Taxing Southeast Asia’s E-commerce sector
The invasion of technologies and the Internet completely spin the retail world in another direction. Before that, the success of a retail store relies greatly on its location and accessibility. However, as technology allows people to shop in just one click, stores are no longer bound by its venue, and the extensive logistics network made it possible to deliver items halfway across the world. Brick-and-mortar stores are going online, but some businesses nowadays don’t even have a physical location since the birth of E-commerce.
For mature markets like Europe and the US, both business-to-business (B2B) and business-to-consumer (B2C) model players have to pay taxes and follow the rules. However, for the case of Southeast Asia, regulations in some countries haven’t been able to keep up with the pace of E-commerce transformation.
The Philippines: The only country with a complete system
Since 2013 – the early start of E-commerce, the government already issued regulations for online sellers and buyers. Regardless of the channel (online or offline), goods and services providers are obliged to impose a 12% value-added tax (VAT). Businesses with below than PHP 1.92 million (USD 36,690) in annual sales are required to pay 3% VAT. The 12% in VAT should be bear by the buyers themselves if purchasing from international sites with a value more than PHP 10,000 (USD 200).
Indonesia: Regulations still in paper
A tax plan called PML-210 was issued by the country’s finance ministry, stating that any business with a yearly profit exceeding IDR 4.8 billion (USD 399,000) has to be charged with 10% VAT, including E-commerce companies. Nonetheless, the plan was retracted by the finance minister for further discussion with industry stakeholders. There are predictions that the tax plan will allow the economy to be dominated by micro, small and medium-sized enterprises (MSMEs) and informal transactions.
Thailand: Foreign investors roam free
According to Thailand’s current domestic tax law, Thai B2C and B2C sellers with more than THB 1.8 million (USD 58,600) in annual revenue have to pay an additional 10% in VAT. However, this law has limited weight in the current E-commerce landscape as all major players are foreign investors. Thailand’s two biggest platforms are Shopee and Lazada, owned by Sea Group (Singapore) and Alibaba (China) respectively. These foreign operators are not under any obligated taxes, which is a huge loss for tax revenue. The Thai Revenue Department attempted to issue Draft VAT Bill in January 2018, focusing mainly on these foreign sellers, proposing 7% in tax for the same threshold as domestic businesses. Until now, the bill has yet to be accepted.
Singapore: Proceed with caution
All goods and services provided in Singapore have to face an additional 7% goods and services tax (GST), with exemptions being low-value goods (under SGD 400) for online purchases. Reports show that the majority of online transactions are below this threshold, leading to a gap in tax revenue in a developed country with an E-commerce market in maturity. Around the year 2017-2018, the government was said to be attending to this matter urgently, but it was only followed by a 9% GST charge on imported goods and services valued more than SGD 400, implementing from January 2020. No more tax plans are announced as it is believed that the government is approaching the sector with caution and trying to create a stable environment for businesses.
Vietnam: Development on its way
The standard rate for VAT is 10%, with an exemption for individuals with annual revenue below VND 100 million (USD 4,540). On 13 June this year, the National Assembly of Vietnam passed a new law that will affect all foreigners selling to Vietnam. Taking effect on 1 July 2020, the law declares that “all Inbound e-commerce activities who do not have a permanent establishment in Vietnam, are obliged to register, declare and pay tax in Vietnam or authorize other parties to do so.” The Ministry of Finance is also reported to be building a draft scheme on management E-commerce activities, spreading across all segments. At this pace, we are expecting to see big changes happening soon.
Boxme is the premier cross-border e-Commerce fulfillment network in Southeast Asia, enabling world-wide merchants to sell online into this region without needing to establish a local presence. We deliver our services by aggregating and operating a one-stop value chain of logistic professions including: International shipping, customs clearance, warehousing, connection to local marketplaces, pick and pack, last-mile delivery, local payment collection and oversea remittance.