PwC Thailand: Entrepreneurs must be ready for raft of digital era tax changes

With cross-border business increasingly conducted online, regulations written for a pre-internet age no longer suffice. Tax agencies aim to establish fair systems that capture revenue in an economy without borders. That means regulations, interpretations and practices will transform rapidly in the coming months and years.

Entrepreneurs must prepare now to adapt. Those who understand the new rules can confidently comply, reducing audit risk and burdensome disputes. But ignoring this tax revolution could create business headaches as companies scramble to realign operations and prove compliance.

Somboon Weerawutiwong, Lead Partner, Tax and Legal Services at PwC Thailand said at the 'Maximise Shareholder Value 2024, under the theme 'Embracing today's complexities, welcoming tomorrow's opportunities', that the digital economy is transforming business faster than tax codes can keep up. With technology and globalisation eliminating borders, tax authorities worldwide are working to establish fair, universal principles. They aim to claim their rightful share of revenue from enterprises engaged in cross border businesses.

In response to these challenges, the Thai government has been working to incorporate international tax principles into domestic regulations. The raft of new initiatives includes guidelines to prevent profit shifting and tax base erosion through tax law loopholes, commonly referred to as base erosion and profit shifting (BEPS). Additionally, there are amendments to multilateral conventions for provisions governing the use of tax treaties (MLI), the introduction of Pillar 1 and Pillar 2 to enhance the efficient allocation of taxing rights between jurisdictions, and the establishment of mechanisms for transfer pricing risk management through advanced pricing agreements (APA) and mutual agreement procedures (MAP).

[1]The Thai Revenue Department's commitment to fair and transparent tax practices in line with international tax principles is presented in its five-year operational plan (2023-2027), as well as the 20-year National Economic and Social Development Plan. Key influences include OECD's BEPS project against profit shifting and tax base erosion, and the Global Forum on Transparency for information exchange. By adopting global best practices, the Revenue Department aims to meet national economic goals while keeping pace with the wider tax policy directions of trading partners.

"The tax evolution brings challenges, but opportunities too. Entrepreneurs must embrace complexity to ensure compliance. But when expanding, they should focus on optimising finances to align with objectives. They must manage funds strategically, mitigate risks, capitalise on M&A, and use technology to enhance tax practices. Tax changes demand a proactive approach to minimise errors and ensure readiness for future audits," Somboon said.

The relentless growth of international trade and the digital revolution also pose great challenges to Customs practices. Tariff inspections, price evaluations, regulatory compliance - especially for BOI tax benefits - face new obstacles. Major developments like the European Union's cross-border carbon adjustment mechanism (CBAM) and Thailand's Personal Data Protection Act (PDPA) are also significant for entrepreneurs who must monitor the international trends and understand their implications to trade, transport and data management.

Digital innovation brings efficiency. However, tax codes often lag behind.

Somboon said, "The changes are inevitable. Authorities must establish fair frameworks for the modern era. And entrepreneurs must develop strategies and resources that mean they're ready for rapid regulatory change. Complete compliance and risk minimisation will allow businesses to thrive through the tax revolution. They will also enhance corporate reputation with partners, investors and agencies."

[1] The Revenue Department, Thailand

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