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Taxation in Thailand

The Revenue Code outlines regulations for the imposition of taxes on income, with income tax divided into three categories: Corporate income tax, value added taxes (or specific business taxes), and personal income tax.

Corporate Income Tax
The general principle of Corporate Income Tax is based on the collection of tax on net profit arising from or in the consequence of the business carried out within an accounting period from the following juristic entities:

Incorporated firms operating in Thailand pay income tax at a rate of 30 percent of net profits. Foundations and Associations pay income taxes at a rate of 2 to 10 percent of gross business income, depending upon the activity however not foundations and associations designated as tax exempt organizations. International transport companies face a rate of 3 percent of gross ticket receipts and 3 percent of gross freight charges.
All companies registered under Thai law are subject to taxation as stipulated in the Revenue Code and are subject to income tax on income earned from sources within and outside of Thailand. Foreign companies not registered or not residing in Thailand are subject to tax only on income derived from sources within Thailand.
Normal business expenses and depreciation allowances, at rates ranging from 5 to 20 percent, depending on the item, or at rates under any other acceptable depreciation method, are allowed as deductions from gross income. Inventory must be valued at cost or at market price, whichever is lower. Net losses can be carried forward for up to five consecutive years.
Inter-corporate dividends are exempt from tax on 50 percent of dividends received. For holding companies and companies listed on the SET, dividends are completely exempt, provided the shares are held three months prior to and after the receipt of dividends.
For gifts and donations can be deducted up to a 0.3 percent of income earned, or of paid-up capital at the closing date of the accounting period, whichever is greater.
Depreciation of assets of limited companies and partnerships is based on cost. The rates of annual depreciation permitted by the law generally vary from 10 to 20 years.
Entertainment and representation expenses are deductible up to maximum limits as a percentage of gross sales, or of paid-up capital at the closing date of the accounting period, whichever is greater.
A corporate taxpayer must file a half-year return and pay 50 percent of the estimated annual income tax by the end of eighth month of the accounting period. Failure to pay the estimated tax or underpayment by more than 25 percent may subject the taxpayer to a fine amounting to 20 percent of the amount in deficit.
Failure to file a tax return, late filing or filing a return containing false or inadequate information may subject the taxpayer to various penalties. Failure to file a return, and subsequent non-compliance with an order to pay the tax assessed, may result in a penalty equal to twice the amount of tax due. Penalties are due within 30 days of assessment.
A corporate taxpayer that overpays its taxes and duties is entitled to claim a refund from the Revenue Department within a period of 3 years from the last day of tax filing for the applicable accounting year by using from Khor No.10.

Value Added Taxes
Under the tax regime, value added at every stage of the production process is subject to a 7 percent tax rate. The transactions shall be affected by this tax are:

Sale of goods or provision of service by a supplier. Provision of service in Thailand means performing services in Thailand regardless of whether the use of such service is made in a foreign country or in Thailand. Moreover, a service, which is performed in a foreign country and is made use of in Thailand, shall be treated as provided in Thailand. A supplier is required for VAT registration under Section 85 or 85/1 or for temporary VAT registration under Section 85/3.
Importer or any other person who imports or brings goods into Thailand including those who remove from an export processing zone not for export any goods whether they be liable to or exempt from import duty under the customs law.

Persons liable to VAT in special cases:

A supplier residing outside Thailand and selling goods or providing services in the ordinary course of business with an agent.
Persons who sell goods or provide services liable to tax at the rate of zero percent to the United Nations, its specialized agencies, Consulate or Embassy, if the ownership in the goods or the rights in the services is then transferred to another person.
Where the import of goods listed in the part on goods exempted from duty under the Law Governing Customs Tariff and VAT are exempted, such goods afterwards become liable to duty under such law if

- That person has the liability under the Law Governing Customs Tariff.
- That person is the transferee, if the goods are transferred.
In the case of amalgamation: the persons amalgamated and the transferee shall be liable to VAT.
In the case of transfer of business: the transferor and the transferee shall be liable to VAT.

VAT must be paid on a monthly basis, calculated as Output tax - Input tax = Tax paid, where output tax is the VAT which the operator collects from the purchaser when a sale is made, and input tax is the VAT which an operator pays to the seller of a goods or service which is then used in the operator’s business.

If the result of this calculation is a positive figure, the operator must submit the remaining tax to the Revenue Department not later than 15 days after the end of each month. However, for a negative balance, the operator is entitled to a refund in the form of cash or a tax credit, which must be paid in the following month.

