Confused About Payroll Tax and Bonuses in Thailand? Here’s What Employers Need to Know

The year-end period is coming up as we approach the last month of the year. For many employers in Thailand, it’s the time to double-check bonus payments, tax withholding, and other payroll obligations.

It is also crucial to ensure your calculations are accurate and compliant because the country’s minimum wage was updated in July 2025.

This guide will walk you through everything you need to know regarding payroll taxes and year-end taxes. You will also get practical tips that you can apply right away to stay organised and compliant.

Thailand’s Personal Income Tax System

Here is a quick refresher on how personal income tax works in Thailand.

The first THB 150,000 of an individual’s income is completely tax-exempt. Beyond that, tax rates increase from 5% up to 35%. It depends on the total annual income.

Let’s take an example. If an employee earns THB 500,000 a year:

• The first THB 150,000 is tax-free
• The next THB 150,000 is taxed at 5%
• The succeeding THB 200,000 is taxed at 10%

These rules apply to Thai nationals and foreign employees who are earning income sourced in Thailand. If you have foreign staff, they are only considered tax resident if they have stayed in Thailand for at least 180 days.

Year-End Bonuses in Thailand

In Thailand, employers are not legally required to provide a 13th-month salary or year-end bonus. This is different from countries like the Philippines or Indonesia, where such payments are mandated by law. Here, bonuses are entirely discretionary and depend on each company’s policy.

So why do many Thai companies still give bonuses? It comes down to competition and employee expectations. In a fast-moving talent market like Thailand’s, year-end bonuses have become a common and valued benefit. Many employees even factor expected bonuses into their personal financial planning, which only implies that bonuses are a strong retention tool.

But here’s an important catch. Once you establish a bonus policy and follow it consistently, it can become legally binding. Thailand’s Supreme Court has repeatedly ruled that when employers pay bonuses for several consecutive years (especially using the same formula), it creates an implied contractual obligation.

So in practice, if you have paid annual bonuses for three straight years using the same calculation method, employees may have the legal right to expect it.

How Bonuses Are Taxed in Thailand

When you pay an employee a bonus, it is treated as regular income for that month. This means you must recalculate withholding tax by combining the bonus with their usual monthly salary.

Here’s the simplified process.

1. Add the bonus to the employee’s monthly salary.
2. Project this combined amount over 12 months to estimate the employee’s total annual income.
3. Apply Thailand’s progressive tax rates to this annual figure.
4. Subtract the tax already withheld year-to-date.
5. The remaining amount is the tax you must withhold from the month in which the bonus is paid.

Let’s look at a simple example:

If an employee who normally earns THB 40,000 per month receives an THB 80,000 bonus in December, their taxable income for that month becomes THB 120,000. But you can’t just tax that THB 120,000 using monthly brackets.

You need to recalculate the entire year’s expected tax, then adjust the December withholding to ensure the total annual tax is accurate.

A common mistake made by employers is treating bonuses as separate, standalone payments. Bonuses must be included in the annual tax calculation, and it’s your responsibility as the employer to make sure the correct total tax is withheld for the whole year.

Corporate Tax Implications of Paying Bonuses

At first glance, it may seem that bonuses increase your payroll expenses. But what you don’t immediately see in the picture is that they help lower your corporate tax. This is because employee bonuses are generally tax-deductible business expenses.

There is an exception. It is when your bonus policy was purely based on company profits. The Revenue Department may question whether the “bonus” is really employee compensation. So in such cases, they may consider it as a profit distribution (non-deductible).

Want to keep bonuses deductible? You need to ensure they are tied to clear and measurable factors, such as the following:

• Individual/team performance
• Length of service
• Achievement of specific targets or KPIs
• Company-wide performance criteria that are not purely profit-based

Corporate Tax Rates to Expect

Your corporate income tax rate will depend on the size of your business.

For SMEs (paid-up capital under THB 5 million and annual revenue below the SME threshold):

• 0% on the first THB 300,000 of net profit
• 15% on net profit up to THB 3 million

For larger companies:

• A flat 20% corporate income tax rate applies

Social Security Contributions and the Upcoming Welfare Fund

At present, employers in Thailand must contribute 5% of each employee’s wages to the Social Security Fund (employees also contribute 5%). These contributions are capped at THB 750 per month, based on the maximum salary base of THB 15,000.

Update on the Employee Welfare Fund

The Employee Welfare Fund, which was originally planned for implementation in 2025, has been postponed to October 1, 2026. (You can read more in our detailed guide here.) Once it launches, contributions will be as follows:

• Employers: 0.25% of wages
• Employees: 0.25% of wages
• Total monthly contributions will range from THB 37.50 to THB 75

Why This Matters

2026 may feel far off, but know that proactive companies are already adjusting their payroll systems, cash flow planning, and HR policies to prepare for the new requirements. If you are prepared as early as now, you can avoid last-minute compliance issues and your business will be updated with all regulatory changes when the fund goes live in 2026.

Personal Allowances That Reduce Tax Burden

Employees in Thailand can claim personal allowances to reduce their taxable income.

As the employer, it is recommended that you are fully knowledgeable of these allowances to show that you are looking out for their best interests. Here are the specific allowances that your employees can claim.

Key Allowances Employees Can Claim

Here are the standard personal allowances commonly applied.

• THB 60,000 for the taxpayer
• THB 60,000 for a non-working spouse
• THB 30,000 per child, for up to three children
• THB 30,000 per parent for employees who financially support their parents
• Additional deductions for life insurance premiums, provident fund contributions, and other approved savings schemes

Special Incentive for Hiring Overseas Thai Professionals (2025-2029)

Companies can enjoy a 50% corporate tax deduction until 2029 if they hire qualified Thai professionals who are returning from overseas.

