Acclime helps you set up, manage & advance your business in Thailand and beyond.
One aspect of taxation in Thailand that can be particularly complex is withholding tax, which is a system of tax collection whereby a third party is responsible for withholding and remitting taxes on behalf of the taxpayer.
Withholding tax can apply to a variety of payments, including salaries, rents, and royalties, among others. Understanding your obligations as a taxpayer and the procedures involved in withholding tax can help ensure compliance with Thai tax laws and avoid potential penalties.
In this guide, we will provide an overview of withholding tax in Thailand, including the types of payments subject to withholding tax, the rates of tax, and the procedures for remitting the tax to the relevant authorities. Whether you are a new business owner or an international company setting up a company in Thailand, this guide will provide you with the knowledge you need to navigate the withholding tax in Thailand.
What is withholding tax in Thailand?
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 type of income and the status of the resident.
Expenses 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 (i.e. telephone or internet bills)
Withholding tax rates in Thailand
The withholding rates for Thai residents are as follows:
|Service||Withholding tax rate|
|Non-life insurance premiums||1%|
|Professional services||3% (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)
Dividends to another Thai company may be eligible for withholding tax exemption if specific conditions are met under the Revenue Code or investment promotion law.
Dividends paid to a non-resident company and individual are also subject to 10% withholding tax which may be reduced under a tax treaty.
Interest paid to a non-resident company or individual is subject to withholding tax at 15% unless it can be reduced under a tax treaty.
Royalties paid to a non-resident company or individual is subject to a 15% final withholding tax and can be reduced under a tax treaty.
Never miss an important deadline with our detailed compliance calendar.
- Get a clear picture of all the accounting, tax and HR deadlines
- Avoid penalties and late fees
- Keep your accountants or accounting firm accountable
Calculation of withholding tax in Thailand
Suppose a company is making a THB 107,000 gross payment to a legal firm for its services (taxed by the rate of 3%).
Since withholding tax is calculated net of VAT (Net = THB 100,000), the amount to be withheld will account for 3,000 THB (=3% of Net). In the end, instead of getting paid THB 107,000, the legal firm receives only THB 104,000 and the withheld THB 3,000 will be credited against its final tax liability once submitted by the company to the Revenue Department.
Effectively, the clients of the legal firm pay its corporate income tax on the firm’s behalf. The company/payer is also required to issue the legal firm a tax certificate as a proof of the deduction.
In essence, the whole point of withholding tax is for the Revenue Depart to able to collect the tax from liable entities in advance instead of having to wait until the end of financial the year.
|Service||Net||VAT (7%)||Gross||Withholding tax (3%)||To be paid|
|Legal service||THB 100,000||THB 7,000||THB 107,000||THB 3,000||THB 104,000|
When is withholding tax due?
Companies withholding tax for other firms, employees or other entities have a duty of submitting the withholding tax to the Revenue Department within the first seven days of the following month in which the payment was made.
Late submission penalties
Failure to submit the tax returns to the Revenue Department on time will result in a fine of THB 100 within the first seven days after the deadline and THB 200 after the first seven days of the deadline.
An additional penalty of 1.5% of the unpaid amount will also be charged each month.
Recent changes in withholding tax policies in Thailand
Withholding tax relief measures in response to COVID-19
The Ministry of Finance released the Ministerial Regulation (No.361) on 27 March 2020 to provide guidelines for withholding tax relief.
The withholding tax imposed on certain payments will be reduced from 3% to 1.5% from 1 April 2020 to 30 September 2020.
The withholding tax will be reduced from 3% to 2% from 1 October 2020 to 31 December 2021 if the payment is made through the e-withholding tax system.
The withholding tax reduction, however, will not be applicable to payments made to charitable foundations and associations.
The types of income based on the Thai Revenue Code that are eligible for the 2% withholding tax relief through the e-withholding tax are:
- Income derived from a performance or work, meeting allowance, gratuity, house rent allowance, bonus, the monetary value of rent-free residence provided by a payer of income, etc. (section 40 (2))
- Only income derived from goodwill, copyright and other rights in a similar nature as royalty (section 40 (3))
- Income from liberal professions, ie laws, medical services, engineering, architecture, accounting and fine arts (section 40 (6))
- Income derived from a contract of work where the contractor has to provide essential materials besides tools (section 40 (7))
- Only income derived from the hire of work, prizes, discounts or any benefits in connection with the sale promotion and certain other services, excluding service fees paid to hotels, restaurants and life insurance premiums (section 40 (8))
The withholding tax rates in Thailand depend on the type of service and expense amount, but until 31 December 2021, payments made through the e-withholding tax system will be reduced to 2% to help boost the economy during the COVID-19 outbreak.
If you have any questions or need advice on your taxes, contact Acclime.
Acclime is Asia’s premier tech-enabled professional services firm. We provide formation, accounting, tax, HR and advisory services, focusing on delivering high-quality outsourcing and consulting services to our local and international clients in Thailand and beyond.