1.) Zero Rate

Exports
Services provided in Thailand for persons in foreign countries
International transportation by air and sea by Thai juristic persons. Foreign juristic persons may enjoy zero percent when its country applies zero percent to Thai juristic persons operating there.
Sale of goods or services to civil service or state enterprises under foreign loan or aid schemes
Sale of goods or service to the UN and its agencies, foreign embassies and consulates
Sale of goods or services between bonded warehouses, between operators in export processing zones, or between the former and the latter.

Business operators earning exceed 1,200,000 Baht per annum must register for VAT within 30 days of the date they reach 1,200,000 Baht in sales. Operators, which business earning less than 1,200,000 Baht, can choose whether they enter the VAT system or not. However, operators that do not enter the VAT system, can not charge VAT to their customers for any step of production.

2.) Special exemption from VA

Operators earning less than 1,200,000 Baht a year
Sale or import of agricultural products, livestock, and agricultural inputs, such as fertilizer, and feed
Sale or import of published materials and books
Auditing, legal services health services and other professional services
Cultural and religious services
Educational services
Services provided by employees under employment contractsThe sale of goods as specified by Royal Decree
Goods exempt from import duties under the Industrial Estate Authority of Thailand (IEAT) Act
Domestic transport (excluding airlines) and international transport (excluding airlines and sealines)

3.) Specified Business Tax (SBT)
A specific business tax of approximately 3 percent is imposed, in lieu of VAT, on the following businesses:

Commercial banks and similar businesses
Insurance companies
Financial securities firms and credit fonciers
Sales on the stock exchange
Sales of non-movable properties
Pawn shops

The SBT is computed on the monthly gross receipts at the following rates:

Banking or similar business, finance, securities and credit foncier business 3%
Insurance business:
- Life insurance 2.5%
- Insurance against loss 3%
Pawnshops 2.5%
Sales of immovable property in a commercial manner for profits 3%

4. Remittance Tax
Remittance tax applies only to profits transferred or deemed transferred from a Thailand branch to its head office overseas. It is levied at the rate of 10 percent of the amount to be remitted before tax, and must be paid by the remitting office of the offshore company within seven days of the date of remittance.

However, outward remittances for the purchase of goods, certain business expenses, principle on loans to different entities and returns on capital investment, are not subject to an outward remittance tax.

The tax does not apply to dividends or interest payments remitted out of Thailand by a company or partnership; these are taxed at the time of payment.

Section 70 of the Revenue Code addresses income paid to foreign juristic persons. When a company or partnership incorporated under a foreign law and not carrying on business in Thailand receives “assessable income” paid either from or in Thailand, the payer is usually required to deduct income tax at a rate of 15 percent of the gross remittance.

In 1992, standard deductions, which used to vary with each type of income, were abolished, making the flat 15 percent rate effective on all assessable income except for dividend income, on which the 20 percent withholding tax was reduced to 10 percent.

There is no withholding tax on capital gains or on the share of profit paid to foreign investors in mutual funds, if in the SET. Physical remittance of funds may not interest tax liabilities, which may be incurred by making book entries.

Personal Income Tax
Every person, resident or non-resident, who derives assessable income from employment of business in Thailand, or has assets located in Thailand, is subject to personal income tax, whether such income is paid in or outside of Thailand. Exemption is granted to certain persons, including United Nations’ officers, diplomats and certain visiting experts, under the terms of international and bilateral agreements.

Personal income tax is applied on a graduated scale as follows:

Net Annual Income (in Thai Baht)	Tax rate
0 - 50,000	0 %
50,001 - 100,000	5 %
100,001 - 500,000	10 %
500,001 - 1,000,000	20 %
1,000,001 - 4,000,000	30 %
4,000,001 up	37 %

Individual taxpayers are divided into 5 categories:

Natural person
An ordinary partnership
A group of persons which is not a legal entity
A person who dies during a tax year
An undistributed estate

Individuals residing for 180 days or more in Thailand during any calendar year are also subject to income tax on income from foreign sources if that income is brought into Thailand during the same taxable year of their being resident in Thailand, even though they may be aliens and are not staying in Thailand under an Immigrant Visa.

Exchange control laws stipulate that all foreign exchange earned by a resident, whether or not derived from employment or business in Thailand, and brought into Thailand, must be sold to or deposited with commercial banks within 15 days, unless permission for an extension is granted.

