Income Tax Act of Thailand

1. Business Taxation in Thailand:

Corporate income tax (CIT) is a direct tax levied on a juristic person which is established under
Thai or foreign laws and carries on business in Thailand or which derives certain types of income
from Thailand. The term 'juristic person' (hereinafter referred to as a ‘company’ or collectively as
‘companies’) means a juristic company or partnership operating in Thailand. The term also
includes any unincorporated joint venture and any trading or profit-seeking activity carried on by
a foreign government or its agency or by any other juristic body incorporated under a foreign law.
Resident companies are those incorporated in Thailand. They are subject to CIT on taxable net
profits by taking into account their worldwide income for each 12-month accounting period. The
ordinary fiscal year for tax submission is for the 12-month period ending 31 December. However,
with the consent of the Director-General of the Thai Revenue Department (TRD), they may choose
a different accounting period for the purpose of determining taxable income.
Resident companies subject to CIT in Thailand can access Thailand’s DTAs. Although Thailand
is not a member of the OECD, the Commentaries on the Articles of the OECD Model Tax
Convention on Income and Capital play an important role as a secondary source for interpreting
Thailand’s DTAs.
The OECD’s Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations
also assist in the interpretation of Thai legislation.
Non-resident companies are those incorporated under foreign laws. They are treated as carrying
on business in Thailand if they have a ‘taxable presence’ in Thailand. A taxable presence generally
refers to either a fixed place through which the business is carried on (e.g., an office, a branch, or
any other physical place of business) or an agent acting on behalf of the non-resident company to
carry on business in Thailand (e.g. an employee, a representative, or a go-between). To this effect,
the concept of a ‘taxable presence’ under the Thai Revenue Code (TRC) is broader than that of a
‘permanent establishment’ (PE) under a DTA.

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 2. Thailand’s Corporate Taxable Income and Rates:
The corporate tax rate is 20% of net profits, calculated by deducting all expenses and costs of
goods sold from revenue arising from the business during the fiscal accounting period. Petroleum
companies pay tax at a rate of 50% of net profits.
A branch of a foreign company pays income tax at the corporate income tax rate, but only on Thai-
source profits. A branch also is liable for a 10% levy on profits remitted or booked to the foreign
head office. If profits cannot be determined, an official assessment may be made based on 5% of
gross receipts at the discretion of the Thai tax authorities, i.e. gross receipts-based tax is not an
option taxpayer may elect.
The standard company tax rate may be reduced, e.g. under the incentives for IHQs/ITCs/ROHs
described in 1.5, above, and in the following cases:
• A bank deriving profits from an International Banking Facility pays a 10% rate for “out-
out” deposits (and is exempt from the 3.3% specific business tax). The remittance tax on
“out- out” loans (i.e. funds borrowed abroad to be lent abroad) extended by an International
Banking Facility licensed bank is 0% for profits derived from a loan business.
• For accounting periods beginning on or after 1 January 2017, a SME is exempt on the first
THB 300,000 of net profits and will pay tax at a 15% rate on net profits over THB 300,000
and up to THB 3 million, and a 20% rate on net profits over THB 3 million. (For accounting
periods beginning on or after 1 January 2015 but no later than 31 December 2016, a 10%
rate applied to all net profits exceeding THB 300,000.)

To be eligible for these benefits, the paid-up capital of the SME must not exceed THB 5 million,
and its gross income may not exceed THB 30 million.
However, where a SME has been granted a tax audit exemption due to the 2016 tax amnesty law
and such tax audit exemption status has not been withdrawn by the Revenue Department, for the
accounting period beginning on or after 1 January 2017 but no later than 31 December 2017, the
first THB 300,000 of the SME’s net profits will be exempt, and a 10% corporate tax rate will apply
on the net profits exceeding THB 300,000 (for the accounting period beginning on or after 1 January
2016 but no later than 31 December 2016, the SME’s total net profits were exempt.
Tax incentives offered by the BOI for SMEs (including a temporary exemption from corporate
income tax) are described under 1.5, above.

