Ecommerce has been snowballing for more than six years in Southeast Asia but yet only recently, was there any progressive movement in taxing digital transactions.

Government bodies in Thailand, Singapore and Indonesia understand the importance of taxes on ecommerce sales (products and services) in order to capture a piece of the fast growing segment and more importantly, level the playing field between its brick-and-mortar peers.

But implementing new tax regimes proves difficult given Southeast Asia’s “diverse and uncertain legal environment” explains Steven Sieker, head of Asia Pacific tax practice group.

Under existing taxation laws, only local players and not foreign companies across markets fall within local tax regimes.

“The main point is to try to tax multinational companies that are not registered in Thailand for their online business,” said Kanchirat Thaidamri, tax partner for Deloitte Thailand.

“Online is simply a reflection of what exists in the offline world: small stores don’t report all their taxes in the outside world” – Jason Ding, partner at Bain & Co, China

Below is a snapshot of the state of ecommerce tax regulations across six major APAC markets:

Ecommerce Tax in Indonesia


In 2017, Finance Minister Sri Mulyani stated the government wanted to “level the playing field between businesses that operate online and those offline, which must add 10% Value Added Tax (VAT) to the price of goods purchased”. While the tax rate is still unknown, it is expected to be lower than 10%.

The ecommerce tax, when implemented, will cover four types of platforms: online marketplaces, classified ads, daily deals and online retail that operate in the local markets but will not be levied on sales through social networks (mainly Instagram and Facebook).

Impact? Bolster the growth of social commerce in Indonesia, a country where social media platform usage is one of the highest in the world and weaken incentive to sell on e-marketplaces like Tokopedia and Lazada. Applying a 10% VAT rate to the online sector would bring in approximately USD$1.34 billion in additional tax revenues.

The Indonesia Ecommerce Association (idEA) was discussing a 0.5% VAT from each marketplace seller at the beginning of the year with the Finance Ministry – nothing has been implemented.

“If the tax regulation restricts ecommerce platforms – making selling in Bukalapak complicated because of the tax – there will be an exodus of people who would prefer selling on Instagram and Facebook, which is uncontrolled and not chased for tax because they sell through the back door,” – Bukalapak co-founder and chief financial officer Muhamad Fajrin Rasyid.

Timeline for implementation? Public trial in 2019.

Ecommerce Tax in Thailand

In July earlier this year, the Cabinet approved a proposal to collect 7% VAT from foreign ecommerce platforms deriving annual service income exceeding THB1.8 million (US$56,000). These businesses must sign up as operators under the VAT system to report to the Revenue Department.

The Nation reports the taxes apply to those selling goods and services on Internet platforms as well as the operators of Internet platforms such as Google, Amazon and Alibaba. Companies with an overseas presence and earning income from advertising/website space rental from Thailand are also subject to a 15% withholding tax.

Impact? Operators such as Facebook and Google could pass on the additional costs to its sellers and ad buyers, likewise with  JD Central, Lazada and Shopee customers. Smaller players could be deterred from doing ecommerce if the business cannot sustain these taxes. Currently, vendors outside of Thailand are liable for 7% VAT only if value exceeds THB 1,500 (USD$45.76).

Timeline for implementation? Government needs to forward the draft VAT bill to the Council of State (the government’s legal advisory body) before submitting to the National Legislative Assembly for a debate. Early 2019.

Ecommerce Tax in Philippines

ecommerceIQThe country is the only market out of the region with an ecommerce taxation. The 12% VAT on total value of online transactions of more than USD$37,310 came into effect in 2016 and is applicable to store owners as well. For transactions lower than the threshold, a 3% VAT is levied instead on online transactions.

Impact? Any person or entity who, in the course of trade or business, sells, exchanges, or leases goods or properties, or renders services, and any person who imports goods, is liable to VAT. The government has its own challenges enforcing these taxes on different online business models as shutting down websites only leads to another one being created under a different IP address.

Ecommerce Tax in Malaysia

ecommerceIQAs of late 2017, there is a mechanism under Malaysia’s current GST model that taxes online services provided by local companies to Malaysian consumers, but currently is not applicable to foreign service providers.

Impact? The implementation of the digital tax may mean that foreign service providers serving Malaysian consumers will be charged with tax. The service provider can pass on the tax to customers by adding it to existing prices.

Timeline for implementation? The country is likely to follow the steps of its close neighbour Singapore.

