Thailand’s strategic location in the heart of Asia connects businesses to the fast-growing economies in the region. Besides enhanced regulations and streamlined government services, find out how businesses and foreign investors can benefit from the different aspects of Thailand’s tax regime.
Every company registered in Thailand must pay corporate income tax on the profits earned from doing business within and outside Thailand. Companies may include juristic companies and partnerships (including registered partnerships, limited partnerships, or unincorporated joint ventures). Branch offices, which are considered extensions of overseas headquarters, are also subject to corporate income tax on revenues earned within Thailand.
The standard corporate income tax rate in Thailand is 20 per cent. The tax will be imposed on your company’s net taxable profits based on its business or trading income, passive income, as well as capital gains.
However, if your company’s revenue is no more than 30 million baht and has a paid-up capital not exceeding 5 million baht, your company can enjoy reduced tax rates. This is because locally incorporated small and medium-sized enterprises (SMEs) are subject to progressive corporate income tax rates that may range between 0 to 20 per cent, depending on your SME’s profitability.
For instance, if your company has a paid-up capital of less than 5 million baht at the end of each accounting period and has a net profit between 300,000 and 3,000,000 baht, your tax rate will be 15 instead of 20 per cent.
Thailand’s Board of Investment offers tax breaks and exemptions for key business activities that are being promoted in Thailand. For assistance on these incentives, please refer to this link or contact us for outsourced taxation services.
If your company has located its regional headquarters in Thailand, you can further benefit from more attractive tax rates that are between 0 and 10 per cent. Your expatriate employees will also benefit from a fixed personal income tax rate of 15 per cent.
Value Added Tax (VAT)
Thailand levies a Value Added Tax (VAT) on the import of goods, and supply of goods and services. To support domestic economic activity, the VAT rate is currently reduced to 7 per cent (down from 10 per cent) until 30 September 2020, unless further extended by the government.
However, VAT only applies for companies with an annual turnover of 1.8 million baht or more. If your company is involved in specific activities such as the production of agricultural products, newspapers, healthcare or education services, certain professional services or cultural services such as libraries, museums and zoos, you will be exempt from VAT.
In addition, the Thai Revenue Department is working to implement VAT on foreign digital service providers. This means that they will be responsible for making VAT payments and filing VAT returns. Electronic platform operators will also be required to pay VAT on behalf of suppliers who are providing digital services through their platforms.
Specific Business Tax
Specific Business Tax (SBT) is another type of indirect tax in Thailand. Businesses that are excluded from VAT are likely to be subject to SBT, especially businesses dealing with banking, finance, securities, life insurance and pawn broking. For instance, if you operate a bank in Thailand, the interests, discounts, service fees and profits from foreign exchange that your business earns will be subject to 3 per cent SBT.
When making payments to Thai companies or individuals, tax must be withheld as a deduction from payments made to them for their services. This tax must be remitted to the Thai Revenue Department within seven days after the end of the month of payment. Different tax rates apply for different types of payments.
- Whether dividends are paid to another Thai company, a non-resident company or to an individual, dividends are subject to 10 per cent Withholding Tax.
- Interest paid to non-resident companies is subject to 15 per cent Withholding Tax.
- When you pay royalties to another Thai company, the royalties are subject to 3 per cent advance Withholding Tax. When you pay royalties to non-residents, the royalties are subject to 15 per cent Withholding Tax.
Thailand taxes both residents and non-residents on Thailand-sourced income. Individuals who are present in Thailand for 180 days or more in a calendar year are known as tax residents. Tax residents are taxed on foreign-sourced income only if the income is remitted into Thailand in the year that it was received.
Personal tax rates follow a progressive schedule that goes up to a top marginal rate of 35 per cent. This top-tier rate applies to individuals who earn 5 million baht in a year or more.
Your Trusted Partner for Incorporating a Company in Thailand
Foreigners who intend to establish a business presence in Thailand are advised to engage the services of a professional corporate services provider, especially if they need help with navigating Thailand’s tax regime.
Outsourcing taxation to a reliable corporate services provider enables you to optimize your taxes and keep your business tax-compliant while freeing up your time for more high value-added or lead-generating activities. A corporate services provider will also be able to provide corporate secretarial services, update your company’s governance procedures and liaise with the Thai government on any administrative issues pertaining to your company’s incorporation.
At Reliance Consulting, our taxation specialists implement tax planning strategies that work best for your organization. We will work with you to reduce existing tax liabilities for your business and help you stay on top of your tax obligations.
At Reliance Consulting, we offer a complete suite of solutions, from company registration and corporate secretarial services to outsourced accounting, audit, tax and other professional corporate services. To set up your local entity in Thailand or find out more, give us a call at +66 (0) 20 263 637 or email us at email@example.com to get started today.