In brief
The rapid growth of eCommerce continues to reshape indirect tax regimes across the Asia Pacific region. This publication examines rules and developments in 15 Asia Pacific countries and territories, offering key regulatory updates and actionable insights to help businesses navigate this evolving landscape. As this publication’s theme underscores, the Asia Pacific indirect tax story reflects ongoing and vibrant changes related to digital services. Notable trends include the rise of new rules targeting low value imported goods and increasing obligations for digital platforms in the sharing economy.
The Asia Pacific digital indirect taxation story 2024
In detail
Digital (or electronic) services rules in the Asia Pacific region appear to be becoming more consistent, which is a promising sign for the future, signalling a move toward harmonisation. In addition, notable recent developments across countries include both scope expansions and refinements, as well as increasing marketplace reporting obligations.
Scope expansions
Across the region, we have seen several incidences of scope expansion in the context of non-residents supplying to local recipient:
- India: From 1 October 2023, India shifted to no longer limiting the scope of overseas digital services as being ‘essentially automated’ nor requiring only ‘minimal human intervention’, effectively expanding the scope to be a remote services ambit.
- Malaysia: The service tax rate increased to 8% from 1 March 2024.
- Singapore: From 1 January 2024, the GST rate rose to 9%.
- Indonesia: Sales through eCommerce platforms have been subject to VAT at 11% since 1 April 2022, with a planned increase to 12% in 2025.
Scope reductions
- Cambodia: There has been scope relief in Cambodia, where foreign head offices engaged solely in digital supplies/eCommerce transactions with local subsidiaries or branches are exempt from registration, provided the local entity notifies authorities about such transactions.
- India: As of 1 October 2023, supplies by non-residents to government and local authorities are no longer covered.
Marketplace reporting obligations
- Thailand: Local electronic platforms are now required to prepare ‘special accounts’ detailing income received from vendors on the marketplace platform. Overseas platforms, however, are not affected.
- Cambodia: Non-resident GST-registered suppliers must now disclose customer information including customer names, tax identification numbers and bank account details.
- Australia: Rules have been introduced in phases, with an initial scope impacting only sharing economy platforms providing ride-sharing and short-term accommodation from 1 July 2023 and expanding to cover all sharing economy platforms from 1 July 2024. Such platforms will need to report various information about the suppliers and the transactions made through their platforms.
Additional recent developments
- Updates to rules and regulations relating to taxation treatment of low value imported goods (LVIG) have also been an area of focus for some countries and territories in the region. From 1 January 2024, non-residents are required to register and account for sale of LVIG to Malaysian customers via platforms. Furthermore, other countries are beginning to introduce a more cohesive perspective on LVIG: Singapore introduced LVIG taxation from 1 January 2023, and Thailand and Vietnam both proposed that LVIG taxation should be introduced in the near future.
- Unsurprisingly, several countries and territories within the region have seen increases in tax authority activity. India has increased the scope of VAT for online gaming for both base (to include deposits made, not previously included) and rate (increase from 18% to 28%). In the Philippines, the Bureau of Internal Revenue issued regulations that cross border services utilised, applied, executed or consumed within the Philippines are subject to Final Withholding VAT. South Korea has introduced a new penalty of 1% of Electronically Supplied Services (ESS) supplied for failing to register from 1 January 2024.
- Cryptocurrencies continue to be an expanding field that is constantly being analysed by countries and territories to determine accurate and effective taxation treatments. Governments and taxing authorities have the challenge to keep up with a rapidly growing industry full of complexity. New Zealand recently introduced the New Offshore Gambling Duty of 12% on net gambling revenue of offshore operators providing online gambling to New Zealand residents. Thailand has passed Royal decrees extending the VAT exemption period for transfers of crypto/digital tokens on digital asset exchanges.
The takeaway
The digital indirect taxes picture in the Asia Pacific region continues to be vibrant and diverse. While there are many similarities with rules across countries, there are also some important key differences. Businesses must carefully assess their indirect tax obligations when operating in the various Asia Pacific countries and territories. It is also critical to review processes to:
- identify business-to-consumer (B2C) and business-to-business (B2B) customers, as well as the customer location
- distinguish between different service types–some of which may be subject to tax and others not, and
- ascertain if they are the type of digital platform covered by the various countries’ marketplace rules.
Looking to the future, businesses should remain vigilant to the ever-changing digital indirect tax environment in the Asia Pacific region and be able to respond accordingly. The overall trend is towards greater revenue collection from digital activities by tax authorities. This underscores the need for businesses to focus on equipping themselves with the knowledge, tools and processes to ensure due and proper compliance with indirect tax laws in the region.
Each country and territory’s summary is based on the law as of 1 June 2024.
The Asia Pacific digital indirect taxation story 2024
Matthew Strauch
Wai Choong Chan
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