Thai Law Insights

Online Entrepreneurs' Dilemma Due to New Thai Tax Law!

Sirapat Dejyarnkorn

It has often been said that in this world, nothing is certain except death and taxes. Online businesses, freelancers and self-employed individuals have become accustomed to the benefits not having to maintain a physical place of business and, to some extent, have been able to avoid taxes due to the government’s lack of oversight.  However, the government now wants to ensure an effective method of tax collection which would no longer make it easy for those working online to avoid paying taxes.

Recent amendments to the Thai Revenue Code 2019 (No.48) (“TRC”) would force financial institutions and online e-payment service providers to report customers’ transactions to the Thai Revenue Department (“TRD”) to ensure that online businesses, freelancers and self-employed individuals are included in the tax reporting system, effective 31 March 2020.  When these new reports are added to the system, the TRD expects to levy taxes on an additional 200,000 accounts in 2020.

Under the new Section 3/17 of the TRC, financial institutions and e-payment service providers have a duty to report to the TRD all money transfer or receipt transactions made by their customers amounting to i) 3,000 transactions per year; or ii) 400 transactions per year exceeding THB 2 million. Both transactions and the total amount of THB 2 million shall be assessed by the TRD for any risk of tax avoidance and the TRD will carry out an investigation on suspicious transactions and examine whether the bank account has been used for such businesses.

With regard to tax issues, all businesses or individuals must pay taxes based on profit when carrying on business in Thailand. A TRD assessment official has the power to summons any person to show accounts or documents within 2 years from the date of filing a tax return. TRD can extend this 2-year period to 5 years. The assessment official has the power to adjust the amount of the tax assessed or the amount calculated in the tax returns, based on evidence. Those businesses or individuals who fail to pay tax on time may be liable to pay a surcharge of 1.5 per cent per month and be subject to additional fines, double the amount of taxes due, if such businesses or individuals fail to file tax returns and do not comply with a TRD summons, according to Section 27 and 26 of TRC.

At the end of the day, the government like in many countries controls the online businesses, freelancers and self-employed individuals. No one can assure that taxes collected in this respect will give rise to fair allocation en masse.