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Taxes Imposed on Offshore Companies Doing Business in Thailand

Transcript of the above video:

As the title to this video suggests, we are going to be discussing offshore business entities doing business here in the Kingdom of Thailand. 

Now in the past, especially online, online enterprises can kind of do business with relatively little tax liability in the Kingdom of Thailand if they basically had no particular presence in the Kingdom.

It appears to me that that era seems to be coming to an end as evidenced by a recent article in the Bangkok Post, published June 25, 2018. The title of the article, “New Law for Foreign Firms in the Works”. Quoting directly, "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 payment. 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". This is a key part of this article, this line right here. "There will be tax data exchanges between countries under a global form exchange in the future". Quoting further, "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".

There is a great deal more in this article. I am only discussing sort of a bit of it but that being said, I want to go back to this line. "There will be tax data exchange between countries under a global form exchange in the future." That is really, really important. As we have discussed in another prior video on this channel, in the context just of American and Thai bilateral relations, the United States and the Kingdom of Thailand have a bilateral memorandum, which the United States has with a substantial number of countries outside of the United States, which basically stipulates that Thailand will remit information about the American expats in the United States bank documentation back to the United States while the United States will remit such information back to Thailand on Thais in the United States. That one key part of that article, in my opinion, is a species or an evolution of that idea which is this sort of Global Information sharing apparatus for tax purposes.

My research has yet to find exactly how this is going to work. It appears to me as to be rather nebulous as of the time of this filming but that being said, I have very little doubt that we are not going to see it come into being in coming years especially as more and more transactions are undertaken over the internet. We are seeing the bulk of commerce being moved online. As a result of that, Governments which are seeing less and less tax revenue as a result of not having people physically present that they can very clearly gain tax jurisdiction over, we are seeing those Governments resort to more and more creative methodologies and international cooperation in order to gain a better foothold or gain more jurisdiction and increase their tax revenues. 

Thailand is a little different. I think we are going to see a major sea change with respect to how VAT revenue is collected in the sort of international context in the very near future and I think this is something that is probably going to happen in a global context just sort of across the board as the years progress.