Ecommerce Tax in Singapore

ecommerceIQCurrently, any online purchase in Singapore under SGD$400 (USD$290.17) is exempt from GST. The government did not include ecommerce tax in the budget released in February 2018 but the Ministry of Finance (MOF) said “B2B imported services will be taxed via a reverse charge mechanism, while B2C imported services will be taxed through an overseas vendor registration model” according to the Strait Times.

Impact? Decrease in shopping overseas as prices could increase with the introduction of GST on ecommerce goods and services from overseas.

Timeline for implementation? While many thought the new GST would be implemented in the 2018 budget released February this year, the government has tabled a concrete tax for ecommerce until 2020. Starting January 1, 2020, consumers will pay GST when buying online services from overseas, which includes music, video streaming, apps, online subscriptions, and digital B2B services such as marketing/accounting).

Ecommerce Tax in Vietnam


Vietnam is one of Southeast Asia’s most attractive and also nascent markets. Foreign ecommerce firms must have local representative office registered in Vietnam and pay VAT of 10%. Individual residents without an established ecommerce company in Vietnam will be subject to tax if they have annual sales revenue over USD$4,300. As of now, there isn’t heavy enforcement in place but there are plans for higher scrutiny by the National Assembly next year.

In November 2017, Vietnam’s government also released a proposal for all cross-border payments to be made through domestic gateways via the National Payment Corporation of Vietnam.

Impact? Not much concern in regards to Vietnam’s attractiveness as few companies have managed to ‘crack the local market’ and ecommerce contribution to total retail is still relatively small compared to other markets. The cross-border payments funnel will increase the tracking of tax liabilities by the National Payment Corporation of Vietnam.

Timeline for implementation? Late 2019.

Difficulties implementing an ecommerce tax in Southeast Asia

Apart from climbing over the layers of government and overcoming pressure from big corporates, and complaints from SMEs calling foul play, regulators also face the large task of enforcing such new reforms, especially concerning tax on digital services.

Products are easily tracked through physical movement in the country but services are intangible.

Axcelasia Inc Executive Chairman Dr. Veerinderjeet Singh shares: “The problem with foreign online companies is they will charge 6% GST on customers for the purchase and delivery [in Malaysia], but how will the Customs collect that amount when they don’t have offices in the country? How do you regulate that? And if they miss a few payments, how will you impose a penalty on them?”

Between now and 2020, when most implementations across Southeast Asia are expected to take root, Internet platforms and operators have little influence on the new tax policies but it’s the customers and the shift in their behaviour that will be largely impacted.

In the words of Senior Minister of State for Law and Finance Indranee Rajah, “keep shopping while you can”.

Here’s what you should know today.

1.  Shopee Philippines sees the growth in male shoppers

More Filipino males are starting to browse online for better deals and are more meticulous than women when it comes to buying online.

But despite the increase of shopping activity, the shopping behavior of men in the Philippines differ based on age groups

Macy Castillo, Shopee’s Head of Commercial Business shared that men aged between 20 and 24 are trend conscious and have lower spending power, but shop more often, buying more Fashion and Accessories. Men between 25 to 30 spend a bit more on Wellness, Hobbies and Sports items; while men between 31-35 who have higher purchasing power, buy from our Toys, Kids and Babies category as well as Men’s Skincare.

To cater to the different and discerning needs of male customers, Shopee expands its product selection with more trusted brands and allays fears by allowing buyers to easily communicate with the sellers for any questions they may have with Shopee’s Live Chat

Read the rest of the story here.

2. Thailand to boost internet connection with submarine cable

Following the recent visit of Deputy Prime Minister Somkid Jatusripitak to China, the government is planning to make a new investment in submarine cable to secure Thailand’s position as a link of international “internet paths” between Europe and Hong Kong.

Instead of laying the new cable down to Malaysia for international broadband connection, they could linking it with AAE-1 (Asia-Africa-Europe-1) via a submarine cable station in Satun in the Andaman Sea and a ground station in Songkhla on the eastern coast.

It will help Thailand easily link with Hong Kong by cutting the distance by 1,000 kilometers.

The cabinet recently approved a 5 billion baht investment in the system but did not reveal the decision. The investment will be handled by state-owned operator CAT Telecom via the Neutral Gateway Network & Data Center project.

Read the rest of the story here.

