Thailand VAT on Digital Services: Rules & Compliance

Following several years of delay, Thailand introduced a significant reform to its VAT system in February 2021 to address the growing digital economy. As a result, on September 1, 2021, new rules targeting foreign digital services providers that supply digital content or services from abroad to customers in Thailand came into effect. The core idea behind this decision was to subject foreign electronic service providers that earn revenue from Thai consumers to VAT, even if they are not physically present in the country. 

At the time, this aligned national legislation with broader regional and global trends, in which countries such as Singapore, Malaysia, and Indonesia have implemented similar regimes to tax cross-border digital services. Nonetheless, while the concept of taxing foreign digital service providers is similar, Thailand's regime, like any other national legislation, has its specifics and characteristics. For foreign businesses, understanding country-specific VAT rules is essential to ensure compliance and avoid costly penalties.

Scope of Thailand’s VAT on Digital Services

The Thai legislation clarifies the meaning of two key terms within the scope of the 2021 VAT rules: electronic services and electronic platforms. 

Electronic services, or digital services, are defined as services that deliver intangible or incorporeal property over the Internet or any electronic network and are inherently automated, meaning they cannot be effectively provided without information technology. Some of the most notable examples for Thailand's market include online games, mobile applications, cloud services, streaming platforms, and online advertising services.

Electronic platforms, on the other hand, are digital marketplaces or channels that multiple service providers use to offer their services to end users. Essentially, digital platforms act as an intermediary, facilitating the entire transaction process: presenting the service, receiving payment, and delivering the service to the customer. Notable examples include websites, mobile applications, or other digital systems, enabling seamless interaction between providers and recipients while supporting the automated nature of electronic services. 

Who Needs to Register for VAT in Thailand? 

Foreign digital service providers and digital platforms must register for VAT in Thailand once their annual income from supplying e-services to Thai customers exceeds THB 1.8 million (approximately USD 55,000).  The registration process must be completed within 30 days from the day the threshold is exceeded, through the Revenue Department’s VAT for Electronic Service (VES) system. Notably, the registration process varies slightly depending on whether the applicant is a business or an individual.

To complete the registration process, businesses must submit a certificate of incorporation, translated into English and notarized within six months, showing the business name, country, and incorporation date, along with a tax residency certificate from their country of incorporation if applicable. In contrast, requirements for individuals are a bit less demanding and require them to provide a notarized copy of their passport or identification card, again notarized within the past 6 months, and, if relevant, a tax residency certificate.

From Filing to Refunds: Managing VAT Obligations

Completing the registration process is only the initial step in complying with the VAT rules and regulations. Once registered, foreign digital service providers and platform operators must comply with Thailand’s VAT filing and payment requirements. The first obligation is to apply, collect, and remit VAT at the currently reduced rate of 7% on every sale to a Thai resident. The standard VAT rate in Thailand is set at 10%. However, the rate is reduced to 7% until September 30, 2026, unless the government extends the application period.

Additionally, VAT returns must be filed monthly between the 1st and the 23rd of the following tax month in which the VAT liability arises. VAT returns must be submitted even in months when no income was generated. Also, foreign VAT-registered digital service providers must, upon request from the Revenue Department, prepare an output tax report that includes a detailed list of transactions in a specified format. These reports must be stored for at least 5 years from the date they are prepared.

Foreign VAT-registered businesses and individuals are entitled to request a refund in several circumstances, including overpayments of VAT collected from VAT-registered customers, overpayments related to customers outside Thailand, overpayments for non-electronic services, or overpayments due to calculation errors or duplicate charges.

Compliance Requirements and Enforcement Measures

Thailand’s Revenue Department has established clear compliance expectations for foreign digital service providers. Those who fail to meet VAT registration, filing, or payment obligations may face civil and criminal penalties.

Note: Data in the table is from the Revenue Department's Guide on VAT on Electronic Services Provided to Non-VAT Registrants in Thailand

Key Elements of Thailand’s Regime

The Thai regime primarily focuses on B2C transactions. As a result, services provided to VAT-registered businesses, or B2B transactions, generally fall outside this obligation, as those customers account for VAT through reverse-charge mechanisms. Also, the rules are specifically designed to cover service transactions rather than goods transactions.

While most of the digital services are included, live teaching, where a teacher delivers course content over the Internet or another electronic network, and professional services that require direct human intervention and are not inherently automated, such as a consulting service via video call or offering advertisement design via e-mail, remain out of scope.

With a relatively low registration threshold of THB 1.8 million, Thailand's government wanted to ensure that a wide range of foreign digital businesses fall within the scope of the regime. For foreign providers, the key is to understand the scope of taxable services, monitor revenue thresholds, and maintain timely filing and payment practices, not only to comply successfully but also to avoid penalties and ensure smooth operations in the Thai market.

Source: Thailand's Revenue Department, EY, PwC