Tax Digitization in Thailand: The New Change of e-Tax Invoice from ‘Analog’ to ‘Digital’

English

This Article was an academic research in 2017 by Asst.Prof.Dr. Yutthana Srisavat, Siam University

Summary

Technologies have dramatically changed the world for many times. Technologies have also changed a business model, offer value-producing opportunities, and provide new revenue models like never before.

Currently, the Thai government is in the process of transforming Thailand’s economic structure to “Thailand 4.0.” Under the Thailand 4.0 development plan led by Prime Minister Prayut Chan-o-cha, Thailand is focusing on creating an innovative and value based economy by promoting and producing innovative products.

Doing digital businesses through limitless communication platforms creates a new economic structure and new consumer behaviors. Using e-payment is one of the new consumer behaviors in the digital businesses. Typically, purchasing goods and services is subject to consumption tax. In Thailand, they are subject to value added tax (VAT).

Therefore, tax administrations in Thailand must be upgraded to handle the growth of digital businesses by reforming rules and regulations to enable electronic submission of documents, particularly e-Tax invoice and e-Receipt.

As of now, there are two separate e-tax invoice systems available in Thailand since 2017: E-tax invoice by email, and E-tax invoice and e-receipt. These two systems are still optional, which VAT registrants are not required to use e-tax systems until January 1st, 2020. 

The e-tax invoice systems in Thailand is just the beginning but it is developing from time to time to catch up with digital businesses. They still have room for improvement. There might be a number of concerns and technical issues which the Revenue Department needs to take into account. If the Thai government is serious about Thailand 4.0, promoting e-tax invoice systems and making them nation-widely accepted is a critical issue.

Introduction

Technologies have dramatically changed the world for many times. Technologies have also changed a business model, offer value-producing opportunities, and provide new revenue models like never before. We are living in the world where a large number of businesses are in the process of moving to digital businesses. This trend has caused a large number of trade transactions and an unprecedented flow of information around the world, for both offline and online. This is a paradigm shift and a global trend. 

Thailand realizes the trend, and the Thai economy has been continuously improved by developing its economic models from time to time as follows. 

  • Thailand 1.0 – main focus: agricultural sector
  • Thailand 2.0 – main focus: light industry sector
  • Thailand 3.0 – main focus: heavy industry sector
  • Thailand 4.0 – main focus: innovative and valued based industry sector

Currently, the Thai government is in the process of transforming Thailand’s economic structure to “Thailand 4.0.” Under the Thailand 4.0 development plan led by Prime Minister Prayut Chan-o-cha, Thailand is focusing on creating an innovative and value based economy by promoting and producing innovative products, instead of solely producing commodities from Thailand 3.0. Creating digital businesses requires innovative tools and technologies. This is a global trend and also part of the Thailand 4.0 development plan.  

People in Thailand are already familiar with innovative products, such as smartphones, laptops, mobile apps, chats, websites and social networks. Many of them are also familiar with the world of digital businesses, such as purchasing tangible products from e-commerce websites, and using e-payment to make the payment, for example. Doing digital businesses through limitless communication platforms creates a new economic structure and new consumer behaviors. Using e-payment is one of the new consumer behaviors in the digital businesses.

Typically, purchasing goods and services is subject to consumption tax. In Thailand, they are subject to value added tax (VAT). Since businesses in Thailand are in the process of moving to digital businesses, e-payment is increasingly playing an important role. Therefore, the Thai government initiates payment infrastructure development to promote and support electronic financial and payment services. As a result, the Thai government comes up with the “National e-Payment Master Plan.” 

To catch up with the growth of e-payment, however, it is necessary to create an integrated electronic tax system, as part of the National e-Payment Master Plan. Therefore, tax administrations in Thailand must be upgraded to handle the growth of digital businesses by reforming rules and regulations to enable electronic submission of documents, particularly e-Tax invoice and e-Receipt. The government believes that e-Tax invoice is supportive to the e-payment system and will help facilitate digital businesses.

How the Current Value Added Tax System Works in Thailand

Overview

Value added tax or VAT is consumption tax and indirect tax. It is also self-assessment system. It has been introduced in Thailand since 1992. In general, the Thai Revenue Department (under the Ministry of Finance) is responsible for collecting the value added tax on domestic trade or services. Tax liability is based on the value of goods or services. The current tax rate is seven percent. That means seven percent will be added to the price of the goods or services. Now there are about six hundred thousand VAT registrants in Thailand.

