Thai Taxation

Thai taxation in brief explanation is featured on this page. It is intended to give you a general idea of Thai taxation. You need to consult with Thai tax experts like MSNA case by case for the best results.

Corporate Income Tax

Thailand’s Corporate Income Tax is 10 to 20 % of net profit. (Read on for the reduced income tax rates announced for 2017 onwards.) All juristic companies and partnerships registered in Thailand are subject to income tax on the revenues earned from within and outside of Thailand.

A Thailand branch of a foreign company is subject to corporate income tax on the revenues earned from within Thailand.

Generally foundations and associations pay income taxes at a rate of 2 % to 10 % of gross revenues depending on the type of income. The foundations and associations prescribed by the notification of the Ministry of Finance as public charity organizations are exempted from income tax.

International transport companies pay income tax at a rate of three percent of gross ticket receipts and three percent of gross freight charges.

An annual tax return must be filed by the corporate taxpayer within 150 days from the accounting year-end. Every accounting period is 12 months except for newly incorporated companies. Returns must be filed together with audited financial statements.

A corporate taxpayer also has to file a half-year tax return and pay 50% of the estimated annual income tax by the end of the 8th month of the accounting year. Failure to pay the estimated tax or underpayment by more than 25% may subject the taxpayer to a fine amounting to 20% of the amount in deficit.

Companies listed with the Securities Exchange of Thailand, commercial banks, finance, securities or credit foncier companies, or juristic companies or partnerships specified under the rules prescribed by the Director-General of the Revenue Department, pay the half-year tax on the actual net profit from the first six months of an accounting period. In such a case, the tax return must be filed together with financial statements which have been reviewed by an auditor approved by the Director-General.

Corporate Income Tax Rates

As a part of an initiative to promote Thailand’s competitiveness, below is the summary of the recently enacted tax law in relation to the corporate income tax.

1. Companies or juristic partnerships (including companies listed on Stock Exchange of Thailand and branch offices of foreign companies):

– Accounting period commencing on/after 1 January 2017, tax rate = 20%

2. Companies or juristic partnerships, with fully paid up capital not exceeding Baht 5 million on the last day of the accounting period and revenue of no more than Baht 30 million from sales of goods or services during the accounting period (SMEs): For the accounting period commencing on/after 1 January 2017 onwards

– The portion of net profit of THB 1 – 300,000, tax rate = 0%

– The portion of net profit over THB 300,000: tax rate = 10%

 

Personal Income Tax

Everyone that has assessable income from employment or business in Thailand, or has assets located in Thailand, is subject to personal income tax, whether such income is paid in or outside of Thailand. Exemptions are granted to certain persons, including United Nations officers, diplomats and certain visiting experts, under the terms of international and bilateral agreements.
An individual who lives for 180 days or more in Thailand for any calendar year is subject to income tax on all incomes from within Thailand and from foreign sources if that income is brought into Thailand during the same year.
Different types of incomes have different rates of standard deductions. For example, the income from employment is entitled to the rate of deduction of 50% but not exceeding Baht 100,000. Standard deductions range from 10 % to 85 %. However, with some types of income, taxpayers may choose to itemize expenses instead of taking the standard deductions specified by law. After the standard deductions, the taxpayers are also entitled to deduct personal allowances and other allowances permitted by law to derive the net taxable income.

Personal allowances

  • Baht 60,000 for the taxpayer
  • Baht 60,000 for the taxpayer’s spouse, who lives in Thailand
  • Baht 30,000 for each of the taxpayer’s children (maximum 3 children)
  • Baht 30,000 for each of taxpayer’s parents in his/her care

Specific allowances

  • Up to Baht 100,000 life insurance premium for the taxpayer and up to Baht 10,000 for the taxpayer’s spouse that does not earn income if specific conditions are met.
  • Up to Baht 15,000 health insurance premium for the parents of the taxpayer’s or the taxpayer’s spouse’s if specific conditions are met.
  • Up to Baht 100,000 for mortgage interest incurred for buying or building a residence in Thailand.
  • Up to Baht 500,000 for investment in a Long Term Equity Fund (LTF) if specific conditions are met.
  • Up to Baht 500,000 for investment in a Retirement Mutual Fund (RMF) if specific conditions are met.
  • Actual amount of donations to specified charities, up to 10% of taxable income after all other allowances are deducted.
  • 200% of actual donations to support education at state and government educational institutes, private schools and universities, but not exceeding 10% of taxable income after all other allowances are deducted.

Personal income tax rates (effective from the year 2017 onwards)

Net Taxable Income (Thai Baht) Income tax rate
1 – 300,000 5%
300,001 – 500,000 10%
500,001 – 750,000 15%
750,001 – 1,000,000 20%
1,000,001 – 2,000,000 25%
2,000,001 – 5,000,000 30%
5,000,001 and more 35%

Personal income tax returns must be filed within of March 31 of the year following the year in which the income was earned.

