The Ministry of Finance and the Revenue Department of Thailand are cooperating on the preparation of the draft law(amendments) to the VAT Act that will set the framework for the introduction of new liabilities for foreign digital platforms or suppliers for supplies of low-value goods.
The present situation permits non-resident suppliers to make cross-border supplies of low-value goods without bearing any additional cost related to the imposition of local import duties or VAT on their imports.
From a practical standpoint, these products are sold without any import duty or VAT levied when the goods are imported into the country and picked by the end consumer. This advantage for foreign sellers makes the domestic market unbalanced and puts non-resident merchants into a privileged position in comparison to local sellers.
The government is striving to find a fair and balanced solution to address the current market imbalance, ensuring that both foreign and local sellers operate on a level playing field within the same sector.
Timeline
The leading local financial institutions plan to prepare the draft law in the following weeks so that the new provisions will be enforced within May.
New rules
The amendments to the VAT law will significantly change the digital service providers’ (platforms) operations through which low-value goods are sold to customers based in Thailand. The Government should reinforce the competitiveness of domestic small and micro businesses by introducing indirect tax obligations for foreign suppliers of low-value goods.
What will new rules change if they are implemented in the form as expected?
- The threshold of baht 1,500 for low-value imports will be abolished;
- Digital Platforms will become deemed suppliers for imported low-value goods sold to customers residing in Thailand;
- Digital Platform Operators will be obliged to register for local VAT and file declarations accordingly;
- Digital merchant operating without the intermediation of the platform will bear this responsibility on its own;
- Foreign and domestic sellers will have some indirect tax duties for the supply of goods.
Non-resident digital platform operators should continuously follow novelties from respected Thai financial institutions because their responsibilities could experience significant shifts in a short timeframe. When the amendments become part of the Law, the digital platform operators intermediating in the sales of low-value goods will become responsible for custom duties and VAT to local tax authorities.
Aleksandar Delic
1stopVAT Senior Indirect Tax Researcher (Global Content)