Experience in VAT management with e-commerce activities in the world

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Countries have introduced strict regulations on indirect taxes (value-added tax - VAT)

According to the National Institute for Finance, different countries have different ways of dealing with taxes in the digital economy as well as on e-commerce, such as applying indirect taxes or goods and services taxes; direct taxes; and measures for effective tax management.

As for indirect taxes, to deal with the loss of budget revenue from e-commerce, some governments require foreign suppliers to make tax registration to sell goods via e-commerce.

The European Union (EU) requires that suppliers of goods and services via e-commerce outside the EU, when selling goods into the EU, must register for tax and collect value-added tax (VAT) from consumers in the EU area.

In addition, from July 1, 2021, online sellers and e-commerce trading floors must register their business in a member country if they want to sell goods online in the EU.

The UK has added measures to tackle the erosion of VAT through online shopping. E-commerce platforms such as eBay and Amazon are responsible for ensuring that their overseas customers register for tax in the UK.

In Germany, a bill passed in 2018 stipulates that e-commerce platforms are legally liable for unpaid VAT from sellers in Germany.

The National Institute for Finance also points out that most countries have enacted VAT/goods and services taxes on cross-border e-commerce under the Organisation for Economic Co-operation and Development (OECD) guidelines.

Governments around the world recognize that the VAT challenges posed by the digitalization of the global economy require a global cooperation response to maximize law compliance of non-resident online vendors with minimal cost, facilitating effective international cooperation in tax administration and enforcement and minimizing the risk of unfair trade.

The OECD has produced a comprehensive internationally agreed policy framework to address the VAT challenges of the digital economy, demonstrating a wide consensus on effective solutions across tax agencies worldwide.

These OECD standards and recommendations have been implemented in more than 70 jurisdiction areas around the world including Australia, Georgia, Japan, Korea, New Zealand, Singapore and more.

Overall, the results are very positive in terms of VAT revenue, specifically Chile collected US$65 million in the first five months of the issuance of the regulation, the EU collected EUR14.8 billion in the first four years, and Australia collected AUD 1 billion (approximately EUR 618 million) in the first two years, the Russian Federation RUB 21.4 billion (approximately EUR 241 million) in the first two years.

Moreover, the compliance level has been increasing and heterogeneity in competition between traditional and online suppliers has reduced.

In Asia, from July 1, 2020, Indonesia started collecting VAT from e-commerce activities. The regulation applies to certain intangible goods and services provided to customers and used in Indonesia from abroad. The General Department of Taxation sets thresholds to determine VAT payers for e-commerce those who have a sale of over IDR 600 million (about US$42,000) per year or IDR50 million (about US$3,500) per month; or charged by visits of e-commerce platforms from Indonesia. The VAT rate is 10% on the value of payments.

Or as in Malaysia, from January 1, 2020, a foreign individual or organization must charge a service tax of 6% on digital services provided to consumers in Malaysia. The range of digital services includes all services provided or registered over the internet or other electronic networks.

In Thailand, overseas electronic service providers and operators of electronic platforms providing services to recipients in Thailand must register for VAT in Thailand if their annual turnover reaches THB 1.8 million (over US$49,000) for that tax year.

This regulation will apply to these transactions from September 1, 2021. Foreign e-commerce businesses will be entitled to a VAT rate of 7% for services provided to customers in Thailand (such as online hotel booking; online movie, online music and e-book subscriptions; online gaming services; online advertising; websites, applications and online trading platforms, etc.).

The imposing of VAT is to increase revenue for the state budget (estimated to be about US$160 million) and create a fair playground for domestic and foreign operators in providing online services to customers in Thailand.

Cambodia issues regulations on criteria and mechanisms for registration and collection of VAT on e-commerce activities in the country, provided by non-resident organizations in Cambodia. For Business-to-Consumer (B2C) transactions, non-resident legal entities providing commercial services to consumers in Cambodia that have registered for VAT are required to make monthly tax declarations and must pay tax with a tax rate of 10% on their transactions to the General Department of Taxation before the 20th of the following month.

The Government remove obstacles in the implementation of VAT reduction by 8%

Notably, from January 1, 2020, according to Singapore's regulations, foreign-provided digital services will be subject to a goods and service tax of 7%.