Not only that you get highly skilled employees, but your overall tax burden is also significantly reduced.

Year-End Tax Filing Requirements and Critical Deadlines

One of the biggest changes this year is that e-filing is now mandatory for most withholding tax submissions (January 2025). Go fully digital if your business hasn’t fully adjusted yet.

Monthly Filing: PND.1

• E-filing deadline: 15th of the following month
• Paper filing deadline: 7th of the following month (only allowed under certain conditions)

Year-End Filing Requirements

Make sure that you submit the following documents needed for year-end filing:

1. PND.1 Kor (annual withholding tax return)
   1. March 8 via e-filing
   2. February 28 for paper filing
2. Form 50 Tawi (withholding tax certificates)
   1. Must be issued to all employees by February 15
   2. Employees need these certificates to file their personal income tax returns

Penalties for Missing Deadlines

Failing to file on time can lead to the following penalties:

• THB 300 to THB 2,000

• 1.5% monthly interest on any unpaid tax
• Automated red flags, as the Revenue Department now relies heavily on digital enforcement systems

Stay ahead of these deadlines to keep your business in good standing.

December Action Checklist for Employers

December is one of the busiest months for payroll teams. Follow this simple, structured checklist below to facilitate the process.

Reconcile Year-to-Date Withholding

Start by reviewing every employee’s total withholding tax for the year. Compare what you’ve already withheld with what should have been withheld based on their actual annual income.

Doing this step will help you identify corrections needed before the year concludes.

Calculate and Process Bonuses Early

As much as possible, finalise and pay out bonuses by mid-December. When you do this at the earliest time possible, it paves the way to the following:

• Include bonus withholding in your December PND.1
• Give yourself enough time to fix any calculation errors
• Ensure a smoother year-end reconciliation

Correct Under- or Over-Withholding

Use the December payroll cycle to adjust withholding.

Over-withheld? Reduce December’s withholding amount. Otherwise, catch up by withholding the remaining tax in December.

Adjustments are much easier to make now, rather than after closing the year.

Verify Employee Information

Double-check all employee records, including:

• ID numbers
• Legal names
• Current addresses
• Spouse and dependent details

Having errors in personal data causes delays in filing and issues for employees when preparing their tax returns.

Prepare Documents Early for the PND.1 Kor

Begin preparing your documents for the PND.1 Kor annual withholding tax return as soon as possible.

Do not wait until February. January is typically busier than expected.

Special Situations Requiring Extra Attention

Some employee scenarios call for more careful tax handling. Let’s discuss these situations one by one.

Employee Resignations or Terminations

When an employee leaves the company, genuine severance payments are tax-exempt up to 400 days of wages, capped at THB 600,000.

However, this exemption applies only to true severance. If a payment is actually a bonus or a disguised final incentive, the Revenue Department may treat it as taxable income.

Foreign Employees and the 180-Day Rule

For foreign staff, the 180-day tax residency rule is important. If they reach 180 days in Thailand during the year, they become tax residents. This means that they may owe Thai tax on worldwide income.

So here are three things you should do:

1. Check whether their home country has a double taxation agreement (DTA) with Thailand
2. Apply the treaty rules where applicable
3. Refer employees to your internal DTA resource or our detailed guide on DTAs

Minimum Wage Workers Receiving Bonuses

Employees who are earning minimum wage can unintentionally move into a taxable bracket when they receive bonuses.

Example:

A factory worker is earning THB 150,000 annually. He’s not paying income tax.

But if they receive a THB 30,000 bonus, their taxable income increases. This pushes them into the 5% tax bracket.

This is why it is important to communicate with affected employees so they understand why withholding tax applies in their case, even if they normally fall below the taxable income threshold.

Common Mistakes That Cost Money and Time

Even well-run businesses can encounter payroll problems if certain details are overlooked. Here, we share some of the most common mistakes that you may run into and tips on how to avoid them.

Ignoring the Move to Mandatory E-Filing

Many employers are still caught off guard by the Revenue Department’s strict shift to e-filing.

If your accounting team says, “We’ve always filed paper forms,” remind them that paper filing is no longer allowed for most businesses.

Set up your e-filing access and login credentials early, not right before a deadline.

Using Vague Bonus Policies

Check if there are ambiguous statements in your bonus policy like “Bonuses will be paid based on your performance in the company.” These call for legal disputes.

What should you do? Make your policy specific. Define clear eligibility criteria and explain how bonuses are calculated. The best option is to include clauses allowing adjustments or cancellation during economic downturns.

In short, put exact bonus policies on paper to protect both you as the employer and your employees.

Basing Bonuses Purely on Profit

Bonuses tied only to profits may be treated as profit distributions. These are not tax-deductible.

If you want to maintain deductibility, structure bonuses around measurable performance indicators, even if overall profit still influences the bonus pool.

Forget Record-Keeping Requirements

Businesses must maintain payroll documents, tax returns, employee contracts, and bonus calculations for at least five years.

Always assume that the Revenue Department can request these records anytime.

Failing to Issue Form 50 Tawi on Time

Employees rely on Form 50 Tawi to file their personal tax returns.

It’s best to issue these certificates on time to avoid employees getting frustrated because of this simple yet essential compliance requirement being delayed.

Moving Forward with Confidence

Managing payroll taxes and year-end compliance in Thailand doesn’t have to be stressful. The key is to prepare early, stay updated, and avoid leaving everything until late December.

The best time to take action is now.

• Review and refine your bonus policy
• Double-check your withholding tax calculations
• Make sure your e-filing system is fully set up and running

Consider partnering with professionals who specialise in Thai payroll and taxation. We, at Reliance Consulting Thailand, can help you build a transparent, compliant, and employee-friendly compensation system.