Withholding tax or WHT in Thailand refers to a deduction from payments made to the suppliers who offer services. Withholding tax also applies to dividend and interest payments. The applicability of withholding tax and its rate depends on the nature of the services offered.
Rates of international payments withholding tax in Thailand are stated in Section 70 of the Revenue Code, as lowered or exempted by Thailand Double Tax Agreement. Here is what you need to know about international payments withholding tax rates in Thailand.
Withholding rates under Thailand local tax regulation
Under Section 70 of the Revenue Code, when a payer in the country pays a particular income type to a corporate entity created under foreign rule and not carrying business in the country, the said payer should deduct WHT from the payment made. The withheld tax should then be remitted to the Department.
The particular income payments types and their corresponding withholding tax Thailand rate are as follows:
- International payments of share or dividend of revenues income: 10% WHT
- International payments of services earnings, rights or royalty earnings, interest earnings, capital gains earnings, property rental profits and income from professional services: 15% WHT
Additionally, Royal Decree issued under the Thailand Revenue Code stated that there should be tax exemption under the law to eligible persons according to the Double Taxation Avoidance Agreement. Hence, the WHT rates are subject to the Double Tax Agreement’s prescriptions, which may lower or exempt the WHT rates required by Section 70 of the Revenue Code.
Withholding tax rates as decreased or exempted by Thailand Double Tax Agreement
Thailand Double Tax Agreements or DTAs are generally prescribed as follows:
- International payments of services earnings:
The Double Tax Agreement Business Profits Articles stated that tax is only payable in the country of residence. Thus, there will be an exemption from the 15% WHT under Section 70.
- International payments of interest income:
If the interest income payment is to an insurance company or financial institution in the DTA country, there will be a reduction of 15% WHT. On the other hand, if the interest income payment is not to these entities in the DTA country, there will be no 15% reduction.
- International payments of rental of property earnings:
If the income is paid for renting an immovable property located in Thailand, no reduction of WHT will be made. However, if the income is paid for the rental of movable property located in the country, the WHT rates will be specified in the Royalty Article for the Equipment Royalty’s payment.
- International payments of professional services fee:
The Independent Services Articles in the DTAs stated something similar to the Business Profits Articles. Hence, there will be an exemption from the 15% WHT.
- International payments of capital gains earnings:
If the capital gains earnings are taken from an immovable property’s alienation located in Thailand, no reduction of the 15% WHT will be made. If the capital gains incomes are taken from the alienation of property in the country other than the above, then there will be an exemption from the 15% WHT. Similarly, if the capital gains income is taken from the alienation of shares in a company in Thailand, there will be an exemption from the 15% WHT.
- International payments of rights or royalty income:
DTAs that specify one same tax rate for distinct types of royalty payments in the DTA will have no reduction of the 15% WHT. In contrast, DTAs which specify distinct tax rates for every type of royalty payment in the agreement will have 5% WHT if the payment is for a Copyright Royalty, 8% WHT if the payment is for a Patent Royalty, 10% WHT for a Know-How Royalty, and 8% WHT for an Equipment Royalty.
Submission of the deducted withholding tax
The withheld tax will be paid to the Thailand Revenue Department within the seventh day of the following month. For instance, a payment made on the 28th of August 2020 to a supplier will need to give the withheld tax to the Revenue Department by the 7th of September 2020.
Late submission penalty
The fine for late submission includes THB 100 within the first seven days, and THB 200 after seven days. An extra penalty of 1.5% of the outstanding amount will be calculated every month.
Seeking advice from competent withholding tax services provider in Thailand
To ensure accurate and legally compliant WHT calculation and deduction, business owners should hire a professional withholding tax services agency. To choose the best withholding tax services provider, consider the agency’s dependability, trustworthiness, industry expertise, and pricing model.