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ResourcesCorporate and Tax AdvisoryThailand Tax LawIs Increased VAT on Online Purchases Likely in the Future?

Is Increased VAT on Online Purchases Likely in the Future?

In this video, we're talking about VAT that's the value-added tax here in Thailand and a recent article came to my attention with respect to VAT. We've been discussing on this channel ecommerce and how it's relating to the Revenue Department and and just generally how regulatory oversight has become an issue with respect to e-commerce here in Thailand.

In a recent article from the Bangkok Post which was published July 6, 2017, the title of the article “Draft ends foreign VAT relief” and to quote directly from the article “A draft bill on e-business tax will know the revenue departments value-added tax exemption for online shopping worth less than 1500 Baht bought, as in purchase. To quote further, “bought from foreign vendors outside of Thailand.” To quote further, revocation of the VAT exemption amount is stated in the paper slated for public hearing of the draft bill scheduled to close on July 11th. To further quote, “given that online purchases are gaining momentum and the Finance Ministry is recording falling tax revenue contributed by traditional sellers, this government is seeking way to increase its revenue.

So what's going on here? Well, I think it's very clear just like any place else in the world, online retailing is becoming and in an increasingly sizable chunk of consumer spending. And as a result of that, the revenues generated from retail sales that sort of the revenue streams are shifting. And as a result of this, the revenue department is seeing a decrease in their collected revenue from retail sales and is looking for a way to go ahead and collect up more VAT revenue from online sales.

In the past, there was a 1500 Baht exemption from VAT for anything bought less than 1500 baht online. It appears to me although this is currently just in its draft stage, this is probably going to be promulgated and then the event that it is that means that we're going to basically be dealing with VAT on all purchases online or otherwise, for that matter, here in the Kingdom of Thailand. I think it's fairly safe to assume that this is going to happen fairly quickly. In the past, there had been discussion of actually raising the marginal VAT or just raising the VAT rate generally on all items. There was a significant backlash against that and and in the end, it was decided to shelve that proposal.

So it would appear that revenue authorities are looking for other means and mechanisms to go ahead and increase revenue without, sort of, stepping on the toes of the general population with respect to issues surrounding raising the high VAT, if you will. So this was probably from a policy standpoint. Just from a practical standpoint, this probably seemed to be a pretty easy sort of if not a win-win because I guess the consumer isn't really winning anything by having to pay more VAT. As far as a politically expedient method of increasing the volume of VAT revenue, it seems to me like a no-brainer. They basically just said “look if we take this 1500 Baht exemption off of all this stuff, we can go ahead and increase our revenue.” That way it looks like that's what's going to be the case.

As has been previously noted, things involving e-commerce I think it's safe to expect that notwithstanding the authorities seem to have kind of backed off on their position to try and collect revenue from all sorts of online activity. I think it's safe to assume that there's going to be sort of creeping increase of taxation with respect to online purchasing, online services and I think that this VAT, this draft with respect to VAT is just a sign for the things to come.