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Taxation in Thailand: Introduction.

taxation in thailand: introduction

In Thailand, business entities and individuals are obliged to pay tax on certain income and land or buildings. There is both direct and indirect tax you may be subject to, and it is important to know which taxes you will need to pay.

Let’s dive right in and learn more about your tax obligations.

I. Corporate tax

1. Corporate income tax

What is corporate income tax?

Corporate income tax is a direct tax levied on a juristic company or partnership conducting business in Thailand or conducting business outside of Thailand but deriving certain types of income from the country.

All companies are required to apply for a Taxpayer Identification Number (TIN) within 60 days after incorporation or – for foreign companies – before starting business in Thailand. This number will not only serve for corporate income tax but also for withholding tax and VAT purposes.

Corporate income tax rates

The standard rate for corporate income tax in Thailand is 20%. However, this rate varies based on the type of taxpayer.

TaxpayerRate
Small company (a company with a paid-up capital of less than THB 5 million at the end of each accounting year)
  • Exempted on profit below 300,000 THB
  • 15% (net profit from THB 300,000 but not exceeding THB 3 million)
  • 20% (net profit over THB 3 million)
Companies listed in the Stock Exchange of Thailand (SET)20%
Companies newly listed in the Stock Exchange of Thailand20%
Companies newly listed in the Market for Alternative Investment (MAI)20%
Banks deriving profits from International Banking Facilities (IBF)10%
Foreign company engaging in international transportation3%
Foreign companies not carrying on business in Thailand but receiving dividends from Thailand10%
Foreign companies not carrying on business in Thailand but receiving other types of income apart from dividends from Thailand15%
Foreign companies disposing profit out of Thailand10%
Profitable association and foundation2% or 10%

Who must pay corporate income tax?

The following entities have a duty of paying corporate income tax:

  1. A company or juristic partnership incorporated under Thai law
    • Limited company
    • Public company limited
    • Limited partnership
    • Registered partnership
  2. A company or juristic partnership incorporated under foreign laws that:
    • Conduct business in Thailand
    • Conduct business in Thailand and in other places including Thailand
    • Conduct business in other places including Thailand, in case of carriage of goods or carriage of passengers
    • Has an employee, an agent or a go-between for carrying on business in Thailand and received income or profits in Thailand
    • Does not conduct business in Thailand, but receiving assessable income under section 40 (2)(3)(4)(5) or (6) of the Revenue Code which is paid from or in Thailand
    • Distributes profit from conducting business in Thailand to other countries
  3. A business operating in a commercial or profitable manner by a foreign government, organisation of a foreign government or any other juristic person established under a foreign law.
  4. Incorporated and unincorporated joint ventures
  5. A foundation or association conducting revenue-generating business, but does not include the foundation or association as prescribed in section 47 (7)(b)
  6. A juristic person who is considered as a company or juristic partnership by the Minister and approved by the Royal Thai Government Gazette.

Half-year report

In addition to the annual tax payment, any company subject to CIT is required to make a half year tax prepayment (Form CIT 51). A company is obliged to estimate its annual net profit as well as its tax liability and pay half of the estimated tax amount within eight months after the beginning of the accounting period. The prepaid tax is creditable against its annual tax liability.

In case not enough tax was prepaid – the actual year-end profitability amounts to 25% more than (the double of) the forecast – an additional 20% tax will be due on the difference between the forecast and the actual tax due.

(Read more in our Corporate Income Tax Guide)

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2. Value-added tax (VAT)

What is value-added tax?

Value-added tax (VAT) has been applied in Thailand since 1992 and is an indirect tax imposed on the value-added at each stage of production and distribution.

Who is subject to VAT in Thailand?

A person or entity that supplies goods or provides services in Thailand and has an annual turnover exceeding THB 1.8 million is subject to VAT.

Service is deemed to be provided in Thailand if the service is performed in Thailand and regardless of where it is utilised or if it is performed elsewhere and utilised in Thailand.

Importers are also subject to VAT in Thailand, and VAT will be collected by the Customs Department at the time goods are imported.

VAT rates in Thailand

The current rate for VAT in Thailand is 7%.