 

Value Added Tax (VAT)

VAT is levied at the rate of 7% on the value of goods sold and services rendered at every level, including on importation. Certain categories of goods and services (e.g. exports) are zero-rated (i.e. subject to 0% VAT). In addition, other categories of goods and services (e.g. sale of agricultural products) are exempt from VAT.

Under the VAT system, the VAT registrant seller of goods or services must levy the VAT on the purchaser. The seller is generally entitled to claim credit for any VAT paid on the acquisition of its raw materials, stock, or other goods, or for services used in the business. This VAT credit is generally not available with respect to entertainment expenses and certain specific expenditures.

A business, which sells zero-rated goods or services, is also entitled to a credit for VAT paid on purchase of goods or services. However, a business, which sells exempt goods or services, is not entitled to such a credit and must bear the VAT as its cost.

The VAT system places stringent registration and documentation obligations on the business. VAT credits are only available if tax invoices in the prescribed form are received from suppliers. There are monthly VAT return filing requirements and records that must be maintained to provide an audit trail for revenue tax examiners.

Categories of goods and services with zero VAT and exempt from VAT

Zero-rated VAT

  • Goods exported from Thailand
  • Services performed in Thailand where the result or value of the services is used by a juristic person outside Thailand
  • International air or sea transport services by a juristic person organized under Thai law
  • Goods or services provided to the Thai
  • Government under certain foreign loan or assistance projects
  • Goods or services provided to the United Nations, an embassy or consulate as prescribed by law
  • Goods transferred between bonded warehouses

Exempt from VAT

  • Traders with less than Baht 1,800,000 revenue per annum
  • Agricultural produce excluding food products contained in cans, vessels or packages manufactured on an industrial scale
  • Fertilizer
  • Fish meal and animal food
  • Drugs and chemicals for preventing or eradicating plant or animal pests or diseases
  • Newspapers, magazines or textbooks
  • Educational services provided by the Thai Government and by certain private schools and colleges
  • Certain artistic and cultural services designated by the Thai Government
  • Services provided in healing, auditing, advocacy in court or any other specifically designated liberal profession regulated by law
  • Designated research or technical services
  • Library, museum or zoological garden services
  • Services provided by employees under employment contracts
  • Services related to organizing amateur sports
  • Services of public entertainers specifically designated by the Thai Government
  • Domestic transport services
  • International transport other than by air or sea
  • Letting of immovable property
  • Services provided by local government authorities other than commercial services and certain goods or services provided by a Thai government department
  • Goods and services exclusively for the benefit of a religious or public charity in Thailand
  • Sale of cigarettes manufactured by the Thai Tobacco Monopoly
  • Sale of government and Red Cross lotteries
  • Postage stamps
  • Rice milling
  • Other goods and services specifically designated by Royal Decree

 

Specific Business Tax (SBT)

Certain types of businesses (e.g. banking, finance, securities, insurance, pawn shop, sale of immovable property in a commercial manner or for profits) are subject to Specific Business Tax (SBT) rather than VAT. Businesses subject to SBT must pay VAT on their purchases of goods and services but are not entitled to a VAT credit. The SBT ranges from 2.5 – 3.0 per cent on monthly gross receipts.

When a monthly return is filed and SBT is paid, an additional amount of 10% of the SBT payable is levied as a municipal tax.

An interesting note to the companies that do not engage in the businesses subject to SBT: During the course of business operation, a lot of times, a company lends its money to its directors or affiliates. When the company receives interest income on the money lent to its directors and other companies, it has to file a Specific Business Tax Return (PT 40) and submit 3.3% (including SBT and municipal tax) on the interest received within 15th of the following month.

 

Double Taxation Treaties (DTA)

Double Taxation treaties between Thailand and foreign countries cover taxes on income and capital of individuals and juristic entities. The Petroleum income tax and the local development tax (i.e. property tax) are covered under some treaties but Value Added Tax, Specific Business Tax and Municipal Tax are not covered under any tax treaties. Thai double taxation treaties generally place a resident of the Contracting State in a more favorable position for Thai tax purposes than under the domestic law, i.e. the Thai Revenue Code. In general, Thai double taxation treaties provide income tax exemption on business profits (industrial and commercial profits) earned in Thailand by a resident of a Contracting State if it does not have a permanent establishment in Thailand. In addition, the withholding taxes on payments of income to foreign juristic entities not carrying on business in Thailand may be reduced or exempted under the double taxation treaties.

As of January 2017, Thailand has double taxation treaties with 60 countries, which are Armenia, Australia, Austria, Bahrain, Bangladesh, Belgium, Bulgaria, Canada, Chile, China, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Great Britain and Northern Ireland, Hong Kong, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, Kuwait, Laos, Luxembourg, Malaysia, Mauritius, Myanmar, Nepal, Netherlands, New Zealand, Norway, Oman, Pakistan, Philippines, Poland, Romania, Russia, Seychelles, Singapore, Slovenia, South Africa, South Korea, Spain, Sri Lanka, Sweden, Switzerland, Taiwan, Tajikistan, Turkey, Ukraine, United Arab Emirates, United States of America, Uzbekistan and Vietnam.