General Concept

Under the current value added tax, if sales is exceeding one million and eight hundred-thousand baht in a taxable year(about fifty five thousand US dollars), typically the enterprise is required to register and enter into the value added tax system within thirty days. Therefore, seven percent tax rate will apply to all goods and services since then. For example, if a VAT registrant is selling a product or service at one hundred baht, the price tag must add seven percent tax rate to the price. As a result, the price tag is one hundred and seven baht. The consumer will pay one hundred and seven baht which the seller must keep seven baht (value added tax) and transfer to the Revenue Department within fifteen days after the end of the taxable month. The VAT registered enterprise is also required to issue a tax invoice to its customers when there is any sales of goods and services.

Tax point

The seller is liable to the value added tax when a tax point is met which depends on a certain types of business activities.

1. Sales of goods

In general, the tax point in case of sales of goods is determined by any event as follows, whichever comes first.

  1. Goods are delivered
  2. Ownership of the goods is transferred
  3. Payment is made
  4. Tax invoice is issued

2. Sales of services

In general, the tax point in case of sales of services is determined by any event as follows, whichever comes first.

  1. Payment is made
  2. Tax invoice is issued
  3. Services are rendered

Computation of Value Added Tax in Thailand

Value added tax adopts seven percent tax rate. VAT payable depends on the value of goods or services sold and bought in a taxable month, which are called “output tax” and “input tax”.

If the value of goods or services is a hundred baht, the VAT registered enterprise must collect additional seven baht from the consumer. That makes the total price a hundred and seven baht. Under the current value added tax system in Thailand, the VAT registered enterprise is responsible for filing a value added tax return and paying the tax collected from the consumer to the Revenue Department in a monthly basis. The value added tax collecting from the consumer when selling goods or services is called “output tax”.

In contrast, if the VAT registrant buys goods or services at a hundred and seven baht, one hundred baht represents the value of the goods or services while seven baht represents the value added tax. The value added tax paying to the other party for goods or services is called “input tax”.

Therefore, each taxable month will result in three tax scenarios:

  1. Output tax is great than Input tax: This means the enterprise collects value added tax from sales of goods or services more than the tax paid when buying goods or services. In this case, the enterprise must file net tax payable to the Revenue Department.
  2. Output tax is equal to Input tax: This means value added tax collected from sales of goods or services is equal to the tax paid when buying goods or services. In this case, the enterprise is not required to file any tax payable to the Revenue Department. Only the value added tax return is needed.
  3. Input tax is great than output tax: This means the enterprise buys goods or services subject to value added tax more than collects value added tax from sales of goods or services. In this case, the enterprise can utilize the net input tax as a tax credit to offset the tax payable in the following taxable month, or even request a tax refund.

Under the third scenario where input tax is great than output tax, tax invoices will play an important role in claiming tax credits or tax refunds.

Importance of tax invoices

The VAT registrant is required to issue an original tax invoice to its customers when there is any sales of goods and services, and another copied tax invoice to keep at the issuer’s place of business. VAT registrants are also required to maintain the input book (VAT report) and the goods and raw materials with costs report.

As a buyer, the value added tax paid to the seller is input tax. The tax invoice, therefore, is an important instrument since it shows the tax credit the buyer is eligible to claim. Having a valid tax invoice is treated as if having cash on hand. Without the tax invoice, in contrast, the buyer may not be eligible to claim the credit. 

Under the Revenue Code, tax invoices are, however, paper-based. The sales is either traditional (buying from physical stores) or even digital (buying from online stores), the seller is required to issue a traditional paper-based tax invoice anyway. Using e-payment is one of the new consumer behaviors in the digital businesses. Purchasing goods and services from digital businesses is subject to value added tax. As a result, using a paper-based tax invoice might not well suit to digital businesses.

As part of promoting electronic financial and payment services, the Thai government initiates payment infrastructure under the “National e-Payment Master Plan.” Under the master plan, an integrated electronic tax system is considered to be upgraded to facilitate the growth of e-payment, especially, the rise of the e-tax invoice.

E-tax invoice systems

In fact, the e-tax invoice system was first introduced in Thailand in 2012 by the Revenue Department Regulation on the preparation, delivery, and storage of e-tax invoices and e-receipts B.E. 2555. In other words, the e-tax invoice system was introduced even before Thailand 4.0 plan and the National e-Payment Master Plan.

