

The reporting requirement is considered a complement to the draft bill on e-business tax, which covers levies for online purchases, advertisements and website rent in Thailand earned by operators with a presence outside the country.

The e-business tax will require online platform operators with a foreign presence to remit VAT from transactions occurring in Thailand to the Revenue Department through an electronic payment channel.

The online platform operators must sign up as operators under the VAT system if they earn more than 1.8 million baht a year from trading online in Thailand.

The measure is intended to create a level playing field for local digital platform service providers, as their transactions are subject to VAT if they earn annual revenue exceeding 1.8 million baht from online services.

Those with an overseas presence that earn income from advertising and website space rental from Thailand are also subject to a 15% withholding tax.

The draft bill will authorise the Revenue Department to revoke the VAT exemption for online shopping of goods worth less than 1,500 baht purchased from foreign vendors outside of Thailand and shipped by mail.

Mr Ekniti said the draft on the e-business tax has already won approval from the Council of State and he is unsure whether the second public hearing on the draft is needed.

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