Thailand’s Tax system: An Overview of Laws and Procedures

Corporate Taxation in the Thai Tax System 

Corporate Income Tax

In the Thai Tax system, the usual corporate income tax is 20%, but small and medium enterprises (SMEs) benefit from a progressive scale contingent on net profits:

• Exempt for net profits up to THB 300,000
  (ap) 15% for net profits between THB 300,001 and THB 3 million
• 20% for net profits surpassing THB 3 million
  To qualify for reduced rates, a company’s paid-up capital can’t exceed THB 5 million at year’s end and annual revenue mustn’t surpass THB 30 million.

For international transportation companies with an office in Thailand, levies rely on 3% of gross earnings, not applying the standard CIT to net profits. They’re also exempt from tax on profit transfers.
Corporate taxation depends on residency. Thai-resident entities pay tax on worldwide earnings, whereas non-residents only on earnings sourced in Thailand. Foreign companies with a branch in Thailand are subject to a 10 percent branch remittance tax on repatriated profits.
Incentives and exceptions play a sizable role. The Board of Investment (BOI) and International Business Center (IBC) regime offer privileges for qualifying companies. BOI-promoted businesses can enjoy tax holidays ranging from three to eight years. IBCs benefit from a reduced CIT rate between three and eight percent, contingent on annual operating expenses.

Dividend Taxation

In the Thai Tax System, dividends distributed from one limited company to another may either be entirely exempt from corporate income tax or subject to a 50% reduction, provided certain conditions are met. Companies listed on the Stock Exchange of Thailand enjoy a complete tax exemption on dividend income. Additionally, any withholding tax applied to dividend distributions can be credited against the company’s corporate tax obligations for the corresponding fiscal year.
Enterprises with International Business Center status enjoy a full exemption on dividend income received from associated domestic and overseas affiliates for up to fifteen years.

Capital Gain and Carryforward of Tax losses 

Capital gains are taxed at the standard corporate income tax rate. There are no limits on using capital losses to offset profits under the Thai Tax System.
Net losses can be carried forward for up to five successive accounting years to offset profits. Yet firms benefiting from Board of Investment promotions adhere to extra rules – losses in a tax holiday period can only diminish profits from non-promoted activities within that same five-year exemption timeframe. Remaining unused losses post-holiday may be carried forward another five years. Critically, Thai law prohibits carrying losses back.

Tax Benefits for international Enterprises 

Multinationals operating in Thailand can benefit from foreign tax credits to deduct corporate taxes paid abroad from their Thai corporate tax liability subject to specific regulations.
Holding firms, for instance, may deduct dividends from foreign subsidiaries so long as they satisfy applicable norms of the Thai Tax System. Meanwhile, enterprises that have secured privileges from the Board of Investment can postpone taxes for staggered periods up to eight years, sometimes with added carveouts for strategic ventures.
Perhaps the most substantial reliefs come through the International Business Center mechanism. Companies operating underneath this framework see rates fall exponentially depending on local expenditures—8% for 60 million baht annually, 5% beyond 300 million, or a mere 3% above 600 million. Furthermore, IBCs benefit from a reduced 10% corporate income tax rate on dividends received from affiliated companies, in addition to withholding tax exemptions on dividend distributions made from treasury reserves to associated entities.
Employees working within an IBC structure in Thailand may also enjoy a reduced personal income tax rate of 15% or, in certain cases, an exemption, depending on their job function and remuneration package.

Tax year and Filing requirements for corporate tax compliance

As for compliance duties, the standard tax year spans 12 months in the Thai Tax System. Yet, the law makes exceptions such as the year of incorporation, when a company changes its accounting period, or in the event of dissolution, where a shorter tax year may be permitted.
Consolidated tax returns are not recognized for corporate income tax purposes in Thailand. Each company must independently file its own tax return.

Corporate Income Tax Filing and Payment Obligations

Taxpayers in Thailand must self-assess and make an advance corporate income tax payment for the initial six months of the tax year, commonly referred to as the half-year return. This report is due within two months following the completion of the first half of the tax year.
The full-year corporate income tax return falls due inside 150 days of the business’ financial year-end. While extension requests typically aren’t permitted, electronic submissions benefit from an added eight-day grace period.
Half-year tax payments can reduce the total liability computed on the yearly statement.

Individual taxation in the Thai Tax system 

Individual Income Tax in the Thai tax system

The Thai tax system employs a progressive personal tax regime with rates varying from five to thirty-five percent based on taxable earnings. As of January 2024, foreign earnings brought into the country by Thai residents is subject to taxation in the year it is brought into the country, regardless of the tax year in which it was earned.
Taxpayers benefit from several deductions, including mortgage interest, retirement contributions, life insurance premiums, and charitable donations. Personal allowances apply for taxpayers, spouses, and dependents.

Tax Year and filing Status for individuals 

In Thailand, personal income taxes follow the calendar year from January to December. Each person must submit their own return, though married couples may file jointly or separately. Additionally, spouses can report employment income separately but file a joint return for other earnings.
Employers must withdraw taxes from employees’ paychecks and remit the tax to the authorities on a monthly basis. Individual Taxpayers then submit an annual personal income tax return by March 31st and pay any remaining balances, facing penalties for delays. While extensions are rare, electronic filers get an extra eight days.

Withholding taxation in the Thai Tax system

Taxations of Dividends 

Dividends conveyed by a Thai business to another domestic business may face a 10% withholding tax, excluding exceptions under the Revenue Code or the Investment Promotion Act apply, permitting a diminished rate of 0% in specific cases. At times dividends are paid to a nonresident business, they are evaluated at a 10% withholding rate, which may be diminished under an appropriate double tax understanding (DTT). The identical 10% withholding tax applies to dividends gotten by both resident and nonresident people.

Interest Withholding tax 

Interest repayments made by a Thai business to another domestic business are generally subject to a 1% advance withholding tax. Yet, the Thai tax System does not apply this tax to interest repayments between banks or monetary establishments in the setting of deposits or negotiable instruments.
When interest is paid to a resident private person, it is liable to a 15% withholding tax, which can be dealt with either as a final tax or as an advance tax, permitting the taxpayer to credit it against their yearly individual income tax liability.
For nonresident companies and individuals, interest payments are taxed at a 15% withholding rate, unless a tax treaty provides for a reduction in a few instances.

Royalties in the Thai tax System 

Royalties paid by one Thai company to another are prone to a 3% advance withholding tax, which can later be credited against the company’s corporate income tax liability in some cases.
When royalties are paid to a resident individual, they are liable to withholding tax at progressive personal income tax rates, depending on the complete income earned by the recipient in some cases.
For nonresident companies and individuals, royalties are generally taxed at a 15% final withholding tax, unless an applicable tax treaty allows for a lower rate in certain situations.

Taxation of Technical Service Fees in the Thai tax system 

Taxation of Technical Service Fees Payments rendered by a Thai company for technical assistance provided by an additional domestic company are subject to a 3% withholding tax, which is able to be credited against the company’s corporate tax due.
Should these expenses be paid to a resident individual, the withholding tax is applied at progressive personal income tax rates, contingent on the taxpayer’s earnings level. Nonetheless, in definite situations, a 3% withholding tax may still apply.
For nonresident companies and individuals, technical service fees are typically subject to a 15% final withholding tax, unless a tax treaty presents a reduced rate.