As part of the National e-Payment Master Plan, eTax system is intended to create an integrated electronic tax system. This scheme at the initial phase, the government starts from reforming rules and regulations to enable electronic submission of tax documents, especially, e-Tax invoice and e-Receipt. That means e-Tax invoice is playing a significant role in transforming Thailand’s economic structure to “Thailand 4.0.”

There were, however, only twenty five registered enterprises under the Regulation during the past six years (2012-2018). The number of the registered enterprises was limited due to the strict requirement of the Regulation and complexity of the e-tax system, too.

As of now, there are two separate e-tax invoice systems available in Thailand. These two systems are, however, still optional. VAT registrants are not required to use e-tax systems until January 1st, 2020.

1. E-tax invoice by email

E-tax invoice by email was first initiated by the Revenue Department Regulation on the preparation, delivery, and storage of e-Tax Invoices by email B.E. 2560, which has been legally effective since March 1st, 2018. The Regulation enables VAT registrants to issue tax invoices to their buyers in electronic format and and send the tax invoices to the buyers through email.

Requirements

  • Already VAT registrants (either individuals or juristic persons)
  • Gross sales in a year is not exceeding thirty million baht 
  • Not operating the e-tax invoice system under the Revenue Department Regulation on the preparation, delivery, and storage of e-tax invoices and e-receipts B.E. 2555
  • No fraud or tax evasion records
  • Valid emails for both sellers and buyers

Registration Process

VAT register enterprises must file an application through the Revenue Department website. This step requires a valid email which will be used to generate a legitimate e-tax invoice by email. 

The application process on the Revenue Department website is not purely online. The applicant must prepare print out the application form, fill out and scan it with other documents to submit the application on the Revenue Department website. Once submitted, the Revenue Department will send an activation code in a physical mail to the applicant’s physical address. Once the activation code is activated, the registration process is complete. This process is to verify and identify the existence of the VAT registrant. Therefore, the registrant’s email will be registered in the system. The VAT registrant is then ready and eligible to legally issue an e-tax invoice by email. 

Issuing e-tax invoices by email

If the system receives a request from the registrant’s email, the system will validate the identity of the registrant and verify the existence of the e-tax invoice.

An e-tax invoice by email is legitimate and valid only if the e-tax invoice meets all three requirements as follows.

  1. Comply with a legal format of a tax invoice under the Revenue Code
  2. Create the tax invoice as an electronic file (Microsoft Words, Microsoft Excel and PDF are all acceptable), and
  3. Have the email time-stamped to verify the existence of the e-tax invoice by ETDA (Electronic Transactions Development Agency) which is a Thai public organization under Ministry of Digital Economy.

To issue a legitimate and valid e-tax invoice, an eligible VAT registrant must create a tax invoice in electronic form (i.e. Microsoft Words, Microsoft Excel or PDF file). The content within the e-tax invoice file itself must also consist of all required elements of a legitimate paper-based tax invoice under the Revenue Code. Lastly, the eligible VAT registrant must use the registered email address to compose an email attached with the e-tax invoice file. The email has to be sent to the buyer’s email address and also copy ETDA email ([email protected]) in so that ETDA can verify that the sender is an eligible VAT registrant from the ETDA database. This process is so-called time-stamp. It is for identity verification purposes.

In case of PDF file, the time-stamp will be embedded in the PDF file. So a single PDF file is a complete and valid e-tax invoice. 

On the other hand, in case of Microsoft Words and Microsoft Excel files, the time-stamp will be a separate XML file, which will match with the original e-tax invoice file. To validate the authenticity of e-tax invoice by email, both time-stamp file and Microsoft Words (or Microsoft Excel) file are required. So two matching files are needed to create a complete and valid e-tax invoice.

After having the email time-stamped through the timestamp system, ETDA will send valid e-tax invoices to both the seller and the buyer through email. As a result, the seller and the buyer will both receive legitimate e-tax invoices by email, which are eligible for claiming tax credits.

2. E-tax invoice and e-receipt

E-tax invoice was first initiated by the Revenue Department Regulation on the preparation, delivery, and storage of e-tax invoices and e-receipts B.E. 2560, which has been legally effective since June 20th, 2018. This Regulation replaces the previous Revenue Department Regulation on the preparation, delivery, and storage of e-tax invoices and e-receipts B.E. 2555.

