An aspect of taxation that can be quite intricate in Thailand is withholding tax – a system where a third party withholds and remits taxes on behalf of the taxpayer, often managed through accounting services in Thailand.
It is applicable to salaries, rents, and royalties, among others. Knowing your responsibilities as a taxpayer and understanding the processes for withholding tax ensure that you adhere to Thai tax laws and prevent possible penalties.
Withholding Tax or WHT is a deduction from payments given to the company’s service providers. This also applies to the payment of interests and dividends.
Withholding tax rates are dependent on the income type and tax status of the recipient. Bear in mind that not all outward payments are subjected to WHT.
Payments to service providers amount to 1000 THB and payments less than 1000 THB to long-term contractors, such as telephone and internet companies, are subject to withholding tax. Exceptions include payments to non-taxpayers such as BOI companies and governmental organizations.
The Revenue Department announced that companies registered for e-filing will get an additional eight (8) days to submit their tax returns. This incentive will be valid until 31 January 2024.
The Department also introduced Ministerial Regulation No. 389 on 13 March 2023, which extends the reduction of withholding tax. This is to encourage people to use the e-Withholding Tax system that was announced in January 2023. The reduced tax rate will be 1.0% instead of the usual rates of 5.0%, 3.0%, or 2.0% (depending on the type of payment) if you make payments using the e-Withholding Tax system from 1 January 2023 until 31 December 2025. The updated rate applies to certain payments made to companies and partnerships in Thailand but not to foundations, associations, and individuals.
A company is required to submit tax returns in the following situations.
It covers companies that derive income in Thailand even if they do not have headquarters, employment, or representatives in the country. They are covered by Revenue Code Sec. 40, which means they are still subject to an income tax.
For foreign companies with parent headquarters located in countries where Thailand has a Double Taxation Agreement (DTA), the rate of withholding tax may be lower. For instance, the existing DTA between Thailand and Germany means that the income derived on interest is reduced to zero if the lender is a German bank. In the occasion that the Thai company’s stock is sold by a German firm, the capital gains are not subject to any levy.
This refers to a company with a branch in Thailand, as well as a representative, employee, or a go-between stationed in the country. The foreign company is covered by Revenue Code Sec. 40.
Apart from the withholding tax, international companies with businesses in Thailand would have to pay corporate income tax. The rate is 20% of the net profit. However, they can compute the amount of tax withheld and count it as a credit against their income tax.
When computing the tax rate, the net of VAT is used.
If the company pays a net rent of 100,000 Baht with a net VAT rate of 7%, the total VAT would be 7,000 Baht. You add that amount to your net rental income, and you get the total amount of 107,000 Baht.
The withholding tax is computed from the gross amount of 107,000 Baht. With the 5% tax rate from rental income, the total tax withheld is 535 Baht.
| Types of Income | WHT |
|---|---|
| Employment income | 5 - 35% |
| Ship Rental Charges | 1% |
| Professional fees/Services | 5% if paid to a foreign business with no permanent headquarters in Thailand 3% if paid to a Thai business or a foreign company with permanent headquarters in Thailand |
| Public entertainer remuneration - Thai resident - Non resident |
5% 5 – 35% |
| Advertising fees | 2% |
| Royalties | 3% |
| Dividends | 10% |
| Interest | 1% |
| Fees for advertising | 2% |
| Rents and Prizes | 5% |
When making payments to vendors, organisations should consider withholding tax obligations that affect both parties involved. In vendor transactions, the base payment amount is subject to withholding tax, which creates a cascade effect where the tax paid on the initial amount becomes taxable itself. This creates two distinct responsibilities:
Organisations can employ two methodologies to calculate the final payment amounts and associated tax obligations the Single Iteration Method or the Perpetual Gross-up Method.
For example, consider a consulting service contract with a value of THB 8,000 and a 15% withholding tax rate.
We calculate the tax obligations sequentially. First is the primary tax calculation. THB 8,000 * 15% = THB 1,200. Then the tax on tax computation of THB 1,200 * 15% = THB 180.
And then, the computation of the final payment goes like this: THB 8,000 + THB 1,200 – THB 1,200 – THB 180 = THB 7,820. The vendor will receive THB 7,820. The total tax withheld amounts to THB 1,380.
This is more sophisticated than the first one. The first step is calculating the perpetual rate: 100 / (1 – 15%) = 117.65%. Next, determine the grossed-up amount by multiplying THB 8,000 and 117.65%, which equals THB 9,412. Then, the withholding tax is applied: THB 9,412 – (THB 9,412 * 15) = THB 8,000.
Using this method ensures that the vendor receives exactly THB 8,000 after tax deductions. The organisation handles all the tax obligations.
All businesses in Thailand are required to submit their income tax returns to The Revenue Department within the seventh day of the succeeding month when the payment was made. For instance, if the payment was made on Sept. 16th, 2023, the withholding tax should be submitted to The Revenue Department by Oct. 7th, 2023.
