Revenue Dept soon to table draft law on e-business taxation

12.06.17

THE Revenue Department is expected to table a draft e-business law, which will tax online trading transactions for goods and services, for the Cabinet’s approval this month.

The department’s director-general Prasong Poontaneat said recently that he had approved the draft law in principle.

The department’s legal team is wrapping up the final details of the draft, which will be proposed to the Cabinet this month and then to the National Legislative Assembly. The law is expected to take effect within the current military-led regime’s tenure.

The legal draft will involve transactions of goods and money-transfer services arising in Thailand as well as business operations through other forms of financial innovation.

Even if business operators do not reside in Thailand, they will be regarded as having establishments here and will be required to pay taxes similar to those levied from operators inside the country.

“Once the law comes into force, if [operators outside Thailand] have transactions in Thailand for purchase or sales of goods or money-transfer services, they will be regarded as having business establishments in Thailand and will be required to pay taxes, extending from withholding tax and value-added tax to other income taxes,” Prasong said.

In practice, financial institutions will be delegated the authority to collect the withholding tax on behalf of the Revenue Department.

When an amount of money is transferred online as payment for goods or services, financial institutions in Thailand will deduct 5 per cent of the amount as withholding tax for the department. The financial institutions also have to deliver to the department the withholding-tax transactions.

Prasong said online transactions were expected to be worth trillions of baht and would be grouped into two categories. One involves online transactions in such systems as online ticket reservations and online payments for public and private agencies, while the other includes payments for advertising via Facebook, Google, Line or Uber.

The government currently does not receive tax revenue from those outside the system. An example is the Uber taxi service.

To illustrate, from a Bt100 ride in Thailand, the total fare is credited and sent across national borders through the Internet into an account of Uber BV in the Netherlands. This firm collects the fare and then sends Bt80 back to the driver’s account. The remainder, Bt20, is for the firm’s management.

Uber is invisible to Thailand’s taxation system, except that it is required to pay value-added tax for its system management in the country.

The remainder of Bt20 from every Bt100 ride is expected to reach Bt2 billion, which has not been taxed in Thailand. The drivers are required to pay personal income tax on the Bt80 they receive from every Bt100 fare.

Prasong said Uber’s share of the fare should be taxed in Thailand, not another country such as the Netherlands. “At least, the amount should be levied VAT of 7 per cent and the withholding tax of 5 per cent.”

He said that if a business is not based in Thailand but it conducts activities here from which it earns revenue, it should be taxed here accordingly.