Requirements

  • Already VAT registrants (either individuals or juristic persons)
  • No restriction on gross sales in a year
  • Reliable controlling system on generating, sending and storing data
  • Not using e-Tax invoice by email system
  • Obtain the electronic certificate from a certification authority approved by the Revenue Department

Registration Process

VAT register enterprises must file an application through the Revenue Department’s exclusive software installed in a personal computer. This step also requires an electronic certificate from a certification authority to digitally sign the application. 

The application process on the Revenue Department website is now completely online. Due to the technical requirement, a Windows-based computer is required to install the Revenue Department’s exclusive software so-called “Ultimate Sign & Viewer” to complete the whole application process. The software is available to download from etax.rd.go.th. The online application must be completed only through the exclusive software.

At the end of the application process, it also requires the digital signature. Similar to timestamp in the e-Tax invoice by email system, The digital signature is for identity verification purposes. The applicant will own a valid digital signature by obtaining the electronic certificate from a certification authority approved by the Revenue Department. The electronic certificate will generate a unique digital signature exclusively for the electronic certificate holder. To hold the electronic certificate, the applicant needs hardware devices: a USB token or a hardware security module (HSM). The applicant who holds the device with the electronic certificate is eligible to digitally sign the online application.

Once the online application digitally signed and submitted, the Revenue Department will send a confirmation email to the registered email address. The applicant then must confirm the email and setup a password to register a corporate account for usage of the e-tax invoice system. The whole registration process is complete when the applicant receives the second confirmation email from the Revenue Department stating that the corporate account is now active. The VAT registrant is then ready and eligible to legally issue an e-tax invoice. 

Issuing e-tax invoices

An e-tax invoice under the Revenue Department Regulation on the preparation, delivery, and storage of e-tax invoices and e-receipts B.E. 2560 is legitimate and valid only if the e-tax invoice meets all three requirements as follows.

  1. Comply with a legal format of a tax invoice under the Revenue Code
  2. Create the tax invoice as an electronic file (Microsoft Words, Microsoft Excel and PDF are all acceptable), and
  3. Have the email digitally signed to verify the existence of the e-tax invoice with the electronic certificate issued by a certification authority approved by the Revenue Department.

As of now, there is only one approved certification authority: Thai Digital ID, Co., Ltd.

To issue a legitimate and valid e-tax invoice, an eligible VAT registrant must create a tax invoice in electronic form (i.e. Microsoft Words, Microsoft Excel or PDF file). Similar to the e-tax invoice by email, the content within the e-tax invoice file must also consist of all required elements of a legitimate paper-based tax invoice under the Revenue Code. Lastly, the eligible VAT registrant must use the digital signature to sign the e-tax invoice. 

In case of PDF file, the digital signature will be embedded in the PDF file. So a single PDF file is a complete and valid e-tax invoice. 

On the other hand, in case of Microsoft Words and Microsoft Excel files, the digital signature will be a separate XML file, which will match with the original e-tax invoice file. To validate the authenticity of e-tax invoice, both digital signature file and Microsoft Words (or Microsoft Excel) file are required. So two matching files are required to create a complete and valid e-tax invoice.

After signing with the digital signature and electronically sending to the buyer, the e-tax invoice file is a legitimate e-tax invoice under the Regulation, which is eligible for claiming a tax credit.

Under the Revenue Department Regulation on the preparation, delivery, and storage of e-tax invoices and e-receipts B.E. 2560, however, it also requires the VAT registrants to have an additional work. The VAT registrants have to digitally send all e-tax invoices issued in a taxable month to the Revenue Department within fifteen days after the end of the taxable month. 

The e-tax invoices in specific XML files as specified by the Revenue Department is the only acceptable format. As a result, the VAT registrants are required to send the e-tax invoices to the buyers, and also convert those e-tax invoices into specific XML format and send them to the Revenue Department. If the VAT registrants create all tax invoices in an electronic format and also send all e-tax invoices in the XML format to the Revenue Department within fifteen days after the end of the taxable month, the VAT registrants are not required to maintain the output book (VAT report) anymore. It is because all sales are recorded on the database where the Revenue Department is capable to access. There are four methods to submit the XML files to the Revenue Department database: 1) Host-to-Host, 2) Service Provider, 3) Direct upload and 4) Web portal.

