On 10 July 2020, the Revenue Department announced that it was expecting a bill for amendment of the Revenue Code to impose VAT on digitalized form of services, or the so-called “e-Service Tax Act”. The bill was approved by the Cabinet on 6 June 2020 and should be legislated and come into effect by the beginning of 2021.

The main objective of the e-Service Tax Act is to impose VAT on offshore entities that provide e-services via internet and telecommunication networks without having a physical presence in Thailand, such as those providing the on-line movie streaming, games, advertisements, sale agents and e-commerce market platforms. The big names expected to be the targets of this new Act includes, among all, Facebook, YouTube, Google, Line, Netflix and Lazada. With COVID-19 influence that increases digitalized activities, it is expected that e-Service Act will raise several billions Baht of VAT revenue to the Thai government.

The e-Service Tax Act will amend the existing reverse charge VAT rules. Where an offshore supplier provides e-services to non-VAT registrant customers in Thailand (e.g. students, wage earners and housewives), it will be liable to register, file and pay VAT to the Revenue Department on behalf of the customers insofar as its VAT revenue exceeds THB 1.8 million per year.

Further, where e-services are offered/rendered/paid via an electronic platform, the operator of platform will be the one to pay VAT on behalf of all suppliers.

The term “e-services” means services rendered via internet or other electronic networks automatically, or substantially automatically, and such services are not possible to be rendered without the telecommunication technology. Meanwhile, “electronic platform” means market, channel or any other process utilized by suppliers in providing e-services to the customers. The offshore e-service suppliers will not be allowed to issue a tax invoice. Once e-Service Tax Act comes into effect, supplementary regulations and notifications will follow.

The draft bill does not mention about VAT for online sale of goods by the offshore suppliers, since the importation is normally subject to VAT upon customs clearance. As for the goods with the value of no more than THB 1,500 imported via postal services, which are currently exempted from customs duty as well as VAT under Section 81(2)(c) of the Revenue Code, another set of the draft legislation will be implemented to repeal the VAT exemption rule.