Personal income tax.
Both residents (people residing in Thailand for a period or periods aggregating more than 180 days per tax year) and non-residents have to apply for a personal income tax ID and file a personal tax return each year.
Income tax in Thailand.
Residents have to pay taxes on all income resulting from:
Advantages realized in Thailand, in cash or in kind (paid in or outside Thailand)- Income from a foreign source that is brought into Thailand within the year
Income generated by non-residents is only subject to the personal income tax if the advantages are received in Thailand.
The assessable income is classified into eight categories:
- Income from wages and salary, including the benefits provided by an employer (e.g. income from stock options, personal income tax paid and absorbed by the employer, living allowances, monetary value of rent-free accommodation…), but excluding business travel expenses and medical treatment
- Income from services, hire of work or office of employment
- Income from royalties (goodwill, copyright, franchise, patents or other rights)
- Income from dividends, interests (e.g. on deposits with banks in Thailand), capital gains, bonuses for investors, acquisition or dissolution of companies or partnerships… This does however not include the share of profits obtained form a non-juristic body of persons or from the sale of investment units in a mutual fund
- Income resulting from leasing out a property and breach of a hire-purchase agreement
- Income resulting from liberal professions (e.g. law, medicine, engineering, accounting, architecture and fine arts)
- Income resulting from construction and other contracts of work, whereby the contractor provides essential materials
- Income from business, commerce, agriculture, industry, transport or any other activity not mentioned here above (carry-all clause). Insurance benefits, inheritances and scholarships, however, do not make part of the assessable income and are thus not subject to personal income tax.
As specified in the fourth point, capital gains are taxable as ordinary income. As is the case in many countries, capital losses cannot be offset against the capital gains.
There are three exceptions to the taxability of the capital gains:
Income from wages and salary, including the benefits provided by an employer (e.g. income from stock options, personal income tax paid and absorbed by the employer, living allowances, monetary value of rent-free accommodation…), but excluding business travel expenses and medical treatment
- Capital gains on the sale of non-interest bearing government bonds or debt instruments (although there are exceptions)
- Capital gains on the sale of government bonds
Several deductible expenses and allowances are available to lessen the personal income tax burden.
The following may be deducted from the assessable income:
- 40% deduction for income as defined in (1), (2), and copyright income mentioned in (3). The maximum is 60,000 THB
- No deductions for the income mentioned under (3) – other than income from copyright – and (4)
- 10 to 30% deduction for income under (5), depending on the type of property
- 30% deduction or the actual expense (if proof can be provided) for income under (6), with the exception of medical professions (60%)
- 70% deduction or the actual expense (if proof can be provided) in case of income earned under (7)
- 65-85% deduction or the actual expense (if proof can be provided) for other business activities
Thai tax law also foresees different allowances:
- 30,000 THB for each the taxpayer and his/her spouse
- 15,000 THB for each child (with a maximum of 45,000 THB)
- 2,000 THB educational allowance for each child
- 30,000 THB per parent (over 60 years old and with a yearly income less than 30,000 THB)
- 60,000 THB per disabled or incapacitated person who the taxpayer takes care of
- Apart from these personal allowances, multiple specific allowances can be deducted:
- Life insurance premiums (max. 100,000 THB)
- Health insurance contributions paid for the taxpayer’s parents (max. 15,000 THB)
- Qualified provident fund payments (max. 500,000 THB)
- Interest on mortgages following the purchase of a residential building in Thailand are deductible up to an amount of 100,000 THB
- Contributions to a Long Term Equity Fund up to 500,000 THB
- Charitable contributions, but not exceeding 10% if the taxable income, and
- Donations to educational institutions may be deducted for 200% (up to maximum 10% of the taxable income)
Tax rates.
The personal income tax system is progressive:
| Taxable income | Tax rate |
|---|---|
| 0 – 150,000 THB (189,999 THB in case of the taxpayer is older than 65 years) | Exempted |
| 150,001 – 300,000 THB | 5% |
| 300,001 – 500,000 THB | 10% |
| 500,001 – 750,000 THB | 15% |
| 750,001 – 1,000,000 THB | 20% |
| 1,000,001 – 2,000,000 THB | 25% |
| 2,000,001 – 4,000,000 THB | 30% |
| 4,000,001+ THB | 35% |
However, if assessable income amounts to more than 60,000 THB per year, the taxpayer has to multiply the assessable income with 0.5%. If the total amount is more than what should be paid according to the progressive tax rate, then that amount will be due. If not the progressive tax rates – resulting in a higher taxable base – will be applicable.
Withholding tax.
For certain types of income, taxes have to be withheld at the source and submitted to the District Revenue Office. For the receiver of the income, the tax withheld will be credited against the tax liability at the end of the year.
There are different rates of withholding tax depending on the sort of income, for example:
| Type of income | Withholding tax | |
|---|---|---|
| Income from employment | 0-35% | |
| Income from rent | Resident: 5% | Non-resident: 15%* |
| Income from hire of work and professional fees | Residents: 3% | Non-residents: 15%* |
| Public entertainment remuneration | Residents: 5% | Non-residents: 0-35%* |
| Transportation | 1% | |
| Advertising fees | 2% | |
*The exact percentage may vary depending on double tax agreement between Thailand and the foreign national’s country.
Contributions.
All companies employing more than ten employees are obliged to make a contribution to the Provident Fund. Compensation can be claimed from this fund in case of, amongst others, retirement or death during the employment. The compensation amounts to the total of the contributions made by the employee and employer, as well as the benefits accrued on it.
Each company and employee also has to make contributions to the Social Security Fund. The contribution amounts to 5% of the total salary but cannot be more than 750 THB. As is the case in many countries, this fund serves for example for those who are injured, sick, disabled, or on maternity leave. Child welfare and unemployment (50% of the salary for maximum 180 days) are paid out of this fund as well.
Companies employing more than ten employees also have to pay a contribution to the Workmen’s Compensation Fund, amounting to between 0.2% and 1% of the annual salary of the employee (depending on the assessed risks of the work). In case of injury, sickness, disablement or decease, the employee or the heirs will receive compensation (60% of the monthly salary) and reimbursement of certain costs out of this fund.
Personal income tax return.
The tax year for personal income tax is the calendar year ending December 31, and tax filings and payments must be completed by March 31 of the following year (PND 90 or 91). Personal income tax filings may be done on paper or by electronic form. For income derived from hiring out property, liberal professions and all income that falls within the scope of point (8), the taxpayer also has to file a half-yearly tax return on September 30. These taxes may be set off at the end of the tax year as tax credits.
In case of an inaccurate return, a penalty of 100% may be imposed. The penalty for not filing a return amounts to 200%. These penalties may be reduced with 50% by the officer at the Revenue Department if he/she is of the opinion that there was no intention to evade taxes.
Contrary to the personal income tax, the employer is responsible for the payment of the withholding tax, social security fund and provident fund contributions. Social security contributions have to be paid within 15 days after the end of the months, and payments to the Provident Fund have to be done within three days after transfer of the salary (SPS 1-10). Withholding tax becomes due on the seventh day of the following month (PND 1).
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Pornpun (Som), Acclime accounting coordinator