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3.1 Taxable Income:
Taxable income includes business profits and passive income (i.e. dividends, interest, royalties,
capital gains, etc.). Corporate income tax is computed by taking into account all revenue arising
from a business carried on in an accounting period, and deducting all allowable expenses.
The tax rates on payments made to a firm not engaged in business in Thailand vary depending on
the type of fees. A foreign firm generally is taxed on dividends, interest from securities investments
and capital gains. Tax must be withheld at source by the Thai payer and remitted to the Revenue
Department.
The following are exempt from corporate income tax:
• Dividends paid by a Thai limited company to another Thai company with no cross
shareholding, where the recipient holds at least 25% of the total shares with voting rights
of the payer for three months before and after the dividends are received or is a listed
company. Similar rules apply to profits from joint venture activities. In all other cases, a
Thai company is required to include only 50% of dividends received from a Thai limited
company as taxable income, provided the relevant investment is held for at least three
months before and three months after receipt of the dividends;
• Dividends received by a Thai company from foreign affiliates, provided the foreign profits
were subject to an income tax at a rate of at least 15% (headline tax) and the Thai parent
company held at least 25% of the shares in the foreign subsidiary for at least six months;
and
• Income that benefits from tax incentives.

3.2 Capital Gains:

Capital gains are treated as ordinary income and taxed accordingly for corporate income tax
purposes.
Capital gains paid to overseas recipients are subject to a 15% withholding tax, although an
exemption may apply to gains derived by investors from certain tax treaty countries.
3.3 Double Taxation Relief:
 Unilateral relief:
Thailand grants a foreign tax credit for tax paid on foreign income, which may be set off against
Thai income tax, up to the amount of Thai tax payable.

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  Tax treaties:
Thailand has an extensive tax treaty network. Treaties generally provide for relief from double
taxation on all types of income, limit the taxation by one country of companies’ resident in the
other and protect companies’ resident in one country from discriminatory taxation in the other.
Thailand’s treaties generally contain OECD-compliant exchange of information provisions.
There are no specific requirements or documentation needed to claim the benefits of an applicable
tax treaty. However, in practice, a revenue officer may request documentation (e.g. the tax
residency certificate, etc.). There are 60 countries in Thailand’s tax treaty network.

3.4 Other Taxes on Business:

 Petroleum companies:
Income derived from petroleum operations is subject to the Petroleum Income Tax Act. It is levied
on net profit adjusted under the conditions specified by the Petroleum Income Tax Act and profit
distributions outside Thailand. Petroleum income is taxed at various rates up to the maximum rate
of 50%. The income tax rate is reduced to 10% of net taxable profit derived from the gross revenue
on the export and import of fuel oil not less than THB 2 billion per annum into or between duty
free zones
 International transportation companies:
International transportation companies are subject to a 3% tax on gross receipts derived from
freight fees on exports and airfare collected in Thailand. Other types of income still are subject to
net profit-based tax.

4. Thailand’s withholding taxes:

 Interest:
Interest paid to a nonresident company is subject to a 15% withholding tax. Interest paid on loans
from a bank, financial institution or insurance agency is taxed at a 10% rate if the lender is resident
in a country that has concluded a tax treaty with Thailand, but interest is exempt if it is paid by the
government or a Thai financial institution on loans granted under a law intended to promote
agriculture, industry or commerce.
A 1% advance withholding tax applies to interest payments made by a corporation to a corporation
carrying on business in Thailand, or by a corporation to a financial institution for interest on

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debentures or bonds, except for interest on deposits or negotiable instruments paid between banks
or finance companies. A 10% advance withholding tax is deducted on interest paid to a foundation
or an association.

 Royalties:
Royalties or fees paid within Thailand are treated as normal assessable income for tax purposes.
Royalties paid to another Thailand company are subject to a 3% advance withholding tax, which
may be credited against the final corporate income tax due for the accounting period. Royalties
paid abroad are subject to a 15% withholding tax on the gross amount. Tax treaties may reduce the
withholding tax charged on royalties paid for the use of copyrighted literary, artistic or scientific
works, etc.
 Other Taxes:
Rental payments paid to a nonresident are subject to a 15% withholding tax. Payers of fees for a
variety of professional services (e.g. medical, architectural, engineering or legal fees) to
nonresident companies must deduct a 15% withholding tax and remit it to the Revenue
Department, unless the rate is reduced under a tax treaty. Capital gains paid to overseas recipients
are subject to a 15% withholding tax, although an exemption may apply to gains derived by
investors from certain tax treaty countries.

5. Thailand’s Indirect Taxes:

An indirect tax is a tax that is paid to the government by one entity in the supply chain, but it is
passed on to the consumer as part of the price of a good or service. The consumer is ultimately
paying the tax by paying more for the product. An indirect tax is shifted from one taxpayer to
another.

