Digital Nomad Taxes in Thailand: 7% VAT Imposed on Foreign Talent

Thailand Introduces 7% VAT on Digital Service Providers

So long and farewell to the digital nomad scene of Thailand! If coronavirus hadn’t already thrown the Thai economy for a loop, this new tax bill is sure to do the trick. Although the days of coworking in Thailand have already been dwindling, this recently passed legislation to secure tax revenue from foreign tech companies will only add to this trend.

Thailand Digital Nomad Tax Explained

For the sake of simplicity, I’m just going to call it the digital nomad tax. The true purpose is to secure tax revenue from foreign tech companies. But that doesn’t mean it isn’t relevant to nomads! We should all be well aware of new tax laws as we live in the gray while abroad. It’s a growing trend in the SEA region and will potentially impact other digital nomad haven countries like Estonia and Hungary, after all.

Thailand passed amendments to the Thai Revenue Code on June 9th, 2020, imposing a 7% value-added tax (VAT) on foreign digital service providers as well as digital sales. Yes, this includes all forms of digital marketing. Yes, this includes ecommerce (and dropshipping). Yes, this includes applications.

While I haven’t received confirmation from my source in the Thai Revenue Department, I believe this can also be applied to influencers who are selling sponsored posts as well.

Before you freak out and ditch your plans to visit (or return) to Thailand once borders are reopened, let’s just set the facts straight. This will not impact the average digital nomad. Why? The majority of digital nomads don’t even make enough money to enter this tax bracket!

Let’s make things simple and just get the cold, hard facts out of the way before we get into its implications and what it really means for digital nomads. Credit to ASEAN Briefing by Dezan Shira & Associates for these quick tidbits that summarize the new legislation quite well:

  • The Thai government has approved draft legislation that will allow the country to impose value-added tax (VAT) on international digital service providers.
  • Those obligated to pay the VAT rate of seven percent will need to earn annual revenues exceeding 1.8 million baht (US$58,000) and must register with the Thailand Revenue Department.
  • Investors will need to wait for the implementing regulations to be issued.

“18% of digital nomads report making more than $100,000 per year, while 22% make between $50,000 and $99,999.” FlexJobs, 2018

If figures haven’t moved by mountains since 2018, then FlexJobs can be trusted on this one. However, we can’t rule out the possibility of the average earnings of nomads to be drastically different in the covid-19 working landscape. The higher performers are likely performing even better. Those in the middle range have likely fallen off or bumped up and the lower performers might not be freelancing or even nomading at all.

filing taxes in Thailand

Who has to pay Digital Service Taxes in Thailand?

For most of you reading this, you’re probably most concerned about yourself and your bottom line so let me ask you 2 questions that will ease your mind:

  1. Are you based in Thailand most of the year?
  2. Do you make $58,000 USD or more digitally per year?

If the answer to both of these questions is yes, then you should get ready to register with the Thai Revenue Department. Simple as that.

If you’ve registered a Thai business and you’re making your bank digitally, you don’t really have to worry, as you’ll have to file your business taxes as normal anyways.

Where this becomes tricky is if you do freelance work outside the jurisdiction of your registered business. I have zero doubt in my mind that there will be people who flat out ignore this tax legislation or try to avoid it by splitting up their revenue through multiple businesses, countries, banks, etc.

I don’t condone this whatsoever, as I think ‘nomads’ that eventually settle into a country they’ve taken a liking to will run into tax issues when revenue agencies dig into their past.

When will Digital Nomad Taxes in Thailand be in effect?

As far as I’m aware, the drafted legislation went into effect on June 9th, 2020 but its actual implementation is a big question mark. Is the Thai government knocking on doors of tech CEOs to collect tax revenue right now? I have no clue. ASEAN Briefing seems to think so, hinting that it’s part of Thailand’s plan to recover its corona-damaged economy.

Taxes on Digital Service Providers in Southeast Asia

As previously mentioned, implementing taxes on foreign tech companies is a growing trend. Singapore introduced its Overseas Vendor Registration regime back in January for the same 7% and Malaysia sits at 6% with its Digital Service Tax. Indonesia has also passed similar amendments, making Bali a weaker choice than for digital nomads over the long term.

To summarize, these are the countries in Asia with taxes on digital providers:

  • Thailand
  • Singapore
  • Malaysia
  • Indonesia

Who’s next? The Filipino government is in deliberations to follow its peers’ lead, with a rumored 7% VAT to match Singapore and Thailand.

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