Use Cases

The e-tax invoice system is intended to replace the paper-based tax invoices in many common business transactions in reality. For example, in a sales contract, the seller can issue an e-tax invoice as a commercial invoice and send it to the seller. Then, the  buyer transfer money through digital payment gateways. Once the payment is accepted, the buyer can issue the e-receipt to the buyer. In a traditional way, the whole activity requires paper-based tax invoice, fiat cash and paper-based receipt. With e-tax invoice system, the whole activity has been transform to electronic tax invoice, online payment and electronic receipt.

Under the National E-payment Master Plan, this system is intended to help reduce cost of doing business and maintenance caused by paperwork for more business friendly.

Analysis

Popularity

E-tax invoice systems under the National E-Payment Master Plan have been introduced since 2017. The popularity is, however, still limited. There are currently about six hundred thousand VAT registrants in Thailand. But there are less than 0.1% of the VAT registrant population applying for using the e-tax invoice systems. Low adoption cannot make the systems not nation-widely accepted.

Since the systems are not nation-widely accepted, this causes confusion to typical buyers when early adopter VAT registrants are trying to use e-tax invoices. For example, buyers who are not familiar with tax invoices in electronic format might feel reluctant to receive e-tax invoices. Under the Regulation, issuing e-tax invoices is optional. VAT registrants under the Regulation can choose issuing tax invoices in either traditional or digital format. 

In the scenario where buyers end up rejecting the e-tax invoices, they would typically then ask for the traditional paper-based tax invoices instead. Under the master plan, an integrated electronic tax system is considered to be upgraded to facilitate the growth of e-payment. But sometimes even the buyers who use e-payment still ask for traditional tax invoices.

As a result, the environment is not friendly to promote e-tax invoice due to low acceptance and low popularity. Even though the VAT registrants are eligible to issue e-tax invoices, the buyers still require the VAT registrants to issue the traditional paper-based tax invoices. This scenario is not supportive or beneficial to the growth of the e-tax invoice system.

Practice

e-Tax invoice by email system

Under the Revenue Department Regulation on the preparation, delivery, and storage of e-Tax Invoices by email B.E. 2560, VAT registrants only need a valid email registered to issue a legitimate e-tax invoice by email. There is no additional hardware or additional cost required other than a computer. The e-Tax invoice by email system is simple to understand and comply with. To start using the system, the user has very low compliance cost to setup the system. Once e-tax invoice by email issued and time-stamped, it is a legitimate e-tax invoice which the buyer is eligible to use for claiming a tax credit. The seller is not required to issue any additional paper-based tax invoice.

In practice, however, if a buyer rejects acceptance of e-Tax invoice by email and instead requests a paper-based tax invoice, the VAT registrant must recall the e-tax invoice and then issue a traditional tax invoice. This might discourage the VAT registrant to issue the e-tax invoice by email due to risks of re-working on issuing tax invoices.

In additional, under the e-tax invoice by email system, VAT registrants are not exempted from maintaining VAT reports. Therefore, the system is only intended to facilitate sending tax invoices in electronic format. Unlike the e-Tax invoice and e-Receipt system, VAT registrants are not required to prepare e-tax invoices in XML format and send them to The Revenue Department. As a result, the Revenue Department does not have organized sales database and might get access to the e-tax invoice by email in a form of unstructured database. This may require more afford to assess and investigate business transactions.

e-Tax invoice and e-Receipt system

Under the Revenue Department Regulation on the preparation, delivery, and storage of e-tax invoices and e-receipts B.E. 2560, VAT registrants might confront with technical issues since the system requires moderate technical understanding to implement the system to generate e-tax invoices and XML files. The system also requires the electronic certificate and hardware to setup the system. Accounting software (or any other sales management software) is required to generate an e-tax invoice with the digital signature and XML file. VAT registrants might need to buy new software, upgrade current software, or even develop their own software to be compatible with the Revenue Department’s standard. This will cause some upfront fees and recurring expenses for using e-Tax invoice and e-Receipt system. As a result, implementing the system increase cost of doing business. This does not meet the expectation set by the National E-payment Master Plan. Only top enterprises are technically qualified for using the system, due to cost of implementation.

Once e-tax invoice issued and digitally signed, it is a legitimate e-tax invoice which the buyer is eligible to use for claiming a tax credit. The seller is not required to issue any additional paper-based tax invoice, too.

