Thailand, Saudis, Improve Value-Added Tax on eBusinesses

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).

Thailand

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.

Saudi Arabia

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 Saudi Arabia.

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.

How This Impacts Mobility

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.