5.1 Value Added Tax (VAT):

VAT applies to all retailers, wholesalers, manufacturers, importers, producers and others supplying
goods and services, unless exempt under the Revenue Code. Firms with turnover not in excess of
THB 1.8 million per year are exempt from VAT, as are certain other business activities, including
the sale and import of raw agricultural products and related goods; the sale and import of
newspapers, magazines and textbooks; and basic services, such as health and educational services,
domestic transport and the leasing of immovable property. Goods exempt from import duty and

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destined for export-processing zones are included in this category, along with research and
technical services, labor contracts, auditing and legal services.
Certain businesses are excluded from VAT; instead, they pay specific business tax.
The standard VAT rate is 10%, although this rate has been reduced to 7% until 30 September 2017.
There are two components: the standard 6.3% VAT and the municipal tax of 0.7%. The municipal
tax is collected at the provincial level. A zero rate applies on a range of activities, including the
export of goods and services wholly used outside Thailand, i.e. any services rendered in Thailand
and used abroad.
A VAT-registered person must issue a tax invoice for each transaction; the invoice must include
specific details about the nature and value of goods sold or services supplied, as well as the amount
of VAT due.
The VAT period is the calendar month. VAT is payable by the 15th day of the month following
the month in which VAT liability arises. If a self-assessment of VAT output is required on the
payment of certain income to nonresidents (primarily services or royalties used in Thailand), VAT
is payable on the seventh day of the month following the month of the payment. A company that
is exempt still must pay VAT on services and products it purchases, but is not entitled to a VAT
refund. Such a company does not have to collect VAT on its sales or file monthly VAT forms. An
exempt company, however, may do so voluntarily and thus may be entitled to a VAT refund if
registered for VAT purposes.
A person that is liable to VAT in Thailand must register for VAT purposes. The VAT registrant
may request VAT consolidation of headquarters and branches.

5.2 Real Estate Tax:

The municipalities levy a house and land tax and a local development tax. The house and land tax
is imposed annually on the owners of a house, building structure or land that is rented or otherwise
put to commercial use, at a rate of 12.5% of the actual or assessed annual rental value of the
property. The local development tax, also an annual tax, is imposed on the owner of land or the
person in possession of the land, with the rate depending on the appraised value of the property,
as assessed by the local authorities.
The Thai Cabinet has approved the repeal of the house and land tax and the local development tax,
and their replacement by a new land and building tax as from 2018. Persons liable to the new tax
will be the owners of land or buildings and persons in possession of state land or buildings, and

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the tax base will be the appraisal value of the land and buildings. The maximum rate will depend
upon the type of land, but rates are expected to range from 0.2% to 5%; the actual tax rates will be
announced by royal decree.

5.3 Stamp Duty:

Stamp duties are payable on most documents filed by companies with the Government agencies
or entities and on official documents of the company, including transfers of land, leases, stock
transfers, debentures, mortgages, life assurance policies, annuities, Powers of Attorney,
promissory notes, letters of credit, cheques, etc. Stamp duties are levied on instruments and not on
transactions or persons. For the purposes of Stamp Duty, an instrument is defined as any document
chargeable with duty under the TRC. The Stamp Duty rules are contained in Chapter VI of Title
II of the TRC.
Examples of stamp duty are as follows: 0.1% on leases, the hire of work, transfers of
shares/debentures, loans (capped at THB 10,000), etc.

5.4 Customs and Excise Duties:

In general, under Thai Customs law, importers and exporters are required to file a customs
declaration, including supporting documents (e.g. invoice, packing list, etc.), at the port of entry
for customs clearance purposes. For importation, before the imported goods can be released from
the port, the importer is required to pay customs duty, import VAT (currently at the rate of 7%)
and other taxes (if any). Depending on the nature of the imports, and regardless of value, the
importers may need to obtain a permit or license to facilitate clearance of prohibited or restricted
goods (e.g. drugs, medical devices, etc.).
The customs clearance process in Thailand generally relies on self-assessment by the importer; the
Customs officer generally will rely on the information or documents submitted by the importer.
The price of obtaining quick clearance of the imported goods, however, is that importers will be
randomly audited by the Post-Clearance Audit Bureau of the Customs Department on a regular
basis.
Regarding the export control of dual-use items (including transit and transshipment), the MOC has
announced an integrated export control system, which is expected to apply as from January 2018.
After the implementation, Thai exporters of controlled dual-use items will need to obtain export
approvals (licenses) from the MOC prior to the physical export of dual-use items. The trial version

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of e-Trade Management on Dual-Use Goods (e-TMD), a system that supports the export controls,
also has been announced and is expected to be fully launched in January 2018.

