As of May 2024, Thailand has changed its value-added tax (VAT) regulations. Prior to the change, small, imported orders under THB 1,500 (approximately USD 40) were exempt from import duties, including VAT. This gave foreign sellers, usually on e-commerce platforms, an advantage over local retailers who had to collect VAT on all domestic purchases. The recent change will impose a 7% VAT on all imports, including those under THB 1,500. This amendment aims to level the playing field for local retailers who previously faced a competitive disadvantage. The amendment will ensure that all purchases within Thailand are subject to the same VAT requirements.

Over the past decade, Thailand has witnessed significant growth in the e-commerce sector. From 2019 to 2023, the e-commerce gross merchandise value (GMV) experienced a compound annual growth rate of 45%. This rapid expansion has resulted in a corresponding increase in demand for warehouse space, making the e-commerce market one of the major drivers of economic growth. Moreover, Thailand’s logistics market also experienced strong progression, with an average annual demand growth of 6%. In 2021, the logistics market grew by 14%, primarily due to the surge in e-commerce during the COVID-19 pandemic.

Figure 1: Thailand’s E-commerce GMV, 2019-2023

Source: Google, Temasek, Bain & Company e-Conomy SEA report, analysis by JLL

Figure 2: Thailand’s prime-grade warehouse demand, 2019-2023

Source: JLL Research

The changes in VAT regulation are expected to impact the warehouse market by highlighting the advantages of bonded and free-zone warehouses. Bonded and free-zone warehouses enable imported goods to be stored and processed without immediate payment of duties and taxes. In some cases, duties and taxes are avoided altogether if the goods are stored for re-exporting. From the perspective of domestic retailers and foreign e-commerce sellers, bonded warehouses allow them to order products in larger quantities without immediate import tax payment. This enables them to gradually pay import taxes as the products are sold. Moreover, storing products closer to consumers in bonded warehouses minimizes delivery time, enhancing the overall customer experience. To meet this growing demand and take advantage of this regulation, developers typically allocate a portion of their logistics projects for free-zone warehousing, particularly near key ports such as Laem Chabang. The low investment required to establish and obtain a license for a free zone makes it an attractive option for developers and occupiers alike.

Thailand’s revision of the VAT regulation for cross-border e-commerce business may mark the start of sector-wide regulation reform. A similar pattern was observed in China in 2016 when it began revising its tax policies for cross-border e-commerce (CBEC). The revisions included removing the exemption of payable duty for amounts under RMB 50 and implementing an annual tax reduction limit per person. Following these changes, China rapidly expanded its CBEC pilot zones. These zones aimed to facilitate import and export activities by developing free-trade zones and bonded warehouses along with improved customs clearance and tax collection processes.

As Thailand embarked on this regulatory improvement, Thailand’s e-commerce market is expected to become even more competitive. International e-commerce sellers may increasingly leverage bonded warehouses to maintain their competitiveness, further driving demand in Thailand’s logistics market.

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