The VAT rate of 0% applies to the following activities:

  • Export of goods
  • Services rendered in Thailand and consumed outside Thailand
  • International transport services by aircraft or sea-going vessels
  • Sales of goods and services to Thai government ministries, departments or state enterprises under foreign loan assistance programs
  • Sales of goods and services to international organisations
  • Sales of goods and services to foreign economic and trade offices
  • Sales of goods or services between bonded warehouses and businesses in export processing zones or duty-free zones

(Read more in our VAT Guide)

3. Withholding tax

What is withholding tax?

Withholding tax is the deduction of tax from payments made to suppliers who provide a service. The withholding tax rates can vary depending on the types of income and the status of the resident.

What expenses are required to withhold tax?

Expenses that require the deduction of withholding tax are:

  • Expenses of more than THB 1,000
  • Expenses less than THB 1,000 in the case that a long-term contract is in place (ie telephone or internet bills)

What is the withholding tax rates?

The withholding rates for Thai residents are as follows:

ServiceWithholding tax rate
Interest1%
Transportation1%
Non-life insurance premiums1%
Advertising2%
Royalties3%
Professional services3% (paid to a Thai or foreign company having a permanent branch in Thailand)

5% (paid to a foreign company not having a permanent branch in Thailand)

Telephone3%
Rent5%
Prizes5%
Dividends10%

(Read more in our Guide to Withholding Tax)

4. Special business tax

What is specific business tax?

Specific business tax is a type of indirect tax introduced to replace business tax and is imposed on companies excluded from value-added tax (VAT).

Who is liable to specific business tax?

Businesses that are subject to specific business tax are:

  • Banking
  • The business of finance, securities and credit foncier
  • Life insurance under the law governing life insurance
  • Pawnbroking
  • Business with regular transactions similar to commercial banks, such as the provision of loans, provision of guarantees, exchange of currencies, issuance, purchase or sale of bills or transfer of money abroad by different means
  • Sale of immovable property in a commercial or profitable manner
  • Sale of securities in a securities market
  • Any other business as prescribed by a royal decree

Specific business tax rates

The specific tax rates and tax base are as follows:

BusinessTax rates
Banking, finance and similar business3%
Finance, securities and credit foncier business3%
Life insurance2.5%
Pawn brokerage2.5%
Businesses with regular transactions similar to commercial banks3%
Real estate0.1%
Sale of securities in a securities market0.1% (exempted)

(Read more in our Specific Business Tax Guide)

5. Land and buildings tax

What is land and buildings tax?

The land and buildings tax was announced on 12 March 2019 and its purpose is to encourage land use.

Who is liable to pay land and buildings tax?

Under section 37 of the Land and Building Tax Act, tax is collected from the following types of land or buildings used for the following purposes:

  • Agricultural purposes, including rice farming, crop farming, plantation, livestock farming, aquatic animal farming.
  • Residential purposes
  • Other purposes excluding agricultural and residential purposes
  • Left empty or unused

What are the land and buildings tax rates?

The maximum tax rates for land and buildings are as follows:

Purpose of land and buildingsMaximum tax rate
Agricultural use0.15%
Residential use0.3%
Other use1.2%
Empty or unused1.2%

Pursuant to section 43, if the land or building is left empty or unused for a period of more than three consecutive years, it will be subject to an additional rate of 0.3% every three years, but the amount will not exceed 3%.

For the first two years of the tax collection, the following rates are imposed:

Land valueTax rate
1.     Land or buildings for agricultural use
THB 1 million – THB 75 million0.01%
THB 76 million – THB 100 million0.03%
THB 101 million – THB 500 million0.05%
THB 501 million – THB 1 billion0.07%
More than THB 1 billion0.10%
2.     Land or buildings owned by individuals for residential use whose names are listed on the household registration documents
THB 1 million – THB 25 million0.03%
THB 26 million – THB 50 million0.05%
More than THB 50 million0.10%
3.     Buildings owned by individuals for residential use whose names are listed on the household registration documents
THB 1 million – THB 40 million0.02%
THB 41 million – THB 65 million0.03%
THB 66 million – THB 90 million0.05%
More than THB 90 million0.10%
4.     Land or buildings for residential purposes other than (2) and (3)
THB 1 million – THB 50 million0.02%
THB 51 million – THB 75 million0.03%
THB 76 million – THB 100 million0.05%
More than THB 100 million0.10%
5.     Land or buildings used for purposes other than for agricultural and residential purposes
THB 1 million – THB 50 million0.30%
THB 51 million – THB 200 million0.40%
THB 201 million – THB 1,000 million0.50%
THB 1,001 million – THB 5,000 million0.60%
More than THB 5,000 million0.70%
6.     Empty or unused land or buildings
THB 1 million – THB 50 million0.30%
THB 51 million – THB 200 million0.40%
THB 201 million – THB 1,000 million0.50%
THB 1,001 million – THB 5,000 million0.60%
More than THB 5,000 million0.70%