6. Thailand’s Individual Taxes:

Individuals is Thailand generally are subject to personal income tax, withholding tax on passive
income and inheritance tax, and are required to make social security contributions.
6.1 Residence:
An individual who is present in Thailand for 180 days or more in a calendar year is deemed to be
a Thai resident for tax purposes.
6.2 Individual Taxable Income and Rates:
 Taxable income:
All individuals who receive assessable income arising in Thailand are liable for personal income
tax, whether or not they are resident and regardless of where the income is actually paid.
A Thai tax resident is liable to tax on income from sources in Thailand, as well as on income
derived from foreign sources that is brought into Thailand in the same year it is derived
(repatriation in later years is exempt from personal income tax). Similarly, foreign capital gains of
individuals are treated as income only if remitted into Thailand in the same year derived and the
individual is a Thai tax resident. A nonresident is subject to tax only on income from sources in
Thailand.
Taxable income includes employment income, business income and investment income, as well
as income from a broad range of activities. It includes income in cash and in kind. Benefits
provided by an employer are treated as taxable income, including rent-free housing, cars and
drivers provided for personal use and any tax paid by the employer on behalf of the employee.
Taxable income is divided into the following eight categories:
• Income from personal services rendered to an employer;
• Income from employment, positions, commission fees or services rendered
• Income from goodwill, copyrights, franchises, other rights, annuities or income in the
nature of annual payments derived from a will or court judgment;
• Income from dividends; interest on deposits with banks in Thailand; income from shares
of profits or other benefits from a company, partnership or mutual fund; payments received
as a result of a reduction of capital; bonuses; increased capital holdings; gains from the

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 amalgamation, acquisition or dissolution of companies or partnerships; and gains from the
transfer of shares or partnership holdings;
• Income from the letting out of property under hire or hire-purchase contracts;
• Income from liberal professions (e.g. law, medicine, engineering, architecture,
accountancy, etc.);
• Income from construction and other work contracts; and
• Income from business, commerce, agriculture, industry, transport or other activities not
specified above.

Deductions and reliefs:

A personal allowance of THB 30,000 is available to a taxpayer and his/her spouse and a THB
15,000 allowance is available for each dependent child, up to a maximum of three children.
Married persons filing separately each may claim 100% of the child allowances. For wage earners,
there also is a deduction of 40% of gross income, up to a maximum of THB 60,000. The same
deduction and ceiling apply to income derived from copyrights. Deductions between 10% and 30%
are available on income from the letting out of property, depending on the type of property.
Taxpayers caring for elderly parents are granted a deduction of THB 30,000 per year. Taxpayers
are allowed an exemption of up to THB 15,000 on health insurance premiums they provide for
their parents. Deductions of up to 10% of income are allowed for donations to registered charities.
A deduction of THB 60,000 is available for each disabled spouse, parent, child or other dependent.
Some of the allowances described above would be increased for the 2017 tax year, under a MOF
proposal approved by the Thai Cabinet; official notification for the changes to become effective is
pending.

Rates:
The personal income tax rates range from 0% to a top marginal rate of 35%. An individual’s first
THB 150,000 of net income (income after the personal standard deduction and allowances)
generally is exempt; for individuals older than 65, the exemption amount increases to THB
190,000 of assessable gross income.
Tax normally is withheld from payments of dividends to resident and nonresident individuals at a
rate of 10%, except for dividends paid by certain companies benefitting from a BOI incentive
regime, which may be subject to a 0% rate.

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Tax is withheld from payments of interest to individuals at 15% if the payer is a Thai bank or Thai
financial institution. Withholding taxes paid generally can be credited against a resident taxpayer’s
final income tax liability.
A flat withholding tax of 15% applies to earnings from the transfer of bonds and other corporate
debt instruments, rental fees and income paid to nonresidents for the provision of services.

Taxable income (THB) Tax Rate (%) Tax Amount Accumulated Tax
0 – 150,000 Exempted – –
150,001 – 300,000 5 7,500 7,500
300,001 – 500,000 10 20,000 27,500
500,001 – 750,000 15 37,500 65,000
750,001 – 1,000,000 20 50,000 115,000
1,000,001 – 2,000,000 25 250,000 365,000
2,000,001 – 4,000,000 30 600,000 965,000
4,000,001 and over 35

 Special expatriate regime:

A reduction in the progressive income tax rates to a 15% flat rate generally is applicable to
assessable income an expatriate receives through the hire of labor by a qualifying ROH or IHQ in
Thailand that provides management, technical or support services to its branches or associated
enterprises in Thailand and abroad. Expatriates are entitled to these benefits while working in
Thailand for a period not exceeding four consecutive years, or up to eight or 15 years in certain
cases. Additional requirements may be applicable in order to apply the 15% flat rate.
A reduction in the progressive income tax rates to a 15% flat rate is applicable to assessable income
an expatriate receives through the hire of labor by a qualifying ITC. The reduced rate is available.

