Thailand taxes are imposed both at the national and local levels. The principal taxes in Thailand include direct taxes (personal income tax, corporate income tax, petroleum income tax) and indirect taxes (value added tax, specific business tax, customs duty, excise tax, stamp duty, property tax).
Tax collections are administered by the Ministry of Finance through three departments: the Customs Department. Which is responsible for import an export duties, the Revenue Department, which attends to the collection of income tax, VAT, specific business tax, and stamp duty; and the Excise Department, which collects excise taxes levied on certain specific commodities. Local governing bodies deal with the collection of property and municipal taxes.
Source of tax low
The Revenue Code is the principal tax low in Thailand. The Code governs personal income tax, corporate income tax, value added tax, specific business tax, and stamp duty. The Petroleum Income Tax Act governs taxation of oil and gas concessionaires, and the Customs Act governs tariff on imports and exports. Other laws govern excise tax and property tax.
Personal income tax
Tax year and taxable persons
The tax year for individuals is the calendar year ending December 31. Individual tax payers are classified into five categories as follows: natural person; non-juristic body of persons; non-juristic partnership (unregistered ordinary partnership); a deceased person's assessable income and estate throughout the year in which death occurred; theundistributed estate of the deceased.
Taxable base and scope
The taxable base is determined by deducting expenses and allowances from all assessable income. Tax is levied on the taxable base at progressive rates ranging from five per cent to 37 per cent.
A resident is an individual who lives in Thailand for one or more periods totaling 180 days or more in any tax year. A resident is subject to tax on all income from sources in Thailand and on income derived from sources outside of Thailand. A non-resident individual is subject to tax only on income earned from sources within Thailand.
Types of taxable income
Section 40 of the Revenue Code describes the various types of income subject to personal income tax. Some types of income entitle the individual to standard deductions. In summary, these types of income and the corresponding standard deductions. If any, are presented in the table below.
Exclusions from gross income
Certain types of income are excluded from the gross income for the purpose of computing income tax. Among the excluded items are:
- Employee moving expenses, or the portion of travelling expenses paid by the employer to the employee for travelling from another location to assume employment for the first time, or for returning to the point of origin at the termination of employment;
- Reimbursement for per diems or transportation expenses of an employee;
- Share of profits obtained form a non juristic partnership or a non-juristic body of persons subject to personal income tax;
- Income from sale of securities traded in the Securities Exchange of Thailand, not including income from sale of debentures and bonds;
- Reimbursement of medical expenses incurred in Thailand for an employee and his or her dependents;
- Income from sale of investment units in a mutual fund set up under the Securities and Stock Exchange Act 1992.
- Up to 290,000 baht of employee contributions to a registered provident fund.
In addition to the itemized standard deductions, taxpayers are also entitled to the following personal allowances:
- 30,000 baht for the taxpayer;
- 30,000 baht for the taxpayer's spouse.
- 15,000 baht for each of the taxpayer's children (maximum three children except those born before 1979)
- 2,000 baht for each child in school in Thailand.
Other allowances are available for the following:
- Life insurance premium, not exceeding 10,00 baht;
- Spouse's life insurance premium, not exceeding 10,000 baht;
- Interest on mortgage of personal residence, not exceeding 10,000 baht;
- Contributions to a qualified provident fund, not exceeding 10,000 baht;
- Contributions to a social security fund, for the full amount
- The estate of a deceased person, 30,000 baht,
- Unregistered partnership or non-juristic body of persons, 60,00 baht (Maximum).
After deducting the standard or itemized deductions, and the applicable allowances from gross income, the resulting net income is taxed at the rates shown in the following table: Unit: Baht'000 Taxable income bracket Tax rate Tax amount Accumulated tax 0 - 50 0% 0 0 50 - 100 5 % 5 2.5 100 - 500 10 % 40 42.5 500 - 1,000 20% 100 142.5 1,000 - 4,000 30 % 900 1,042.5 4,000 and over 37 % The tax rate on the joint income of spouses is the same as that applicable to persons filing individual returns; the incomes of both spouses are treated as accruing solely to the husband. However, if both spouses have employment income, each spouse may elect to file a separated tax return. In that event, each employed spouse is entitled to a separate standard deduction and the personal exemption of each spouse will then be Baht 30,000 plus Baht 7,500 for each dependent child (or 8,500 if school allowance is applicable)
In the case where an individual has a gross income of more than Baht 60,000, excluding income under Section 40 (1) of the Revenue Code (employment income), the income tax payable must not be less than 0.5 per cent of that gross income.