A non-resident is a Thai or an alien who resides in Thailand for one or more times but for less than a total of 180 days in any calendar year. His tax liability is limited to the income received

From a post or office held in Thailand;
from a business carried on in Thailand;
from a business of an employer in Thailand;
from a property situated in Thailand;

whether such income is paid within or outside Thailand and whether or not he brings it into Thailand.

Payment of personal income tax may be made under one of the following methods:

Withholding Income Tax
Payment of tax before its due date
Payment of tax on its due date
Joint tax liability
Assessment by tax authorities

If a tax payer has overpaid his tax by either direct payment or tax deduction, he is entitled to request a refund from Revenue Department on the excess amount, provided that he files a claim for the refund (form 'Khor 10') with the tax authority within 3 years.

Personal income taxes and tax returns must be filed prior to the end of March of the year following the year in which the income was earned.

A standard deduction of 40 percent, but not in excess of 60,000 Baht, is permitted against income from employment or services rendered or income from copyrights.

Standard deductions ranging from 10 percent to 85 percent are allowed for other categories of income. In general, however, taxpayers may elect to itemize expenses in lieu of taking standard deductions on income from sources specified by law.

Other types of taxable income and the rate of standard deduction include:

Interest, dividends, capital gains on the sale of securities: 40% percent, but not exceeding 60,000 Baht.
Rental income: 10 - 30 percent depending on type of property leased.
Professional fees: 60 percent for income from medical practice, 30 percent for others.
Income derived by contractors: 70 percent.
Income from other business activities: 65 percent to 85 percent, depending on the nature of the business activity.

Only three children per taxpayer family qualify for the child allowance, but this limitation applies only to children born on or after January 1, 1979.

Therefore, in counting the number of children, each child born prior to 1979 can also be counted. For example, a taxpayer with four children born before 1979 continues to qualify for an aggregate allowance of 60,000 Baht. A fifth child, born in 1979 or thereafter, would not qualify.

Additional taxes can be assessed within a period of 2 years from the date of filing a return and up to 5 years for tax evasion or tax refund. If an individual fails to file a return, the assessment officer may issue summons within a period of 10 years the filing due date.

Treaties to Avoid Double Taxation
Thailand has treaty agreements to eliminate double taxation with the following countries:

Austria	Finland	Japan	Norway	Spain
Australia	France	Laos	Pakistan	Sri Lanka
Bangladesh	Germany	Luxembourg	Philippines	Sweden
Belgium	Hungary	Malaysia	Poland	United States
Canada	Indonesia	Mauritius	Romania	Vietnam
China	Israel	Nepal	Singapore	Switzerland
Czech Rep.	Italy	Netherlands	South Korea	United Kingdom
Denmark	India	New Zealand	South Africa

The treaties generally place tax payers in a more favorable position for Thai income than they would be under the Revenue Code, as profits will only be taxable if the taxpayer has a permanent establishment in Thailand.

Other Taxes

Petroleum Income Tax
The Petroleum Income Tax Act replaces the Revenue Code in imposing a tax on income from firms which own an interest in a petroleum concession granted by the Thai government or which purchase oil from a concession holder for export. Net income from petroleum operations includes revenue from production, transport or sale of oil and gas, the value of has delivered to the government as a royalty and the proceeds of a transfer of interest in a concession. The tax rate for most operators is not less than 50 percent and not more than 60 percent of profits.
Stamp Tax
The Revenue Code contains a Stamp Duty Schedule listing transactions subject to stamp tax. Rates depend on the nature of the transaction, and fines for failure to stamp documents are very high.

With a few exceptions, only instruments executed in Thailand are subject to stamp duty. However, the provisions in the Revenue Code also require persons who import certain instruments be subject to stamp duty even though they are executed outside Thailand, to pay the stamp duty once these instruments are brought into Thailand.
Excise Tax
Excise tax is levied on the sale of a number of goods, including petroleum products, tobacco, liquor, soft drinks, cement, electrical appliances, and automobiles.
Property Tax
Owners of land and/or buildings in designated areas may be subject to annual tax levies by the local government. Under the Local Development Tax Act of 1965, rates per unit vary according to the appraised value of the land. However, land for the personal residence of the owner animal husbandry, or land cultivation is exempted from this Act. For land taxable under the House and Land Tax Act of 1932, which is based on the value of the land and buildings or any other improvements, annual tax is levied at the rate of 12.5 percent of the assessed assumed rental value of the property, and only owner-occupied residences are exempt.

