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The purpose of this guide is to provide an overview of Thailand’s double tax agreements.
Individuals or companies in Thailand can benefit from taxation relief by tax exemptions or tax credits in the case that specific conditions are fulfilled.
Let’s take a look at the details of the double tax agreement in Thailand.
What is a double tax agreement?
Double taxation occurs when two or more different jurisdictions are taxing the same declared income.
This can happen when an individual or a company resides and operates in more than one country and is mitigated by double tax agreements between countries. As a result, the income will be taxed only once.
If an individual generates income in Thailand but does not have a permanent establishment in the country, the income on business profits is subject to an exemption.
Only interest, dividends and royalties may be taxed in the country in which the income arises if there is no permanent establishment.
Additionally, 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 tax agreement.
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What is a permanent establishment in Thailand?
A permanent establishment is:
- A place of management
- A branch
- An office
- A factory
- A warehouse, in relation to a person providing storage facilities for others
- A workshop
- A farm
- An oil or gas well, a mine, a quarry or any other place of extraction of natural resources
- A building site, construction, installation or assembly project where such site, project or activities continue for more than six months.
The following are not permanent establishments:
- Use of facilities for storage
- Display or delivery of goods or merchandise belonging to the company
- The maintenance of a stock of goods or merchandise belonging to the company for storage, display or delivery
- Maintenance of a stock of goods or merchandise belonging to the company for processing by another
- Maintenance of a fixed place of business to purchase goods or merchandise or for collecting information for the company
- Maintenance of a fixed place of business for advertising, for the supply of information, for scientific research or similar activities
Who can benefit from the double tax agreement?
The double tax agreement applies to individuals and juristic persons of a contracting state. To be entitled to the treaty benefits and be classified as a Thai resident, the person must meet one of the following conditions:
- An individual who stays in Thailand for at least 180 days in a tax year
- A juristic person who is incorporated under the Civil and Commercial Code of Thailand
What taxes are covered by the double tax agreement?
Taxes that are covered by the double tax agreement are income taxes, such as personal income tax, corporate income tax and petroleum income tax.
Indirect taxes such as value-added tax and specific business tax are not covered by the agreement.
Types of exempt income
Income from services and rent from moveable property is exempt from taxation in the country it is paid.
Under the Thai-Japanese tax treaty, all rent is subject to taxation, and there is no exemption for income from the rental of movable property.
Double taxation elimination methods
Each double tax agreement states different methods of elimination of double taxation of an individual according to the country.
- Exemption method
The country of residence does not tax the income, which according to the double tax agreement is taxed in the source country.
- Credit method
The resident country has the right to tax the income which was already taxed in the source country. It calculates the tax on the basis of the taxpayer’s total income, including income from the other country, which according to the double tax agreement, is taxed in that other country. However, it allows a deduction from its own tax for the paid tax in the other country.
Which countries have a double tax agreement with Thailand?
Thailand currently has concluded 61 double tax agreements with countries around the world.
|Estonia||New Zealand||United Arab Emirates|
|Finland||Norway||United States of America|
|Great Britain and Northern Ireland||Pakistan||Vietnam|
Mutual agreement procedure
What is the mutual agreement procedure (MAP)?
The mutual agreement procedure is a dispute resolution procedure specified in the double tax agreement.
The Minister of Finance authorised the Director-General of the Revenue Department to be the competent authority under the double tax agreement.
Mutual agreement procedure application
The taxpayer can initiate a MAP by submitting a request in writing and in Thai to the Revenue Department.
The request should be submitted together with the following information:
- Identification and contact details of the person that submits the request, including the name, address and tax number
- Identification of other persons concerned by the request
- Power of attorney, if lodged by an authorised person
- Other countries concerned
- Detailed information about the facts and circumstances of the case
- Periods for which the double taxation or taxation not in accordance with the provisions of a respective double tax agreement has occurred
- Detailed information of the actions whereby double taxation or taxation not in accordance with the provisions of the respective double tax agreement occurs or will occur
- Analysis and supporting reasons for which the person considers that one or both of the contracting states’ actions result or would result in taxation which is not in accordance with the provisions of the double tax agreement
- Detailed information on any action taken to avoid double taxation in Thailand or in other countries
- Detailed information on any remedy sought in Thailand or in the other country
- A statement confirming the accuracy and completeness of all information and documents in the MAP request and that the taxpayer will assist the competent authority by providing additional information as requested
- Any other information that would help resolve the case
When must the request be submitted?
The MAP request must be submitted to the Revenue Department within the time limit specified in the double tax agreement, which is either two or three years from the first notification of the action resulting in taxation not in accordance with the agreement’s provisions.
Thailand currently has 61 double tax agreements which prevent individuals or companies in more than one country being taxed twice on the same income.
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