(Read more in our Land and Buildings Tax Guide)

II. Personal tax

1. Personal income tax

What is personal income tax?

Personal income tax is the tax imposed on an individual’s assessable income derived from employment at progressive rates.

Taxable income types

Assessable income in Thailand is categorised into eight categories:

  1. Income from employment
  2. Income from the hire of work, office of employment or services
  3. Income from goodwill, copyright, franchise, patent or other rights
  4. Income from interest, dividend, bonus for investors, gain on amalgamation, acquisition or dissolution of a company or partnership or gain on transfer of shares
  5. Lease of property
  6. Income from liberal professions
  7. Income from a contract of work whereby the contractor provides essential materials other than tools
  8. Income from business, commerce, agriculture, transportation or any other activity not mentioned above

Personal income tax rates

The current rate for personal income tax rates in Thailand are as follows:

Taxable income (THB)Tax rate
0 – 150,000Exempted
150,001 – 300,0005%
300,001 – 500,00010%
500,001 – 750,00015%
750,001 – 1 million20%
1,000,001 – 2 million25%
2,000,001 – 5 million30%
5,000,001 or more35%

(Read more in our Personal Income Tax Guide)

2. Inheritance tax

What is inheritance tax?

Inheritance tax was announced on 5 August 2015 with the purpose of making the tax system fair by taxing those who gain wealth from the inheriting estate of a deceased person.

Who is liable to pay tax when inheritance is received?

Under section 11 of the Inheritance Tax Act, the following persons who received inheritance have a duty to pay tax:

  • A person of Thai nationality
  • A natural person of non-Thai nationality but having a domicile in Thailand according to the law on immigration
  • A person of non-Thai nationality but receiving an inheritance which is an asset situated in Thailand
  • Juristic person registered in Thailand or established by Thai laws, or a Thai shareholder(s) who holds more than 50% of the registered and paid-up capital

Inheritance tax rates

If the inheritance received has a value exceeding THB 100 million, only the portion that exceeds THB 100 million will be taxed.

The inheritance tax rates for the exceeding amount are:

  • 5% inheritance tax for parents and descendants
  • 10% inheritance tax for other heirs

Assets subject to inheritance tax

Inherited assets subject to the tax are:

  • Immovable property
  • Securities in accordance with the Securities and Exchange Act
  • Deposited money, or other forms of wealth, where the heir has the right to withdraw it from a financial institution or claim it from a person holding the deposit
  • A registered vehicle
  • Financial assets to be prescribed by a Royal Decree

(Read more in our Inheritance Tax Guide)

3. Gift tax

What is gift tax?

Gift tax is a type of personal income tax, and the tax is imposed on money or assets given to parents, ascendants, descendants, spouse or others as a gift and exceed the threshold.

Assets or money given that do not exceed the threshold are exempt from gift tax.

What gifts are exempted from tax?

Gifts that are exempted from personal income tax are as follows:

  • Income from the transfer of immovable property received by a lawful child not exceeding THB 20 million in a tax year.
  • Maintenance income or gifts received by ascendants, descendants or a spouse in the amount not exceeding THB 20 million throughout a tax year
  • Maintenance income or gifts received by a person who is not an ascendant, descendant or spouse on occasions of tradition or custom in the amount not exceeding THB 10 million in a tax year
  • Income from gifts received by a person who intends to use the gift for education, religion or public benefit purposes according to the intention of the donor is exempt from personal income tax referred to in the Ministerial Regulations

(Read more in our Gift Tax Guide)

Conclusion

Failure to comply with Thailand’s tax requirements may lead to possible penalties and surcharges; therefore, it is necessary that you stay compliant with your tax obligations.

Do not hesitate to contact Acclime to help you out with your taxes.


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