Thailand to Start Collecting Tax from Foreign Tech Firms

In an unprecedented move, Thailand has announced its plan to start charging and collecting value-added tax (VAT) from technology corporations operating in the country. The plan is to generate about 5 billion baht– the equivalent of $154.7 million– from the tax every year. The announcement was made by a senior official of the government.

              The new tax rule will affect foreign corporations that operate electronically in Thailand. These companies now have to register with the government to pay VAT payments. Ekniti Nitithanpraphas, a senior official at Thailand’s finance ministry, made the announcement  to reporters. Ekniti also said 69 out of the target 100 tech firms have registered with the government so far.

Thailand’s officials, saddled with enforcing the new tax rule, decided to divide the technology firms into five categories. This includes companies that earn income from advertising like Google and Facebook. Streaming services like Netflix and companies like Grab are among the other categories .  The companies that make more than 1.8 million baht will be compelled to pay 7% of their revenue to the Thai government every month.

Thailand’s ministry of finance set a minimum revenue target before the coronavirus pandemic hit, and it expects to make more than that figure every month. Thailand already earns approximately 800 billion baht from VAT every year. The country’s VAT rate has been 7% since the Asian financial crisis in 1997-1998.

This rate was extended to September 2023, and the extension was approved by the government of Thailand. This tax rate isn’t expected to be well received in South Korea, whose companies have a major presence in Thailand and see the country as a desirable business location.  The Thai government has been quite supportive of foreign businesses, as it has revised several laws guiding businesses in a bid to simplify business processes  in the country.