Understanding E-Commerce Tax Legislation in Asia Pacific

Robert Pelletier
October 27, 2021

The global e-commerce market continues to transform in today’s digital world. E-commerce transactions consist of a variety of digital services and products such as software, applications, streaming media, web hosting, online advertising, e-books, online newspapers, and various others.

From an indirect tax perspective, nations across the globe apply destination-based VAT and GST legislation to these transactions. There is a trend requiring non-resident digital service providers who conduct international business to consumer (B2C), and/or business to business (B2B) transactions to register and account for VAT/GST in the customer’s jurisdiction.

One region in particular, Asia Pacific, has joined the global trend of drafting and implementing new e-commerce rules. In addition to New Zealand (2016), Australia (2017), and India (2017), Asia Pacific has seen significant indirect tax rules enacted to cover the supplies of digital services since January 2020.

Definitions of digital services vary between these countries. Typically, a digital service is defined as any electronic good or service delivered or subscribed to via the internet or other electronic network, that cannot be obtained without the use of information technology and delivery is usually automated. Some rules broadly apply to any e-commerce activity.

VAT/GST e-commerce legislation on cross-border digital sales in Asia Pacific:

Malaysia
Effective 1 January 2020: registered digital service providers must collect and remit a 6% service tax on digital services supplied to customers in Malaysia (B2C and B2B).
Singapore
Effective 1 January 1 2020: non-resident digital service providers must register, collect, and remit 7% GST on digital services supplied to customers in Singapore (B2C and B2B through reverse charge). Beginning 1 January 2023 GST will be extended to imports of non-digital services.
Indonesia
Effective 1 July 1 2020: non-resident digital service providers must register, collect, and remit 10% VAT on e-commerce supplies to customers in Indonesia (B2C and B2B through reverse charge).
Thailand
Effective 1 September 2021: non-resident digital service providers must register, collect, and remit 7% VAT on digital services supplied to customers in Thailand (B2C).
Cambodia
Effective 8 September 2021: non-resident digital service providers must register, collect, and remit 10% VAT on digital services supplied to customers in Cambodia (B2C and B2B through reverse charge).
Vietnam
Generally effective on 1 January 2022: non-resident digital based businesses will be required to register, declare, and pay VAT on revenue from e-commerce activities in Vietnam (B2C and B2B). VAT registration and payments will be handled through an e-portal system that is still in development. Registration is not required until the portal is activated following the effective date of Circular No. 80.

Similar legislation has been proposed in both Bhutan and the Philippines.

Take Action

Sovos expects that the trend of new VAT registration requirements for foreign e-service providers will continue to spread in Asia Pacific and beyond – it is vital that businesses in this sector stay on top of these developments.

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Author

Robert Pelletier

Robert Pelletier is a Junior Regulatory Counsel at Sovos Compliance. Within Sovos’ Regulatory Analysis function, Robert specializes on research and analysis of global VAT and GST. Robert received a B.A. magna cum laude in Legal Studies from Quinnipiac University and a J.D. cum laude from Suffolk University Law School. Robert is a member of the Massachusetts Bar.
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