Tax Courts
Tax cases are considered different in nature from normal civil cases. The Tax Court Establishment and Procedure Act, effective since 1985, provides special and accelerated procedures for tax litigation. Tax courts have authority to judge the following cases:
Appeals against the decision of tax officers or committees
Disputes over the claims of state tax obligations
Disputes over tax refundsDisputes over rights or obligations concerning tax collection obligations.
Disputes over the right or obligations regarding tax collection obligations
Other cases made subject to the Act as prescribed by other laws.

Please note: Decisions of the tax courts may be appealed to the Supreme Court within one month after the date of the judgment.

Tax Clearance Certificates
As of May 1991, requirements for tax clearance certificates have been significantly reduced. Provided that an individual demonstrates compliance with tax laws, he is not required to secure a tax clearance certificate within 15 days before leaving the country. Employees of businesses incorporated under foreign law, but which carry out business in Thailand, must acquire a certificate from the Revenue Department before departure. The requirement is not enforced if the individual has been in Thailand less than 90 days in any tax year and has not received any income.

Other Tax Reforms
Thailand is actively pursuing reform of its tax system and taxes on industrial imports have already been sharply reduced. Over the past five years, the government has consistently moved to reduce import tariffs on machinery and raw materials. In August 1999, the government introduced a number of measures to encourage investment, including tariff cuts. One - hundred and forty-six tariff lines - 85 percent of the total number - had their rates cut to 0 - five percent, notably on raw materials and capital goods.

Customs Duties
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 5 to 60 percent.

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 value of the goods determined with reference 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.

As a part of the BoI’s Investment Promotion Program, BoI-promoted companies are eligible to receive exemptions or reductions from import duties on raw and essential materials as well as machinery.

Further, companies that belong to the BoI’s Investor Club Association (IC) are eligible to use the IC’s Raw Materials Tracking System. For companies that take advantage of this service, release of raw materials can be done in three hours or less.

Export duties are imposed on only a few items, including rice, hides, skins and leather, scrap iron or steel, rubber, teak and other kinds of wood.

Two exceptions to the obligation to pay customs duties apply to the importation of machinery, equipment, and materials for the use by:

Oil and gas concessionaires and their contractors.
Certain companies promoted by the BoI

Import and Export Regulations
There are certain regulations governing the import and export of goods into and out of Thailand. However, trade in certain items is restricted through outright prohibition, the imposition of duties or licensing requirements. Thus, the export of unmilled rice and rice bran is expressly prohibited. Other goods, such as rubber, timber, rice, hides and skins, silk yarn, and iron scrap may be sold to foreign buyers, but duties must be paid on them. To export certain items, such as gold, cattle, or sugar, one must secure a license from the relevant government authorities.

Import controls
The Ministry of Commerce designates classes of goods that are subject to import controls, which usually take the form of permission and licensing. Although these controls are being liberalized, at present more than 50 classes of goods require import licenses from the Ministry of Commerce. These categories are frequently changed through notifications from the ministry. A license to import any of the specified items must be secured from the Ministry of Commerce. Application for the license must be accompanies by a supplier’s order, confirmation, invoice, and other pertinent documents.

In addition to the Act imposing the above controls, a number of goods are subject to import controls under other laws. These include:

The import of modern drugs requires prior licensing from the Food and Drug Administration under the Ministry of Health.
The Minerals Act stipulates that without appropriate permission, an importer is prohibited from importing tungsten oxide and tin ores and metallic tin in quantities exceeding two kilograms.
The Ancient Monuments, Antiques, Objects of Art and National Museum Act provides that antiques or objects of art, whether registered or not, must not be delivered without permission from the Director General of Fine Arts.
The Armation, Ammunition, Explosives, Fireworks and Imitation Firearms Act bars people from producing, buying, using, ordering or importing armations or ammunition or explosive devices unless they have the appropriate license from the Ministry of Interior.
The Cosmetic Act stipulates that for the purpose of protection of public health, any importer of controlled cosmetics must provide the name and location of the office and the place of manufacture or storage of the cosmetics, the name category, or kind of cosmetics to be imported, and the major components of the cosmetics.

Export Controls
The Act Controlling the Importation and Exportation of Goods authorizes the Ministry of Commerce to subject products to export control. At present, close to 50 items require such control.

Certain goods require export licenses under other laws, such as seeds, trees, and leaves of tobacco. Certain goods, such as sugar and rice, are subject to export licenses under the Export Standard Act, which aims to ensure that such exports are of the set quality.

Exporters of agricultural commodities may find that membership in trade associations is mandatory, and they may impose their own regulations for membership.

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