At the cabinet meeting on June 4, the Thai government approved a proposal to improve the collection and management of value-added tax (VAT) on imported goods.. This aims to promote fair competition and boost fiscal revenue. Starting July 5, all imported goods valued over 1 baht will automatically incur a 7% VAT, marking a significant shift from Thailand’s previous tax exemption for low-value items.

01 Actively respond and launch the “automatic price increase” function

Shopee Thailand site will automatically implement VAT collection regulations from July 5. This policy perfectly responds to the government’s tax policy and ensures the transparency and efficiency of taxation. Under the new rules, Shopee will automatically calculate and display after-tax prices, relieving sellers of manual adjustments.Sellers only need to enter the pre-tax price, and the system will handle the rest. The 7% VAT will not count toward the seller’s final income but will be listed separately on their income statement. Shopee advises sellers to quickly adjust marketing strategies like coupons to align with the new tax policy.

It’s important to note that for returns, no VAT is required if the package is returned before Thai customs clearance. However, if the package is in Thailand or has cleared customs, the seller must bear the VAT even if it’s returned.All cash on delivery (COD) orders are also subject to VAT collection rules.

Newly created products will automatically be included in the VAT calculation system. Regardless of the original or discounted price, the system will add 7% and display this price to consumers. For one-store-multiple-shipment model stores, local inventory prices will remain unchanged, while cross-border prices will increase for fair policy implementation. Additionally, Shopee Thailand will enhance the dynamic lock function for stores to optimize inventory management in line with the VAT policy.

If you want to know more information, please click this link: https://shopee.cn/edu/article/2122

Simplify the tax collection process and improve efficiency

• VAT will be collected directly through e-commerce platforms, which will handle payments to the tax bureau.
• Purpose: To simplify the tax collection process, reduce administrative costs and improve the efficiency of tax collection.

Increase fiscal revenue and alleviate trade deficit

• Expected Outcome: This policy is anticipated to contribute around 18 billion baht to government finances annually.
• Economic significance: This additional revenue will help reduce Thailand’s trade deficit with China, which has lasted three years, and strengthen the country’s economic position.

Building a fair competition environment

• Policy objectives: To ensure that domestic and foreign companies enjoy equal tax treatment and maintain market balance and healthy development.
• Benefits to the private sector and SMEs: This will allow Thailand’s private sector and SMEs to compete in a fair tax environment, promoting their growth and development.

This tax reform in Thailand represents a significant fiscal policy shift aimed at promoting healthy economic growth and market balance. It focuses on simplifying the tax collection process, increasing fiscal revenue, and fostering a fair competitive environment. While implementation may pose challenges, this policy is expected to positively impact Thailand’s economic development in the long run. By creating a fairer market and enhancing transparency, it can encourage investment and support sustainable growth.

02 The function takes effect, focusing on low-price sellers

While the upcoming tax reform and Shopee’s measures aim to boost fair competition and national revenue, they also present new challenges for sellers of low-priced goods.These sellers may struggle to maintain profit margins and competitiveness in a more regulated environment.

Automatic VAT collection forces low-priced goods sellers to adjust pricing and marketing strategies for new after-tax prices. While Shopee’s automatic calculation and display of prices reduce the workload, sellers still need to manage additional costs to remain competitive.This is especially crucial when re-evaluating marketing tools like coupons and add-to-cart discounts. Sellers need to strategize to keep their appeal to customers while adapting to these new financial dynamics.

For sellers in the one-store-multiple-shipment model, local inventory prices remain unchanged, but rising prices for cross-border goods and updates to the dynamic lock function demand greater sophistication in inventory management. Additionally, the new refund function optimization will further increase pressure on these sellers, posing a challenge for those with limited resources.

03 Optimizing Shopee’s return process

Shopee Thailand will optimize delivery and refund processes for local stores starting June 19, 2024, to enhance user experience and protect sellers’ rights. If a product is marked as “successfully delivered” but disputed, Shopee will intervene to protect both parties. These changes will fully roll out by July 10.

For VAT on returns, if a package has cleared customs, the seller must cover the VAT even for refunds, increasing financial risk.

While these improvements aim to enhance user experience, they also raise demands on sellers. Sellers may need to provide proof of delivery for disputed orders, complicating processes and raising costs.

In summary, VAT reform and refund process improvements boost efficiency but introduce complex tax processing and operational challenges for sellers in Thailand.

04 What impact does the new VAT have on domestic companies in Thailand

The new VAT policy will significantly impact domestic businesses in Thailand in several ways:

First, it will enforce VAT collection on all low-priced imported goods, removing the previous exemption for items under 1,500 baht. This means all imported goods, whether from online platforms like Shopee or traditional channels, will now incur a standard 7% VAT, creating a fairer and more transparent business environment for all.

Second, the policy will directly affect Thailand’s cross-border e-commerce market. With over 15 million imported packages now subject to VAT, this will challenge the price advantage of Chinese sellers and may reduce their competitiveness.However, fully curbing their influx into the Thai market remains a challenge.

Finally, the new VAT policy may increase operating costs for domestic enterprises, impacting profitability. However, it could also drive companies to improve management and enhance efficiency to meet these new challenges.

Overall, the impact of the new VAT policy on domestic businesses in Thailand is complex, presenting both challenges and opportunities. Companies must adapt their strategies promptly to stay competitive. Wellion is your go-to partner, offering expertise and support to keep you in the loop on the latest policies. We provide one-stop services for your e-commerce business in Thailand, helping you achieve success.