Income Tax in Thailand

Individual - Taxes on personal income

Thailand taxes its residents and non-residents on their assessable income derived from employment or business carried on in Thailand, regardless of whether such income is paid in or outside Thailand. Residents who derive income from abroad are taxable on that income if remitted into Thailand in the year in which it is received.

Personal income tax rates:

The following personal income tax (PIT) rates are effective for assessable income of 2017 onwards.

Net income (THB*)	PIT rate (%)
0 to 150,000	Exempt
150,001 to 300,000	5
300,001 to 500,000	10
500,001 to 750,000	15
750,001 to 1,000,000	20
1,000,001 to 2,000,000	25
2,000,001 to 5,000,000	30
Over 5,000,000	35

* Thailand baht

Individual - Income determination

Employment income:

Both resident and non-resident individuals who receive assessable income by virtue of hire of service performed in Thailand, including salary, bonuses, gratuities, pensions, the monetary value of rent-free housing, the employer’s payment of income tax, or any other money, property, or benefits derived by virtue of hire of service, are subject to tax in Thailand, regardless of whether the income is paid within or outside Thailand. There are no concessions to foreigners or short-term residents.

Capital gains:

Most types of capital gains are taxable as ordinary income. However, the following capital gains are exempt from tax:

·        Capital gains on the sale of shares in a company listed on the Stock Exchange of Thailand, provided that the sale is made on the Stock Exchange of Thailand, and on the sale of investment units in a mutual fund.

·        Gains on the sale of non-interest bearing debentures, bills, or debt instruments issued by a corporate entity, except in the case where the bonds or debt instruments were sold for the first time at a price lower than their redemption price to an individual.

·        Gains on the sale of securities listed on stock exchanges in the Association of Southeast Asian Nations (ASEAN) member countries and traded through the ASEAN Link, excluding securities in the form of treasury bills, bonds, bills, or debentures.

Capital gains and investment income earned by a resident from sources outside Thailand are not taxable unless remitted to Thailand in the year of receipt.

Capital losses may not be offset against capital gains.

Dividend income:

Dividends received from a company incorporated in Thailand are subject to withholding tax (WHT) at a flat rate of 10%. A resident of Thailand receiving dividends from companies incorporated in Thailand may elect to exclude this income from the computation of income tax and waive the tax credit referred to in the Other tax credits and incentives section.

Dividends received by Thai resident individuals from foreign companies listed on the Stock Exchange of Thailand, and subject to the 10% WHT, are exempt from inclusion in their annual PIT returns.

Interest income:

Interest received from bank deposits, loans to finance companies, government bonds, debentures, and bills issued by a corporate entity is subject to WHT at a flat rate of 15%. Resident individuals may choose to exclude interest income from other income, in which case they pay the 15% WHT, or they may choose to include such interest income with other income and pay tax according to the PIT rates, in which case the tax withheld at source is credited against the tax liability.

The following income earned by a non-resident individual is subject to a final 15% WHT:

·        Interest on government bonds/debentures.

·        Difference between the redemption price and the initial sale price of government bonds/debentures (i.e. discount).

·        Gain on the transfer of government bonds/debentures.

Gifts:

PIT is levied on gifts given by persons who are still alive. The tax is collected on the assets or the amount given to parents, ascendants, descendants, spouse, or others based on the value of the gift that exceeds a prescribed threshold, which depends on the type of gift and donor. Assets or amounts given that do not exceed the threshold are exempt from tax.

The following gifts are exempt from PIT:

·        Income derived by a parent from the transfer of ownership or possessory right in an immovable property without any consideration to a legitimate child, excluding an adopted child, in the amount not exceeding THB 20 million throughout a tax year in respect of each child.

·     Maintenance income or gifts from ascendants, descendants, or spouse, in the amount not exceeding THB 20 million throughout a tax year.

·      Maintenance income derived under a moral obligation or gifts made in a ceremony or on occasions in accordance with established custom from persons who are not ascendants, descendants, or spouse, in the amount not exceeding THB 10 million throughout a tax year.

·        Income from gifts in the case where the person who receives the gifts will use them for religious, educational, or public benefit purposes according to the intention of the donors under the criteria and conditions referred to the Ministerial Regulations.

Gifts in excess of the above thresholds will be subject to PIT at the rate of 5% and will not need to be included together with other income when computing the annual PIT liability.