In an effort to further digitalize Thailand’s tax system, the Revenue Department has announced through Direct-General’s Notification No. 438, released on Sept. 21, 2024 (BE 2566), that starting in 2024, all Thai personal income withholding tax returns (Form PND1 and Form PND1 Gor) will need to be submitted electronically through the department’s e-Filing system, e-Withholding Tax, and Withholding Tax Service System-SVS.
This new regulation will come into effect for employment income falling under Section 40(1) and (2), such as salaries, bonuses, and commissions, paid to employees from Jan. 1, 2024 onwards. Consequently, beginning in February 2024, employers will be required to submit personal income tax withholding tax returns for their employees’ employment income using the electronic systems mentioned above.
In cases where employers are unable to file the returns via these systems and wish to submit hard copies of the return forms to the Revenue Department, they will also need to provide a letter explaining the necessity for filing the tax returns in paper format.
The income payer must file the return and submit the amount of tax withheld to DROs or District Revenue Offices within seven (7) days of the following month upon payment.
Use the appropriate reporting form for a specific type of income and payee.
| Types of Income | Payee | Tax Form |
|---|---|---|
| Section 40(1) and 40(2) | Personal | PND 1 |
| Section 40(3) and 40(4) | Personal | PND 2 |
| Section 40(5) to 40(8) | Personal | PND 3 |
| All type of Income | Corporate | PND 53 |
Thailand has established Double Tax Agreements (DTAs) with the following 61 countries to prevent double taxation and encourage international trade and investment.
| Armenia | Hungary | Poland |
| Australia | India | Romania |
| Austria | Indonesia | Russia |
| Bahrain | Israel | Seychelles |
| Bangladesh | Italy | Singapore |
| Belarus | Japan | Slovenia |
| Belgium | Korea | South Africa |
| Bulgaria | Kuwait | Spain |
| Cambodia | Laos | Sri Lanka |
| Canada | Luxembourg | Sweden |
| Chile | Malaysia | Switzerland |
| China | Mauritius | Taipei |
| Cyprus | Myanmar | Tajikistan |
| Czech Republic | Nepal | Turkey |
| Denmark | Netherlands | Ukraine |
| Estonia | New Zealand | United Arab Emirates |
| Finland | Norway | United States of America |
| Germany | Oman | Uzbekistan |
| Great Britain and Northern Ireland | Pakistan | Vietnam |
| Hong Kong | Philippines |
We can help you understand and manage withholding tax in Thailand, making sure you follow the rules and pay the right amount.
Reliance Consulting, a business services company, provides expert guidance to help you navigate the complexities of withholding tax in Thailand. We will work with you to make sure that you understand your obligations, follow the appropriate rules, and pay the correct amount of tax.
Our goal is to simplify the process and minimize your tax liabilities. Whether you are a foreign company conducting business in Thailand or a local entity making payments to service providers, we offer support every step of the way.
Businesses that fail to submit tax returns within the deadline will be fined. The penalty is 100 Baht within the first week after the deadline date and 200 Baht after the first week. They will also be charged with an additional penalty each month, calculated as 1.5% of the unpaid amount.
The withholding tax or WHT is a deduction given on payments to suppliers for the services provided. Withholding tax also applies to dividend and interest payments. The applicability of withholding tax and its corresponding deduction rate depends on the nature of the services offered.
Withholding tax deduction may also be incurred on remittances made to suppliers abroad. Nations with a double tax treaty with the country have distinct applicable rates.
In Thailand, not every outward payment is subjected to withholding tax. It only applies to expenses more than 1,000 THB and expenses less than THB 1,000 wherein a long-term agreement existed, such as internet or telephone bills.
Thailand has DTAs with 61 countries, including China, Mauritius, Taipei, Cyprus, Myanmar, Tajikistan, the Czech Republic, Nepal, Turkey, and many more. The complete list can be found here.
When filing for withholding income tax return or P.N.D.1, taxpayers are asked to provide the following:
Yes. However, the Thailand Revenue Department answers questions through letters. The letter should detail the tax questions, and the answer obtained from this process is known as “ruling”.
The ruling is a letter written by individuals with tax issues and want to consult with the Revenue Department to obtain official answers. Here is how to get the Department’s ruling:
Nevertheless, the ruling is not considered the law and only a legal opinion provided by the Revenue Department’s legal team. Therefore, taxpayers are not obligated to abide by it.
In certain cases, people having tax problems could ask an official verbally.
A withholding tax certificate is a document confirming that a certain amount of tax has been withheld by the payer from the payee’s income. It serves as proof of tax payment and can be used by the payee to claim tax credits when filing their tax return.
Reliance Consulting Co. Ltd. in Thailand is a member firm of international accounting network firm of Santa Fe Associates International (SFAI), based in Santa Fe, New Mexico, USA. SFAI is a multinational professional service company specializing in accounting services, auditing, tax, corporate legal consulting, enterprise risk and financial advisory.
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The year-end period is coming up as we approach the last month of the year. For many employers in Thailand,
Thailand has the highest household debt rate in Southeast Asia, and around 8 in 10 Thai people are at risk
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The year-end period is coming up as we approach the last month of the year. For many employers in Thailand,
Thailand has the highest household debt rate in Southeast Asia, and around 8 in 10 Thai people are at risk
