On February 24, 2022, Laos’ Ministry of Finance issued notification No. 0541/MOF on the implementation of tax obligations for non-resident digital platforms and e-commerce service providers.
Under the new rules, non-resident e-commerce and digital platform providers must register for a tax identification number (TIN) via an online portal to file and pay their taxes. Further, they must register and pay value-added tax (VAT) if their annual revenue meets a certain threshold.
The decree also covers the tax requirements for resident individuals who earn an income from e-commerce or digital service platforms and the amount of taxes they need to pay.
What are non-resident e-commerce and digital platform providers?
Notification No. 0541/MOF states that non-resident, e-commerce marketplaces, and digital platform services include:
- Providers of online music, films, and games from providers, such as TikTok, YouTube, and Zoom;
- Streaming services providers, such as Disney+, Netflix, and AppleTV+;
- E-commerce services for sellers and buyers, such as Lazada and Shopee;
- Online advertising platforms ranging from Google to Facebook; and
- Online booking platforms for travel and accommodation.
The non-resident companies must register for a TIN through the TaxRIS online portal. Further, non-resident companies must register and pay VAT if their revenue is over 400 million LAK (US$33,600). There is also an additional tax on profits.
The due dates for filing and paying VAT for e-commerce and digital service providers are twice per year; January 20 and July 20. Non-resident companies may be asked for additional information about the e-commerce services they provide by the Ministry of Finance.
Resident individuals who earn an income through e-commerce channels or digital services will be subject to a two percent income tax rate.
E-commerce providers with regular sales in Laos must pay and file their income tax on the 20th of every month while those with periodic sales must pay and file within 15 working days.
A continuing trend in ASEAN
The taxing of e-commerce and digital players in Laos is part of a continuing trend in ASEAN with Indonesia, Singapore, Malaysia, and Vietnam also implementing digital taxes.
Indonesia issued Regulation No. 48/PMK.03/2020 in May 2020 and imposes a 10 percent VAT on non-resident companies.
Further, government regulation 50 of 2020, which was issued in the same month obligated foreign e-commerce organizers to establish a representative office in Indonesia if they had completed over 1,000 transactions with Indonesian consumers within a year or delivered over 1,000 packages to Indonesian consumers within a year.
Indonesia’s digital economy — already the largest in ASEAN — is expected to have a gross merchandise value (GMV) of US$146 billion in 2025. E-commerce is the biggest growth driver and could see its GMV value reach US$104 billion also by 2025.
Malaysia has been imposing a six percent digital service tax on foreign digital service providers since January 2020. However, they need to have an annual turnover of 500,000 ringgit (US$118,000) or more to be taxed.
The Royal Malaysian Customs Department provides a few examples of digital services which include:
- Online licensing of software;
- Mobile applications and video games;
- Provision of e-books, films, music, streaming services, subscription-based media;
- Search engines and social networks;
- Website hosting services, cloud storage services;
- Online advertising platforms;
- Internet-based communications; and
- Online learning services.
Singapore’s Overseas Vendor Registration (OVR) regime, which was issued in January 2020, obligates foreign digital service providers to register and pay for goods and services tax (GST) of seven percent. Although from January 1, 2023, the GST rate will be increased to eight percent and to nine percent for 2024.
The foreign digital service provider needs to have an annual turnover of S$1 million (US$733,000) and sell more than S$100,000 (US$73,000) worth of digital services to Singaporean consumers in a 12-month period to be taxed.
Under Vietnam’s Circular 80, foreign e-commerce platforms engaging in business-to-consumer (B2C) activities and earning revenue in Vietnam must pay local taxes. Previously, the tax was applied to business-to-business transactions. Circular 80 was issued in January 2022.