Payments of employment income and certain specific types of assessable income to natural or juridical persons are subject to income tax withholding at various rates depending on the type of assessable income. Taxes withheld by payer of income must be remitted within seven days after the end of the month of payment, together with a return, to the Revenue Department. The recipient of the assessable income is provided with a withholding tax certificate and can use the tax withheld at source as a credit against the annual or mid-year income tax payable for the pertinent tax year.
Interest income is subject to 15 per cent withholding tax. Dividend income is subject to 10 per cent withholding tax. A Thai resident may consider the withholding tax on interest and dividend income as the final tax, or include the interest or dividend in his assessable income and claim a credit for the withholding tax. However, the withholding tax is a final tax for a non-resident.
Tax credit for dividend
In the case where an individual elects to include dividends with other income in the computation of annual tax payable, the individual who is a resident of Thailand, with a domicile in Thailand, and receives dividends from any companies organized under the Thai law, is entitled to claim a tax credit.
The tax credit is regarded as taxable income and is required to be included first with the other income to arrive at the total gross income, and then deducted from the amount of tax.
Filing of returns and payment of tax
Returns must be filed and taxes paid on or before the last day of March each year for income obtained during the preceding year.
An individual who derives income under Sections 40 (5), (6) or (8) of the Revenue Code is liable to file a half-year return, and pay tax on or before the last day of September for the income earned during January to June.
The half-year tax paid is allowed as a credit against the tax due for the full year.
Corporate income tax
The juristic companies and partnerships organized under Thai law are subject to income tax on income earned from sources within and outside of Thailand. The definition of juristic companies and partnerships for income tax purposes are broader than those under the Civil and Commercial Code. Juristic companies and partnerships for income tax purposes include, but are not limited to:
- Private and public limited companies.m,
- Registered ordinary and limited partnerships.
- Joint ventures.
- Foundations and associations.
A branch of a foreign corporation is taxed only on income derived from sources within Thailand Tax is imposed on the net profits of juristic companies and partnerships, ascertained in accordance with generally accepted accounting principles, subject to conditions imposed by the Revenue Code of Thailand.
Rules on computing taxable net profit
When computing taxable net profit, there are rules imposed under the Thailand Revenue code which include but are not limited to:
- A net loss carry-over for a period of five years is allowed.
- Inventory is to be valued at cost or at market price, whichever is lower.
- The employer's contributions to a registered provident fund are deductible expenses.
- Deductions for gifts and donations up to a total of 4 per cent of net profit are available, as follows:
- two per cent to approved public charities or for public benefit, and
- two per cent to approved education or sports bodies.
- No deduction is permitted for any expenditure that is determined on the basis of net profit (e.g. bonuses paid as a percent-age of net profit) at the end of an accounting period.
- Depreciation of assets of limited companies and partnerships is based on cost. The rates of annual depreciation permitted by the law generally vary from 5-20 years.
- Entertainment and representation expenses are deductible up to 0.3 per cent of gross sales, or of paid-u [capital at the closing date of the accounting period, whichever si the greater. The maximum amount allowed is 10 million baht.
- Capital gains are treated as ordinary taxable income
- Unrealized gains and losses from foreign currency exchange must be included in the computation of taxable net profit.
- A Thai limited company may exclude 50 per cent of the dividend income received from other Thai limited companies from its assessable income. The exclusion is in creased to 100 per if the recipient is either listed with the Securities Exchange of Thailand or owns at least 25 per cent of the shares of the payer company, and the payer company does not hold any share in the recipient company, In all cases, there is a requirement that the recipient company holds its shares in the payer company for at least three months both before and after receiving such income.
- Tax penalties, surcharges and criminal fines under the Revenue Code are nondeductible expenses.
Tax on corporate net profit is computed at the following rates: Taxpayer Tax Rate All limited companies, juristic partner- ships and branches of foreign companies 30 % Petroleum concessionaires 50% - 60% Exceptions to the general rate of income tax imposed on net profit apply to:
- Companies or partnerships organized under foreign laws and engaged in the business of international transportation in various countries, including Thailand, as follows:
- In the case of transport of passengers, tax is paid at the rate of three per cent of the fares, fees, and any other benefits derived in Thailand for the transportation business, before deduction of any expenses;
- In the case of transport of goods, tax is paid at the rate of three per cent of the freights, fees, and any other benefits derived (Whether in Thailand or elsewhere) in respect of the transportation of goods from Thailand, before the deduction of any expenses.