Exempt income:

Certain types of income are exempt from PIT. In respect of income from employment, money derived in the form of per diem, traveling expenses, and certain fringe benefits, such as medical treatment, are tax exempt. The exemptions also include maintenance income derived under moral obligation (see Gifts above), corpus of a legacy or inheritance (see Inheritance tax in the Other taxes section), and income of a mutual fund or from the sale of investment units in a mutual fund.

Furthermore, provided certain conditions are met, gains or benefits from registered provident funds, retirement mutual funds, long-term equity funds, and national saving funds, including amounts derived from insurance or social security funds, are also tax exempt.

In order to support low income earners and the aged, the first THB 150,000 of net income is tax exempt. For a resident who is 65 years of age or older, an exemption is granted on income up to an amount not exceeding THB 190,000.

Tax administration:

Taxable period

The taxable year is the calendar year.

Tax returns

All persons liable to tax are required to file a return no later than 31 March of the following year, except for individuals whose income from employment is THB 120,000 or less (for single persons) or THB 220,000 or less (for married persons) and in the case of having income from other sources (with or without employment income) THB 60,000 or more (for single persons) or THB 120,000 or more (for married persons).

Individuals engaged in most forms of business are also required to file a return of their income for the first six months of the year by 30 September and pay the tax due.

Each husband or wife earning income can choose to file their income tax return either separately or jointly with their spouse, whichever they prefer.

Payment of tax

Income tax is required to be withheld at source from payments of salaries, other employment benefits, and certain other categories of income. The balance of any tax due for a calendar year is payable at the time of filing the annual tax return.

Corporate - Taxes on corporate income:

Companies incorporated in Thailand are taxed on worldwide income. A company incorporated abroad is taxed on its profits arising from or in consequence of the business carried on in Thailand.

The corporate income tax (CIT) rate is 20%.

A foreign company not carrying on business in Thailand is subject to a final withholding tax (WHT) on certain types of assessable income (e.g. interest, dividends, royalties, rentals, and service fees) paid from or in Thailand. The rate of tax is generally 15%, except for dividends, which is 10%, while other rates may apply under the provisions of a double tax treaty (DTT).

Rates for companies with low paid-in capital and income

For accounting periods beginning on or after 1 January 2017, companies and juristic partnerships with paid-in capital not exceeding 5 million Thai baht (THB) at the end of any accounting period and income from the sale of goods and/or the provision of services not exceeding THB 30 million will be subject to tax at the following rates:

Net profit (THB)	Tax rate (%)
0 to 300,000	0
300,001 to 3 million	15
Over 3 million	20

Reduced rates for certain banking transactions

Banks are subject to tax at the rate of 10% on their profits derived from lending to non-Thai residents from foreign currency funds obtained from non-Thai sources (so-called ‘out-out' business).

Petroleum income tax

Taxation on income from petroleum operations is imposed on petroleum concessionaire companies by the Petroleum Income Tax Acts (PITA). Companies taxed under the PITA are exempt from taxes and duties on income imposed under the Revenue Code and under any other laws. The exemption applies so long as the company pays taxes and duties on income subject to the PITA or on dividends paid out of income subject to the PITA.

Petroleum companies are taxed at the rate of 50% of their annual net profit from petroleum operations, including profit from the transfer of their concession interests and other activities incidental to the petroleum operations. Deductions are allowed for ‘ordinary and necessary’ business expenses, as well as depreciation of capital expenditure, petroleum royalties, and other charges. Certain types of expenses are specifically disallowed for deduction, including interest.

The Petroleum Act (No. 7) 2017 (BE 2560) and the Petroleum Income Tax Act (No.7) 2017 (BE 2560) were enacted in June 2017.

The amendment to the Petroleum Act, which became effective on 23 June 2017, introduced two new alternative structures for oil and gas procedures. In the past, international oil companies could engage in exploration and production activities in Thailand only under a concession. While the existing law retains the concession option, this amendment introduced production sharing contracts and service contracts as alternatives for upstream oil and gas producers in Thailand.

Under the amendment to the PITA, effective from 23 June 2017, a production sharing producer is taxed at the rate of 20% of its annual net profit derived from petroleum business, including profits derived from the transfer of interests in the nature of rights, annuity, or any other recurring income as a consequence of such transfer which cannot be definitely determined.

On the other hand, petroleum companies under a service contract will not be taxed under the PITA but under the Revenue Code.

