Thailand is an emerging economic powerhouse in the Southeast Asia region. With an astounding growth and industrial transformation with the last half-century, Thailand has become one of the best locations for foreign investors to set up their businesses.
Along with its business-friendly environment, Thailand has a diverse corporate taxation system. This article walks you through the different types of corporate taxes in the country.
Corporate income tax
Businesses registered in Thailand are subject to corporate income tax. Corporate income tax imposes a tax on chargeable earnings from sources both within and outside of the country according to the regulations prescribed by Thailand’s Revenue Code. Entities liable for this tax include limited companies, registered ordinary or limited liability partnerships, associations, joint ventures, and the branch offices of a foreign parent company.
Each return is required to have an audited financial statement. The corporate taxpayers also need to pay fifty percent of the estimated income tax at the end of the eight-month each year. Companies that fail to pay the required taxes may be fined with the amount of twenty percent of the deficit.
Double tax treaties
First introduced back in 1963, double tax agreement involves both individual and juristic persons who are the contracting states’ residents. To qualify for the treaty benefits, the individual must stay in Thailand for a minimum of one hundred and eighty days every year, either successively or in aggregate. The juristic person, on the other hand, needs to be incorporated under Thailand’s Civil and Commercial Code.
This type of tax involving other nations only applies to income taxes, such as corporate income tax, personal income tax and petroleum tax. Specific business taxes, VAT, and others are not included.
Value-added tax or commonly known as VAT was introduced back in 1992. It involves the sale of goods or services provisions imported or supplied into the country. The current rates are seven percent and zero percent with some VAT exemptions. It is an indirect tax imposed on the value-added on every manufacturing and distribution phase. Hence, this tax impacts manufacturer, service providers, retailers and wholesalers, and importers and exporters.
Businesses exempted from VAT include cultural services, charitable services, religious firms and services necessary for life and social welfare maintenance, such as health care sectors, educational sectors and domestic transportation. VAT payers need to pay the tax and submit a VAT return every month, either on or before the fifteenth day of next month.
Specific business tax
Businesses with value-added which are hard to define are subject to the specific business tax. Examples of such companies include banking, life insurance, finance and real estate. These businesses are considered to be beyond the VAT system. Hence, VAT is not imposed on them. This type of tax is calculated on gross receipts of each month, excluding the municipal tax.
When taxpayers pay VAT, one-ninth of its amount goes to the municipal tax. When they pay the specific business tax, on the other hand, the municipal tax will be paid at the amount specified by Thailand’s government.
Stamp duty tax
Unlike most taxes which are taxed on transactions or persons, stamp duty tax is imposed on instruments. These instruments are prescribed in Thailand’s Revenue Code. Examples of such instruments include promissory notes, powers of attorney and bills of exchange.
If the execution of the instrument is within the country, the stamp duty will be due within fifteen days following the date of execution. On the other hand, if the instrument performance is outside of the country, the stamp duty will be due within thirty days following the instrument arrival in the country.
Customs duty tax
Custom duty tax is imposed primarily on import products and certain export products, as specified by the Customs Tariff statute. As a participant of the GATT and WTO, Thailand adopts standards and policies according to the GATT codes when deciding on the customs price.
Company tax for Thai and foreign businesses
A local company in Thailand generally pays tax at thirty percent of the net revenue. But some businesses are entitled to a reduced rate. On the other hand, a foreign company carrying on a business in the country; be it a branch office or an agent, needs to pay thirty percent tax on the revenue generated from companies in Thailand.
However, foreign companies that do not carry on business in the country are not subject to withholding tax on some income categories generated in Thailand. The rates of withholding tax can be decreased further or exempted, depending on the income types according to the DTA’s provision.
Thailand currently concludes a tax treaty agreement with forty-nine nations, including Australia, Bahrain, Canada, Indonesia, Japan, Malaysia and Singapore.
Seeking professional help from accounting service providers in Thailand
Considering the diverse corporate taxes for businesses in Thailand, it is advisable for foreign investors, especially startups, to seek the help of experts from reputable accounting service in Thailand to ensure regulatory compliance and better tax management.