- Foundations and associations prescribed by notification of the ministry of Finance as public charity organizations or institutions are exempted from income tax on all kinds of income. Foundations or associations organized under Thai law which are other than the above, and are engaged in any revenue producing business, are subject to income tax on gross receipts before the deduction of any expenses at rates of either two per cent or 10 per cent, depending on the type of gross revenue. Income tax exemption is granted on subscription fees received from members, or any money or properties received by way of donation or gift
Filing of returns and payments of tax
A corporate taxpayer must file an annual tax return and pay the tax due within 150 days from the closing date of each accounting period. Except for newly incorporated companies, an accounting period is defined as duration of 12 months. Returns must be accompanied by audited financial statement. A corporate taxpayer must file a half-year return and pay 50 per cent of the estimated annual income tax by the end of the eighth month of the accounting period. Failure to pat the estimated tax or underpayment by more than 25 per cent any subject the taxpayer to a fine amounting to 20 per cent 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, shall pay the half-year tax on the actual net a profit for the first six months of an accounting period. In this case, the tax return must also be accompanied by financial statements, which have been reviewed by an auditor approved by the Director-General.
Tax on repatriation of income
Repatriation of a; branch's after tax profits to the head office, or keeping of profits abroad where the head office has directly received a payment for goods sold or services rendered in Thailand, is subject to further income tax at the rate of 10 per cent of the after tax profit actually or deemed to be remitted. Repatriation of assessable income from Thailand to foreign companies not doing business in Thailand (non-resident companies) is subject to withholding tax as shown below:
Type of income Tax rate Dividends 10% Royalty, interest, rent, service fees, capital gains 15% Double taxation treaties
Tax 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.
The Thai tax treaties generally place a resident of the contracting state in a more favorable position for Thai tax purposes than under the domestic law. In general, Thai tax 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 payment of income to foreign juristic entities not carrying on business in Thailand may be reduced or exempted under the tax treaties. As of October 1,2000, Thailand had double taxation treaties with 40 countries, including the United States.
Value Added Tax
Value Added Tax (VAT) is levied at the rate of seven per cent 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 per cent 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 service 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 services used in the business. This VAT credit is generally not available with respect to entertainment expenses and certain specific expenditures.
A business which sell zero-rated goods or services are 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.
Specific business tax
Certain types of businesses (e.g.) banking, finance, securities and insurance) 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 is computed on the monthly gross receipts at the following rates: Banking or similar business, finance, securities and credit foncier business at three per cent; life insurance at 2.5 per cent; pawnshop 2.5 per cent; and sale of immovable property in a commercial manner or for profits at three per cent from 5 July 2000 to 31 December 2001).
Documentary stamp duty
Certain documents mentioned in the Stamp Duty Schedule of the Revenue Code (e.g. power of attorney, letter of credit, check, bill of lading, service contracts, etc.) must contain documentary stamps of various specified denominations. While the stamp duty is generally at nominal rates, failure to affix such stamps may attract a surcharge of up to 600 per cent.
Excise tax is currently levied on the following commodities: domestically produced petroleum and oil products; non-alcoholic beverages, excluding water, mineral water and milk; air conditioners with a capacity of not more than 72,000 BTUs; certain light fittings; crystal; motor cars designed to carry not more than 10 persons; yachts and other pleasure boats; perfume; cosmetic products; and certain entertainment businesses. In addition, there are special excise taxes imposed on liquor, beer and cigarettes.
Customs duties are governed by the Customs Tariff Decree of 1987, an amendment of previous tariff codes, to conform to the Harmonized System of the Customs Cooperation Council. Tariff duties on goods are levied on an ad valorem or a specific rate basis. The majority of goods imported by businesses are subject to rates ranging from 0 per cent to 80 per cent.
The majority of imported articles are subject to two different taxes: tariff duty and VAT Tariff duty is computed by multiplying the CIF value of the goods by the duty rate. The duty thus determined is added to the CIF price. VAT is then levied on the total sum of the CIF value, duty, and excise tax, if any. Goods imported for re-export are generally exempted from import duty and VAT. Export duties are imposed on only a few items including rice; hides, skins, and leather; scrap iron and steel; rubber, including latex, rubber waste, tree and lump scraps, earth rubber, and bark shavings from rubber trees; teak and other kinds of wood. Tariff duties may be lowered at the discretion of the Minister of Finance with the approval of the Cabinet. Two exceptions to the obligation to pay customs duties apply to the importation of machinery, equipment, and materials for use by:
- Oil and gas concessionaires and their contractors.
- Certain companies promoted by the Board of Investment.
There are two kinds of property tax in Thailand, namely, house and land tax, and local development tax. House and land tax is imposed on the owners of a house, building, structure or land, which is rented or otherwise put to commercial use. The tax rate is 12.5 per cent of actual or assessed annual rental value of the property.
A local development tax is imposed upon any person who either owns land or is in possession of land. The tax rates vary according to the appraised value of the property being determined by the local authorities. There is an allowance granted for land utilized for personal dwellings, the raising of livestock and the cultivation of crops by the owner. The extent of the allowance differs according to the location of the land.
Source: American Chamber of Commerce in Thailand
Ministry of Commerce