3. Malaysia’s leader: ASEAN could be the world’s fourth largest economy by 2030

The 10-countries of the Association of Southeast Asian Nations, or ASEAN, could form the world’s fourth largest economy by 2030, said Malaysia’s Prime Minister Najib Razak in the summit of ASEAN leaders in Manila last week.

As of Nov. 2015, the region’s combined economy was nearly $2.7 trillion, ranking 7th largest in the world, but he’s optimist to see the region turn into the world’s fourth biggest economy after the U.S., EU and China. The combined size of the ASEAN’s economies will grow to $9.2 trillion by 2050.

The growth is crucial to ensure prosperity can be shared among the less countries that are still left behind and work is needed to help small companies by helping them expand with ecommerce and reduce trade barriers and bring average tariffs to zero or near zero.

Read the rest of the story here.

Constraints within Vietnam’s underdeveloped infrastructure are not well documented, but that hasn’t stopped the country from continued economic developments and growth in ecommerce.

Raphael Wilhelm and his co-founder Vanessa Santamaria launched SoNice, a new entry to Vietnam’s newest e-marketplace, took time to share with eIQ the challenges with starting a business in the up and coming ecommerce market.

What is SoNice?

The company launched in October 2016 in Ho Chi Minh City enabling Vietnamese designers and makers to scale their businesses as SoNice is capitalizing on the emerging and fast growing sector of local independent brands.

As many merchants on SoNice have little ecommerce experience, the company began to offer services such as content production, brand management and logistics in addition to hosting them on the platform.

Businesses were selling items such as concrete lamps, sketch notebooks and handmade leather wallets on the platform but they didn’t just want another online channel, they wanted someone who could help them scale.

SoNice features over 800 curated products and with a 80% month over month GMV growth since its launch four months ago, activating Vietnam’s smaller brands is working.

Home decor is one of SoNice’s core categories, which taps into Vietnam’s growing property market, where more young people are buying their first apartments and choosing western inspired, modern interiors.

Vietnam emerging from the shadows

Before 2015, Vietnam’s market was often overlooked by foreign investors and only two main companies were offering opportunities for brave investors, Dragon Capital and Vietnam Asset Management Limited.

During that time, countries such as Indonesia and India were showing investors that Asia was more than China, these two countries in 2014 accounted for 21% of the world’s population and 3.8% of global GDP together, and shadowing Vietnam’s potential.

But the tide slowly turned and Vietnam’s investment potential continues to grow. In 2016, the country overtook Indonesia and Thailand as ASEAN’s most attractive market for US firms – 40% of them cited Vietnam as their priority market in the region.

In that same year, ecommerce revenue also increased to $5 billion, accounting for about 3% of total retail trade and services revenue. The number could surge within the next few years as the government plans to invest $111.6 million from the State budget into the ICT sector by 2020.

With a young population, increasing urbanization and 44% Internet users in 2015, the country is steadily becoming an attractive market for businesses.

However, the ASEAN market comes with its own obstacles SoNice co-founder Raphael experienced firsthand. He details what new companies should look out for:

Overcrowded B2C space

Marketplaces such as Tiki, Sendo and Lotte are some of the most well-known marketplaces among the Vietnamese in addition to the region’s most popular marketplace, Lazada. This means that new businesses trying to capture market share would be entering an already crowded battleground.

Raphael advises,

“Understand the playing field first. It would make more sense as a smaller, new player to offer a more select and strategic product offering on your platform to increase the chance of survival.”

He notes that Vietnam’s vertical ecommerce market is still relatively young. Notable startups such as WeFit and Foody are good examples of successful companies that saw opportunities in their untapped fields by offering something unique to consumers.

“For entrepreneurs poised to enter Vietnam, think about what is lacking, and go from there.”

Challenges specific to foreigners

As a European business owner in Vietnam, the process of opening a bank account took 2X longer than it would for a local.

“The quality of financial services is also quite low in Vietnam. Not only did it take me a few hours to open a bank account, I was also required by the bank to pay a deposit to apply for a credit card,” comments Wilhelm.

For 100% foreign owned businesses, it will be a challenge to overcome the country’s bureaucracy. Wilhelm recommends hiring at least two different lawyers in Vietnam to help navigate the 5-6 month long process of launching your own company, whereas for locals, the process simply takes five days.