6.3 Inheritance and Gift Tax:

Inheritance Tax Act applies to individuals or juristic entities that receive a legacy from a deceased
testator. Certain properties are subject to inheritance tax and only the value of a legacy that exceeds
THB 100 million obtained from each deceased testator together either once or on several occasions
is subject to inheritance tax at 10%. The rate is reduced to 5% if the heirs are ascendants or

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descendants of a deceased testator. A legacy received by the spouse of a deceased testator is
exempt from inheritance tax.
Items subject to inheritance tax include immovable property, securities, deposits, vehicles with
registration and financial assets, as set out in the relevant royal decree.
A gift given by a living person is subject to personal income tax under the TRC. Only the value of
a gift exceeding the prescribed threshold is subject to personal income tax at 5%, depending on
the type of gifts and donor. An exemption may be granted in certain circumstances.
A 5% gift tax is levied on the portion of a gift exceeding THB 10 million for any tax year that is
received from a person other than an ascendant, a descendent or a spouse; only the portion
exceeding THB 20 million will be taxable if the gift is received from an ascendant, a descendant
or a spouse.

6.4 Real Estate tax:

The municipalities levy a house and land tax and a local development tax. The house and land tax
is imposed annually on the owners of a house, building structure or land that is rented or otherwise
put to commercial use, at a rate of 12.5% of the actual or assessed annual rental value of the
property. The local development tax, also an annual tax, is imposed on the owner of land or the
person in possession of the land, with the rate depending on the appraised value of the property,
as assessed by the local authorities.
The Thai Cabinet has approved the repeal of the house and land tax and the local development tax,
and their replacement by a new land and building tax as from 2018. Persons liable to the new tax
will be the owners of land or buildings and persons in possession of state land or buildings, and
the tax base will be the appraisal value of the land and buildings. The maximum rate will depend
upon the type of land, but rates are expected to range from 0.2% to 5%; the actual tax rates will be
announced by royal decree.

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6.5 Social security contributions:
The employer and the employee are required to contribute 5% of monthly compensation (up to
THB 15,000) paid to the employee (i.e. the monthly contribution cap is THB 15,000 times 5% or
THB 750).
6.6 Compliance:
The tax year for individuals is the calendar year January to December.
A married couple may opt for joint or separate filing on all kinds of personal income. The spouses
may agree to file tax returns separately with respect to employment income and to file tax returns
jointly on other kinds of personal income.
Personal income tax returns must be filed by 31 March following the taxable year. The employer
withholds tax on employment income and pays it to the Revenue Department. Other withholding
taxes could be imposed at various rates, depending on the other types of income paid.

7. Foreign Tax Relief in Thailand:

For income derived from overseas foreign tax credits are allowed, subject to certain conditions, up
to the amount of Thai tax that would have been payable had the income been derived in Thailand.
The rules apply whether or not Thailand has a relevant DTA with the overseas country from which
the income is derived.

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 8. Conclusion:

The concept of tax was initiated with a view to generate government revenue in its very beginning
stage. In course of time it has been utilized for various purposes. One is to raise government
revenue for development and welfare programs in the country. Another one is to maintain
economic equalities by imposing tax to the income earners and improving the economic condition
of the general people. Taxation system help to encourage the production and distribution of the
products of basic needs and discourage the production and harmful ones and discourage import
trade and protect the national industries. After reviewing of Thailand’s taxation system, we can
see that Thailand’s taxation system is developed in a way that helps the government not only to
raise the revenue but also developing the economy. Thailand’s taxation system is developed in a
way that protect the local industry as well as welcoming foreign investment. Their taxation system
focused more on individual tax and a little less on company. This should be ideal taxation system
because if a country focus on individual tax, then they will be able to collect more revenue and
also can control inflation. If a countries corporate tax rate is flexible, it can attract more investment
and development of economic condition which Thailand’s taxation system has. So we can say
Thailand’s taxation system is far better than most of the developing countries specially than
Bangladesh.

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