Income Determination:

Inventory valuation

Inventory is valued at the lower of cost or market price. Any recognised method of ascertaining the cost price may be used, but a change in the method may only be made with the prior approval of the Director-General of the Revenue Department.

Capital gains

There is no specific legislation governing capital gains. All capital gains earned by a Thai company are treated as ordinary revenue for tax purposes. Capital gains on the sale of investments derived from or in Thailand by a foreign company not carrying on business in Thailand are subject to a tax of 15%, withheld at source by the purchaser, unless otherwise exempt under a DTT.

The following income earned by a foreign company not carrying on business in Thailand is subject to 15% WHT:

·        Interest on bonds/debentures issued by state enterprises.

·    Difference between the redemption price and the initial sale price of bonds issued by the government, state enterprises, and specified institutions.

·        Gains on the transfer of bonds issued by the government, state enterprises, and specified institutions.

Dividend income

Dividends received from a Thai company by a company listed on the Stock Exchange of Thailand are exempt from tax. Dividends received by a non-listed company from other Thai companies are also exempt from tax, provided that the company receiving the dividends holds at least 25% of the total voting shares without any cross-shareholding in the company paying the dividend and that the shares have been held for at least three months before and three months after the dividends were received.

In other cases, where one Thai company receives dividends from another Thai company, one-half thereof is exempt from tax also on the condition that the shares have been held for at least three months before and three months after the dividends were received.

Dividends received from a company incorporated abroad are exempt from tax if the Thai company receiving the dividends holds at least 25% of the shares with voting rights of the company paying the dividends for a period of not less than six months before the date on which the dividends are received and the dividends are derived from the net profit in the foreign country taxed at a rate of not less than 15%. In the event that a ‘special law’ in a particular foreign country provides a reduced tax rate or exemption for the net profit, the limited company that receives the dividends is still eligible for the tax exemption.

The share of profits received by a Thai company or a foreign company carrying on business in Thailand from an unincorporated joint venture carrying on business in Thailand is exempt from tax.

Stock dividends

Stock dividends are taxable to the recipient as ordinary income.

Interest income

Interest is taxable as income on the accrual basis.

Royalty income

Royalties are taxable as income on the accrual basis.

Foreign income

Companies incorporated in Thailand are taxed on worldwide income. The foreign income received by a company incorporated in Thailand is taxable on the accrual basis. Double taxation is relieved by way of a credit against the tax chargeable in Thailand.

Corporate - Tax administration:

Taxable period

The tax year for a company is its accounting period, which must be of 12 months’ duration. However, it may be less than 12 months in the case of the first accounting period after incorporation, the accounting period of dissolution, or after approval for a change in the accounting period has been received from the Revenue Department and the Business Development Department.

Tax returns

The tax system is one of self-assessment. A company prepares and files its tax returns by the due dates and at the same time pays the taxes calculated to be due. The annual CIT return is due 150 days from the closing date of the accounting period.

Payment of tax

CIT is paid twice in each year. A half-year return must be filed within two months after the end of the first six months of an accounting period. The tax to be paid is computed on one-half of the estimated profit for the full accounting period, except for listed companies, banks, certain other financial institutions, and other companies under prescribed conditions where the tax is based on the actual net profit for the first six months. The balance of the tax due is payable within 150 days from the closing date of the accounting period, together with the annual tax return. Credit is given for the amount of tax paid at the half-year.

Tax audit process:

If, within a period of two years from the date of filing a tax return, the assessment officer has reason to believe that false or inadequate information has been declared in a return, the assessment officer has the power to issue a summons requesting the presence of the person responsible, or a witness, for examination, and to order either of them to produce accounts or other relevant evidence, provided that advance notice of seven days is given. The subsequent examination of the books and records is normally carried out at the company's offices if it is inconvenient to transfer all the documents to the tax office. After completion of the examination, the assessment officer has the power to adjust the amounts previously assessed or included in a return on the basis of the evidence, and issue a further assessment for tax together with penalties and surcharges, or adjust the amount of losses available for carry forward.

Tax audits may cover the previous five accounting periods from the date of filing a tax return with the approval of the Director-General if the assessment officer has evidence of an intention to evade tax or in the case of a claim for a refund of tax. However, under the Civil and Commercial Code, the Revenue Department can assess tax for up to ten years.

Statute of limitations:

The statute of limitations for tax is ten years.

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Note: Information placed here in above is only for general perception. This may not reflect the latest status on law and may have changed in recent time. Please seek our professional opinion before applying the provision. Thanks.