Vietnam’s unbanked population

Although it’s becoming less common, some people still pay for their houses using gold and the reason why Raphael says 90% of ecommerce transactions in Vietnam are paid with cash-on-delivery (COD).

According to the World Bank, 70% of Vietnamese are still unbanked. However, with 38% of the population owning a smartphone, payment companies and banks have the potential to access more clients and increase financial sophistication amongst the Vietnamese.

Low trust in logistics 

“The postal services in Vietnam are not yet up to an international standard, which can sometimes cause delays in delivery, making it hard to persuade people to shop online,” comments Raphael. “We use motorbike riders in Ho Chi Minh City and 3PLs to deliver to other cities like Hanoi and Danang.”

SoNice’s best-selling products range from Home décor items such as canvas art prints and Edison Desk Lamps to hand-crafted notebooks – the right size for motorbikes making delivery cost is also favorable.

“While logistics are a challenge, the price ranges between $1-2 to take your customer’s parcel from one district to another.”

Winning over VCs

According to Raphael, there’s a lack of funds and VCs that solely focus on Vietnam. Instead, startups often have to pitch elsewhere to raise funding, commonly to outsiders who aren’t quite convinced of the market potential.

However, it seems that overseas VCs are taking notice. In 2016, Vietnam saw two dozen startups receive funding from seed to Series C stages with the help of Hanoi based ed-tech startup Topica’s Founder Institute incubator.

For Raphael, interested investors are advised to spend time with local entrepreneurs and get to know their way around the city before committing to an investment opportunity.

“The culture here is so distinctive that it requires an understanding of the locals, of how things are done and these two require time and effort,” says Raphael. “The market can’t be pitched in 5 or 6 slides, it’s important to come with an open mind.”

Although the fundraising process takes time, the average deal size in Vietnam is relatively small, meaning that investors don’t need to commit to a major investment to make an impact. They could easily inject $500,000 and it would be considered a significant contribution, unlike funding rounds in Singapore or Indonesia where numbers are in the millions.

The Vietnamese mindset

In general, Vietnamese people have more to spend compared to even two-three years ago. When Raphael arrived in Ho Chi Minh City in 2012, the landscape was completely different.

“After Starbucks opened shop in Vietnam, a wave of boutique coffee houses popped up and young people also started to invest more in their first apartments. Vietnam is slowly opening up room for more experiences, shopping and consumer-centric verticals,” remarks Raphael.

The Vietnamese government has recently announced Resolution 35, an initiative to help launch one million enterprises by 2020, double the current number. The State is ensuring equal access to funding sources, land and natural resources among enterprises, regardless of their types and economic sectors and adopt policies to back SMEs, startups and creative businesses.

Vietnam: Is it worth it?

“Despite the hurdles in Vietnam’s growing ecommerce landscape, the challenges in payment, logistics and the law exist because the ecommerce landscape is so new, not because Vietnam is not suitable for ecommerce,” says Raphael.

SoNice’s growth in less than six months speaks for itself and Raphael is a passionate advocate for Vietnam’s potential.

“By coming in now, startups have a higher chance of succeeding but they must differentiate themselves from what’s out there. Deep rooted challenges in Vietnam present companies with lots of opportunities,” said Raphael.

Raphael (center) with the SoNice team in Ho Chi Minh city

We’re sure everyone is confused, concerned, or if you are one of the voters from Florida, celebrating Donald Trump’s Presidential win. Here are our usual headlines with a Donald Trump twist.

1. With Trump’s win, Silicon Valley investors start losing their minds

A Trump win is antithetical to a Silicon Valley culture that prides itself on (rightly or wrongly) on meritocracy, openness, and rationality. Beyond that, many in the Valley have a problem with Trump’s blatant bigotry, misogyny, xenophobia, and homophobia.

Read the rest of the story here.


2. What a Trump or Clinton win could mean for ASEAN

A Trump presidency would mean further disengagement in Southeast Asia in terms of security and foreign policy, but maybe some continued engagement in the economics, according to political science professor Dr. Aries Arugay.

It could also impact the impending trade deals with South China Sea.

Read the rest of the story here


3. China-US relations decline because of Trump’s victory? 

The prospects of a Trump victory had been greeted with ambivalence in China, which has grown more assertive at home and abroad during the presidency of Xi Jinping. A professor said that “a decline of China-US relations is inevitable” under a Trump presidency, predicting: “More frictions on trade would arise during his administration”.

