- For the purposes of the proposed E-commerce law, a foreign company that operates a business by using electronic media in Thailand is a foreign company that operates through a domain which name includes “.th” or uses Thai alphabet (e.g. ภาษาไทย.com) and/or receives payments in Thai Baht from Thailand. The latter includes simply having the option of payment in Thai Baht on its website (including through a foreign currency translation tool). A foreign company that falls within these conditions would be regarded as having a taxable presence in Thailand (i.e. a Thai permanent establishment (“PE”)) and be subject to Thai corporate income tax on the net profits attributable to that PE. The TRD confirmed that tax treaties may provide protection where a PE is created under the proposed E-Commerce law.
- Having a deemed PE in Thailand does not necessarily mean that the foreign company is obliged to register for VAT. The TRD also confirmed that the Foreign Business Act restrictions will not be triggered solely due to the PE creation as these laws should be considered separately.
- The proposed E-Commerce law establishes that a foreign company that operates its business by using electronic media will be subject to 15% withholding tax on income derived in Thailand from online advertising or provision of space on a webpage. The TRD has clarified that this provision will apply to both business-to-business (B2B) and business-to-consumer (B2C) transactions. The TRD commented that the Thai tax treaties may be amended in the future to give Thailand the explicit right to tax such income.
- Under the draft law, a foreign company selling intangible goods or rendering services through electronic media to a non-VAT registered person in Thailand will be required to register for VAT in Thailand and will be subject to VAT on its Thai sale. The TRD clarified that the affected foreign businesses will not be required to issue tax invoices on the sale of intangible goods or provision of services through electronic media. The peculiar comment that was made without further clarification is that the foreign e-commerce businesses registered for VAT in Thailand will not be able to offset input VAT against output VAT.
- VAT registration will not automatically create a taxable presence / PE in Thailand for income tax purposes.
- The registration process for a foreign operator that is required to register for VAT under the proposed E-Commerce law will be amended in order to be simplified and additional guidance will be issued on how to determine the place of supply for VAT purposes.
Although the TRD has provided some additional comments and explanation on the proposed E-Commerce law, there are still several unaddressed concerns on the practical application of the proposed law and the impact on the industry players. KPMG is at the forefront of the discussions on this subject with the government and welcomes feedback and comments from the industry operators.