As discussions of tax on the
digital economy continue, both Thailand and Saudi Arabia recently announced
changes that would subject services supplied by non-resident e-businesses to
customers in those countries to Value Added Tax (VAT).
VAT in Thailand is presently 7%. The tax
authorities recently decreed that the tax would apply to such services as online
hotel booking, online movies and music, online advertising and gaming, and
other such offerings.
The tax would apply to the
extent any service is consumed in Thailand, regardless of the jurisdiction in
which the service was supplied or the residency of the supplier.
Foreign suppliers must register
for VAT in Thailand if their annual income from such transactions exceeds THB
1.8 million. This represents a significant expansion of the VAT in Thailand.
In Saudi Arabia, the VAT is currently 5%. Saudi tax authorities
recently released guidelines subjecting services supplied electronically to VAT
regardless of whether the supplier is a Saudi resident. The tax would apply to
any service relating to the transmission, emission, or reception of signals,
writing, images, sounds, or information of any nature by wire, radio, optical,
or other electromagnetic systems. This broad definition encompasses all
provision of items such as music, films, games, etc. electronically within
Non-resident suppliers are
required to register in Saudi Arabia regardless of the value of services
supplied in that country. The guidelines also contain rules for determining the
place of use of the services.
These new rules are examples of
activity occurring worldwide to subject remotely supplied goods and services to
tax in the jurisdiction where they are consumed, regardless of the tax
residence of the supplier. For example, the European Union has been working for
several years to implement a single cross-border system for VAT.
Companies who supply electronic
services must keep abreast of these developments, which will affect their
worldwide tax liability.