Read the rest of the story here


4. World markets’ plunge signals investors’ doubts about Trump

“This is a negative shock for markets,” said Ricardo Reis, an economist at the London School of Economics. “For sure, this is a huge increase in uncertainty. And for the most part what certainty is available seems bad. Like the Brexit vote, this raises the likelihood that trade deals will be repudiated and borders will be closed.”

Read the rest of the story here


Perhaps it seems like a good time to shift the global market focus to Southeast Asia. What do you think?

Vietnam has been chosen as the top priority market for future business expansion in Southeast Asia by 40% of US enterprises according to the recent ASEAN Business Outlook Survey released by US Chamber of Commerce.

The country has passed Indonesia, the largest market in the region, to become the first market US companies are looking to expand in across Southeast Asia. Indonesia ranked second with 38%, followed by Myanmar (34%) and Thailand (30%).

More than half of the respondents (53%) believed the ASEAN markets have become more important in terms of their companies’ worldwide revenue over the past two years. 49% expected to increase their ASEAN workforce by the end of 2016.

Expanding business in Vietnam for foreign companies

84% of respondents have a positive outlook for the country in 2016.

84% of respondents have a positive outlook for the country in 2016.

According to the survey, Vietnam has many competitive advantages for foreign companies, especially from the US, to expanding their business there. Among them are:

  • Low labor costs (64%)
  • Personal security (62%)
  • Positive sentiments towards the US (58%)
  • Stable government and political system (45%)

Nevertheless, the country still faces many problems that could hinder their growth and discourage foreign investors in the future, such as corruption (66%), lack of infrastructure (59%), legislations (55%). In addition, more than 40% of respondents said they were dissatisfied with government agencies, especially customs and tax authorities.

Among the top three industries that consider Vietnam as an attractive destination for expansion are:

  • Consumer Goods (41.9%)
  • Pharmaceutical (40%)
  • Wholesale/Retail (37.5%).

Vietnam was also voted the second market for moving investments from China into ASEAN with 17% of the vote, following Malaysia at 19%.

Until April 2016, US investment in Vietnam has reached $30.5 million, placing US at 17th in the ranking of Vietnam’s FDI partners. Top three investors in Vietnam is still held by South Korea with more than $48 billion investment; Japan, over $39 billion; and Singapore, over $36 billion.

A version of this appeared in VN Express on August 15. Read the full article here and access the full report here

McKinsey Forum Urges Thailand To Speed Up Digitalization

Source: McKinsey

Speakers during the “Digitising Thailand’s Economy” forum held in Bangkok by McKinsey have called for a regulatory framework in order to speed up the country’s digital growth reports The Nation.

A proper regulatory framework, human-capital reform and private-public collaboration are needed to transform Thailand into a digital ecosystem for future economic growth. Although Thailand is an early adopter of digitization, it has been very slow in terms of investment and management.

According to Tomas Koch, Senior Partner at McKinsey, Thai businesses should be digitally disrupted in order to shift towards more agile performance.

Greg Theisen, fellow Senior Partner and Leader of McKinsey’s ‘Digital Asia’ practice comments,

Thailand falls behind Japan, South Korea, Singapore and Malaysia when it comes to ecommerce purchases, with only 22% of households shopping through ecommerce this year.

According to a survey by McKinsey, 30-40% of top business players could be replaced by digital disruption across all sectors in Thailand within the next five years. Companies in telecommunications, retail, financial services, media, healthcare and energy companies should invest more on digital adoption. To combat these challenges, companies are encouraged to integrate new and old operations, and invest in talent development.

The Minister of Commerce has also asked the Board of Investment to create schemes to attract foreign investment into the country in order to help boost economic growth.

“Human-capital reform is another national priority, with the aim of transforming people to ‘Thai Citizen 4.0’.”

For example, Thai farmers should be transformed into smart farmers while unskilled laborers should be made knowledge workers instead.

The government and various banks have been rolling out schemes to help empower the growth and potential of startups and SMEs, most recently with CIMB’s fintech initiative to expand SME customer base and Krungthai Bank’s soft loan offering to small businesses.

Despite the surge in Thailand’s fintech ecosystem, the country is also in need of other digital businesses such as property tech and education tech according to Krating Poonpol, Venture Partner at 500 Startups.

The biggest job now is to move from initial ideas discussed at the forum to execution.

A version of this appeared in The Nation on July 9. Read the full version here.


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