Thailand’s Revenue Department, along with eleven banks, has recently launched the new e-Withholding Tax system. This system was introduced as part of the Department’s persistence on digital information to improve taxpayers’ convenience.
The eleven participating banks include Bangkok Bank, the Bank for Agricultural and Agricultural Cooperatives, Kasikornbank, Krungthai, Krungsri, Mizuho Bank (Bangkok branch), TMB, Sumitomo Mitsui Banking Corporation, Siam Commercial Bank, Thai Standard Chartered, and the Land and Houses Bank.
What is an E-withholding Tax System, and How Does it Work?
E-Withholding Tax system is the Revenue Department’s new system that attends to the needs of the people who are in the process of reporting the tax withheld amount, both the individual responsible for withholding tax and the taxpayer whose tax is withheld. The system utilizes information technology to incorporate financial technologies for greater convenience and ease. This system decreases the number of steps required in the process for every relevant party applying the Department’s new normal policy and D2RIVE strategy that all sectors, business operators, and people worldwide must abide by.
The system comprises four parties:
- Banks (system service providers)
- The Revenue Department
Payees will make payments through a bank together with the necessary information. The banks will issue an electric invoice to both the payee and payer once it receives the payment. Withholding tax will be applied to the payee. Afterwards, the amount of withholding tax will be handed over to the Revenue Department within four working days following the date the bank gets the money. The Revenue Department will then issue the payer with an electronic receipt.
If the withholding tax amount is absent, payers can submit extra remittance via the system. Proof of withholding tax certificate can be verified at the Revenue Department’s website at any time.
If withholding tax is remitted electronically for some payment types made from 1st October 2020 through 31st December 2020, the rate will be lowered from three per cent to two per cent. Under the law, banks will serve as the agent to remit and deduct withholding tax to the Department on behalf of a legal partnership or company.
A legal partnership or company that wishes to remit withholding tax electronically are required to present the following:
- The company’s or legal partnership’s tax identification which is necessary to remit the withholding tax to the Department
- The recipient’s name or tax identification number
- The paid assessable income’s amount and type, including VAT amount, if any.
- The withholding tax amount to be remitted or deducted to the Department
What are the Benefits of the E-withholding Tax System?
The e-Withholding tax system makes services more convenient to the taxpayers. Typically, taxpayers need to submit tax filings and prepared documents as proof for an intermediary like financial institutions to carry out the withholding tax process.
Apart from lessening steps in processing numerous tax-related operations, the system decreased costs by removing storage or document delivery needs. Reducing restrictions in terms of lost documentation and improving transparency in the deduction process of money received for the withholding tax are the system’s additional benefits.
Moreover, the e-Withholding tax system sends tax information and transfers money to a bank providing the service in one-step, unlike the current system wherein the individual liable to withhold tax needs to file a certificate of withholding tax and keep the documents’ copy as evidence every time, as well as preparing an annual withholding tax summary and submit it to the Revenue Department every year.
What is the E-withholding Reduction Criteria?
The two per cent withholding tax reduction is only applicable to legal partnerships or companies for certain payment types and some payment recipients, as stated under the Thai Revenue Code.
The kinds of eligible payments are assessable income from the following:
- Rendered services like commission or brokerage fees – accessible under the Revenue Code’s Section 40(2)
- Royalties, goodwill, copyrights, and other rights – accessible under the Revenue Code’s Section 40(3)
- Liberal arts professions, such as engineering, law, and architecture – accessible under the Revenue Code’s Section 40(6)
- Contracts of work related to essential materials the contractor offer – accessible under the Revenue Code’s Section 40(7)
- Hire work remuneration, discounts, prizes, and benefits from sales promotions and other similar services, excluding public entertainer remuneration, transport charges, non-life insurance premiums, and advertisements
Types of qualified recipients include:
- Legal partnerships and companies in Thailand, except for any income-producing associations or foundations and any associations or foundations under the Revenue Code’s Section 47(7)(b)
- Individual liable for personal or corporate income tax who lives or conducts businesses in the country, except for any income-producing associations or foundations and any associations or foundations under the Revenue Code’s Section 47(7)(b)
Getting Help from a Professional Accounting Services Provider in Thailand
Professional accounting services in Thailand helps companies enhance their financial management and avoid legal penalties due to accounting errors. Many Thailand accounting firms also offer withholding tax, payroll, audit, and assurance services. They have a team of accounting and financial experts who stay up-to-date with current legal changes and ensure that the company complies with the changes.