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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

ecommerceIQ

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

ecommerceIQ
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

ecommerceIQ

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. Amazon launches Prime Reload, offering 2% back on purchases funded through debit cards

Amazon today is launching a new perk for Prime members that will give them cash back on purchases – even if they’re not paying for items using an Amazon cashback credit card.

Through a new rewards program called Amazon Prime Reload, Prime members can receive 2 percent back on purchases when they first load funds into their Amazon Balance using a debit card attached to their bank’s checking account.

Amazon Prime Reload is meant to encourage more people to sign up for Prime, the $99 per year membership program that includes free, 2-day shipping on millions of products, plus same-day shipping in select markets.

Amazon Prime Reload has another advantage for the retailer, as well – it may encourage people to load large lump sums into their Amazon Balance, in order to ensure they never accidentally pay for an item through their debit or credit card directly, therefore missing out on the cash back option.

Is this an indication that Amazon is working towards becoming a bank and payments platform? We think so.

Read the rest of the story here.

 

2. Wall Street Is betting against Tesla and Alibaba like never before

The two day tech stock sell-off has come to a stop, with major companies like Apple, Amazon, and Netflix all rebounding slightly in trading Tuesday.

While that’s good news for investors who held onto their shares, it’s less so for short sellers, who reap winnings by betting on a stock’s fall. Tech companies Alibaba, Tesla, and Apple are now the three most shorted stocks in the world, according to S3 Partners head of research Ihor Dusaniwsky.

with Alibaba and Tesla in particular, Wall Street’s bets against those stocks have never been higher, Dusaniwsky says.

 It remains to be seen if tech companies can meet investors’ lofty expectations. Mizuho analysts downgraded shares of Apple to “hold” Monday, while Morgan Stanley recently did the same for shares of Tesla.
Read the rest of the story here.

 

3. Bid to tax ecommerce on fast track to reality in Thailand

A draft bill on taxing ecommerce operators and social media networks will go before the cabinet this month, a step to ensure that the law will be enforced under the current government.

The draft bill will authorise the Revenue Department to tax online transactions; advertising fees on social media such as Facebook, Google and Line; and activity by other operators such as ride-sharing service Uber.

Under the draft bill, money changing hands from online purchases for goods and services, advertising on social networking and Uber, and transfers by senders or recipients in Thailand will see the 5% withholding tax imposed.

Read the rest of the story here.

 

Here are the headlines you should know today.

1. Amazon to collect sales tax nationwide in the US in April 

Amazon will begin collecting sales taxes from all states with a sales tax as of April 1, 2017. Amazon won’t collect sales tax in Alaska, Delaware, Oregon, Montana and New Hampshire. Those states do not have a state sales tax.

Collecting sales tax on online purchases has been a controversial subject for years. Companies which make sales over the internet are still subject to the same sales tax collection requirements as offline stores.

Read the rest of the story here.

 

2. B2B/G ecommerce platform Mbiz raises Series A

The company has closed its Series A round, led by Japanese leasing company Tokyo Century Corporation (TCC). Though the exact number was undisclosed, co-founder Ryn Hermawan said that it has put the company’s valuation to $75 million.

Backed by Indonesian conglomerate Lippo Group, the launch of Mbiz followed the earlier launch of MatahariMall, the group’s B2C marketplace.

Mbiz itself is an e-procurement and e-catalogue platform which aims at blue chip companies as its main target market. Its purpose is to simplify the procurement process for businesses.

Read the rest of the story here.

 

3. Indonesia’s Bukalapak will hopefully be profitable by the end of 2017

Bukalapak, Indonesia’s third largest player in the marketplace landscape hopes to become profitable by the end of this year.

Bukalapak is among the larger C2C ecommerce platforms that focuses on helping small and medium enterprise go online. The company was rumored to be gearing up for an IPO back in 2016, it remains a long time goal.

Read the rest of the story here.

Welcome to the first of March, read on to see what you need to know this morning.

1. New tax on ecommerce in Thailand to be introduced in April

The Revenue Department says it will enforce a new law to tax cross-border ecommerce transactions by April, a move that could hinder the growth of the sector.

The development by the tax collection agency is intended to increase tax collection efficiency, particularly for fast-growing cross-border ecommerce transactions.

The Revenue department will apply e-tax invoicing via email for companies with annual revenue of less than $85,7600 (30 million baht) to facilitate small ecommerce merchants in processing VAT issues. It plans to launch a full tax invoicing system for large enterprises in the near future.

Read the rest of the story here.

 

2. Alibaba calls out China to be harder on counterfeiters 

At a press conference, Alibaba representatives said that China’s current anti-counterfeiting laws are too ambiguous, “letting products sip through the cracks along the manufacturing chain.”

Last year, while the company fought and ultimately lost the battle to stay a part of the International Anti-Counterfeiting Coalition, its team came across almost 4,500 counterfeiting leads, but had just 469 cases and ultimately just 33 convictions because of loopholes in the laws.

The latest developments in Alibaba’s anti-counterfeiting saga may indicate that, down the line, there will be further support from outside parties to legitimize the products sold on its platform.

Read the rest of the story here.

 

3. Recommended Reading: The future of shopping is more discrimination

This new stage of retailing—a stage that harks back to 18th-century strategies of price and product discrimination—is only beginning.

Merchants, left to their own interests and in response to hypercompetition, will create a world where what individuals experience when they shop will be based on data-driven profiling.

At present, shoppers have little or no insight into the profiles and how they are used

Read the rest of the article from the Atlantic here

 

4. Community Chatter: Uber CEO Travis Kalanick filmed during a heated argument with Uber driver

The video shows Kalanick getting angry at the driver, Fawzi Kamel, who complained about the company decreasing prices for its UberBlack service. Kalanick claimed that wasn’t true.

Upon the release of the video, Kalanick issued an email apology to his staff at Uber.

It’s clear this video is a reflection of me—and the criticism we’ve received is a stark reminder that I must fundamentally change as a leader and grow up. This is the first time I’ve been willing to admit that I need leadership help and I intend to get it.

It has been a rough couple of weeks for Uber, following sexual harassment claims.

Read the rest of the story here.