In practice, however, if a buyer rejects acceptance of e-Tax invoice and instead requests a paper-based tax invoice, the VAT registrant must recall the e-tax invoice and then issue a traditional tax invoice. This might discourage the VAT registrant to issue the e-tax invoice due to risks of re-working on issuing tax invoices. This case has been addressed by the Revenue Department Regulation on the preparation, delivery, and storage of e-tax invoices and e-receipts (No.2) B.E. 2560. The Regulation offers a solution to the case where the buyer refuses to accept the e-Tax invoice by offering the paper-based e-tax invoice. 

If the buyer refuses to receive the e-tax invoice in digital format, the VAT registrant can find an alternative by printing out the e-tax invoice with the statement “This document has been prepared and submitted to the Revenue Department through an electronic channel.” Issuing the e-tax invoice in form of paper under this procedure is considered to have been legitimately delivered to the buyer under the Revenue Department Regulation on the preparation, delivery, and storage of e-tax invoices and e-receipts B.E. 2560. In other words, sending paper-based e-tax invoice with the statement is treated as if legitimately sending e-tax invoice through the electronic channel. The statement on the paper-based e-tax invoice can be made by using a rubber stamp, hand-writing, typewriter or any other similar means.

Under the e-tax invoice and e-receipt system, VAT registrants are exempted from maintaining VAT reports if they also generate e-tax invoices in XML format and send them to the Revenue Department on time. E-tax invoices in XML format will make the Revenue Department database organized. This system would be more convenient than the e-tax invoice by email system in terms of afford to assess and investigate business transactions.

In exchange to the VAT report maintenance exemption, the VAT registrant might need to bear additional cost for the XML file transfer process. 

  1. Host-to-Host: Submitting XML files through Host-to-Host channel requires in-depth technical support, staffs and expenses. The channel is not open to every VAT registrant. The Revenue Department will consider on case-by-case basis. Typically, criteria are the number of transactions, technical readiness of the VAT registrants, for example. Thus, not all VAT registrants are qualified for the Host-to-Host channel.
  2. Service Provider: Submitting XML files through a third party Service Provider is eligible under the Regulation. The qualified Service Provider must be listed by the Revenue Department. The VAT registrants can hire the qualified Service Provider to do outsourcing work on the preparation, delivery, and storage of e-tax invoices and e-receipts. The Service Provider will receive service fees in return from the VAT registrant client. The current situation regarding the Service Provider channel, however, is still in progress. There is no qualified Service Provide for now. In addition, it is worth noting that any fault on the preparation, delivery, and storage of e-tax invoices and e-receipts caused by the qualified Service Provider is still the VAT registrant’s responsibility from the Revenue Department’s point of view.
  3. Direct upload:  Submitting XML files by uploading through the Revenue Department website is the most straightforward channel, compared to other channels. Even though it is quite straightforward, it requires moderate computer skills to upload XML files. Users must login on the Revenue Department website and enter into the upload menu. The system limits uploading capacity to one XML file (or ZIP file) at a time. Since one XML file represents one e-tax invoice, this process might take time to upload all XML files if there are a lot files prepared for uploading. Due to this limitation in the system, the direct upload channel might not be practical to large businesses. This service, however, is not available for now.
  4. Web portal:  Submitting XML files through the Revenue Department’s web portal service is an automatic service. Web portal is helpful for small or medium businesses where are wondering about how to generate valid XML files and not ready to buy software or develop its own software to generate the XML files for now. Users can login on the Revenue Department website and create a draft of e-tax invoice there. Then, the users must use the Ultimate Sign & Viewer software to embed the digital signature. Once digitally signed, the Ultimate Sign & Viewer will also generate a XML file and automatically submit the XML file to the Revenue Department database. Web portal is free of charge and does not require any action by the users to send the XML file. As a result, the VAT registrants will not miss the deadline to send XML files to the Revenue Department website. But due to very limited functions, web portal is only suit to small businesses. This service, however, is also not available for now.

By the way, missing the XML submission deadline does not cause any penalty under the Regulation.

Integration

E-tax invoice by email and E-tax invoice are separate e-tax systems. VAT registrant must choose to adopt only one of them. Data between those two systems is not synchronized or even connected. E-tax invoice by email is solely intended to facilitate sending e-tax invoices by email between sellers and buyers, while the e-tax invoice and e-receipt system is also intended to organize e-tax invoice database for administrative monitoring purposes, too. Using the e-tax invoice and e-receipt system will benefit VAT report exemption, while using the e-tax invoice will not. As long as VAT registrants are using the e-tax invoice by email system, the systems and database are impossible to be integrated.

