Taxes to be levied on e business

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Taxes to be levied on e-business from this year

The director-general of the Revenue Department recently announced that the government is set to introduce a draft bill to the parliament which will introduce an e-business tax, which will be a levy on any transaction that takes place inside Thailand, no matter where the e-commerce operator happens to be located.

The levy is expected to be set at a maximum of 15 percent but, as the director-general noted, the rate will vary depending on the nature of the business.

The government has recognised that people are purchasing goods online in increasing numbers and much of this is coming from overseas operators who do not have a physical presence in Thailand. Concomitantly, the Finance Ministry has noted a drop in revenue from traditional sellers and it is therefore seeking ways to redress the imbalance.

The Revenue Department said the draft bill will put the onus on financial institutions, which currently act as the intermediaries for money transfers, to withhold tax for online purchases and advertising fees on social media networks, sending the collections to the department.

The idea is to create a more level playing field between the online world and traditional bricks and mortar operations. As the director-general pointed out, there are several online businesses which earn revenue out of customers living in Thailand, but they are not subject to tax.

The Revenue Department estimates the value of online purchases to be currently in the trillions of baht with online advertising estimated to be worth about 10 billion baht.

The draft bill has been designed to supersede the double-tax agreement, which states that those who are liable for tax payments in any country must have a permanent physical presence in those locations.

The draft bill on e-business tax will also annul the current value-added tax (VAT) exemption for online shopping on goods worth less than 1,500 baht and were purchased from foreign vendors outside of Thailand. The plan appears to be aimed at making all online purchases subject to tax.

At the present time only goods purchased outside Thailand to a value of 1,500 baht or more are subject to the seven percent VAT.

It is probably no surprise that online shopping for goods worth 1,500 baht or less from overseas vendors has become a popular activity and the Revenue Department has recognised that this is unfair to local bricks and mortar businesses which must charge VAT on all products, regardless of the sale price.

The e-business tax will simply redress this imbalance.