As a result, Thailand is having two different and separate e-tax invoice systems and two different and separate database. Without sending the XML files to the Revenue Department database, it is difficult for the Revenue Department to monitor sales activities from the system.

Summary and Observations

The e-tax invoice systems in Thailand are rising since 2017, due to the National E-Payment Master Plan. Even though adopting e-tax invoice is optional, some VAT registrants are early adopters and already applied for the e-tax invoice systems. This is a good beginning for the country since enterprises are interested to study and implement the system. The e-tax invoice systems are expected to completely replace the traditional paper-based tax invoice system by 2020.

VAT registrants, however, might have some concerns regarding the implementation. So there are some observations that might be beneficial to the whole value added tax ecosystem.

1. One single e-tax invoice database at the end

As of now, there are two different and separate e-tax invoice database: one from e-tax invoice by email and the other one from e-tax invoice and e-receipt. To make e-tax invoices transparent and easy to be monitored by the Revenue Department, there should be only one organized e-tax invoice database. E-tax invoices in XML format seems more fit to the ideal plan of Thailand 4.0.

2. E-tax invoice by email cannibalized by the e-tax invoice and e-receipt system

At the beginning, e-tax invoice by email is intended to serve only small and medium businesses (gross sales in a year not exceed thirty million baht). The e-tax invoice and e-receipt system is, on the other hand, more open for any size of businesses. In addition, e-tax invoices in XML format are more friendly to administration, whereas e-tax invoice by email is not administrative friendly, due to technical limitations. 

Since the e-tax invoice and e-receipt system can serve broader businesses and also meet more administrative needs, e-tax invoice by email should be cannibalized by the e-tax invoice and e-receipt system at the end. 

3. Software ready

Issuing e-tax invoices would be easier if accounting software is ready for the adoption of the e-tax invoice systems, such as generating e-tax invoice in XML files with digital signature embedded. Simple and easy-to-use accounting software will be a catalyst to accelerate the adoption of the e-tax invoice systems.

4. Hardware free

Using the e-tax invoice and e-receipt system will cost the VAT registrants some upfront fees and recurring expenses to have a digital signature; the hardware with a valid electronic certificate is required. This step is for identity authentication purposes to make sure that the specific VAT registrant is actually issuing the e-tax invoice. Migration costs might affect the VAT registrant’s decision to move to the e-tax invoice system. Compared to the e-tax invoice by email system, there is no upfront fees or any recurring expenses, since there is no specific hardware free or electronic certificate required for identity verification purposes.

Also, using the hardware is costly and might not be practical for many businesses, especially small businesses. Therefore, implementing with little or no cost and no hardware required should attract more VAT registrants to apply for the e-tax invoice system.

To combine the best of both e-tax invoice systems, VAT registrants would feel more comfortable if the Revenue Department can find an alternative that hardware is not required and that the identity verification process is technically acceptable.

From centralized database to distributed one

The e-tax invoice database is now hosted by the Revenue Department. It is a centralized platform, which might be outdated in the near future. A distributed platform where all data can be stored on the blockchain is the rising technology which offer more trust than a centralized platform. The distributed platform is considered to replace the centralized platform, since it is more suitable for applications that require to store transaction data with high security. Using a distributed platform, like blockchain technology, for e-tax invoice is beneficial to the ecosystem because data already stored on the platform cannot be changed or hacked. Adopting a distributed platform should avoid the security concern and make the e-tax invoice more reliable.

In sum, therefore, the e-tax invoice systems in Thailand is just the beginning but it is developing from time to time to catch up with digital businesses. The Thai government is serious about Thailand 4.0 and the National E-Payment Master Plan is part of the government’s strategy. Digital businesses might change very fast because of the technology. So the government must move even faster to understand where businesses and technology are going and use the technology to facilitate the businesses. Therefore, promoting e-tax invoice systems and making them nation-widely accepted is a critical issue.

References

Articles
Laws
  • Revenue Code
  • Revenue Department Regulation on the preparation, delivery, and storage of e-tax invoices and e-receipts B.E. 2555.
  • Revenue Department Regulation on the preparation, delivery, and storage of e-tax invoices and e-receipts B.E. 2560
  • Revenue Department Regulation on the preparation, delivery, and storage of e-Tax Invoices by email B.E. 2560
Websites
iTAX คำนวณและวางแผนภาษี
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