Is Thailand tax free?

I – Corporate tax obligations in Thailand

1. What is Corporate Income Tax (CIT)?

Corporate Income Tax is the principal tax levied on businesses in Thailand. It applies to all companies registered in Thailand, as well as foreign companies that derive income from sources within Thailand. The standard CIT rate is 20% of net profits, whether Thai-registered or foreign corporations earning income domestically. However, certain promoted industries may qualify for full CIT exemptions of up to eight years through the Board of Investment, aimed at prioritizing strategic sectors like technology and green energy.

2. Withholding taxes

In addition to Corporate Income Tax, businesses face withholding tax on payments like dividends and interest. Withholding tax rates vary, usually from 1% to 15%, depending on the recipient’s income source and residency status. Companies must retain this tax from payments and remit it to the Thai Revenue Department.

II – Individual Taxation in Thailand

1. Thailand’s Personal Income Tax System

For individuals, Thailand uses a progressive personal income tax structure with rates from 0% to 35% based on earnings. The current tax brackets for residents are:

• Up to 150,000 THB: Not taxed
• 150,001 to 300,000 THB: 5%
• 300,001 to 500,000 THB: 10%
• 500,001 to 750,000 THB: 15%
• 750,001 to 1,000,000 THB: 20%
• 1,000,001 to 2,000,000 THB: 25%
• 2,000,001 to 5,000,000 THB: 30%
• Over 5,000,001 THB: 35%

Foreigners staying in Thailand over 180 days annually become residents taxed on worldwide income. Notably, since January 2024, Thailand introduced tax reform requiring residents to report income transferred to Thailand from 2024 onwards.

2. Expatriate tax benefits

Expatriates holding visas like long-term residence are eligible for exemptions on untransferred foreign earnings. This visa particularly benefits retirees or digital nomads with high foreign income by excluding their offshore pay from taxes.

III – VAT and Specific Business Tax

1. What Is Value Added Tax (VAT)?

VAT is a critical component of Thailand’s taxation system, applying to both goods and services alike. The standard VAT rate sits at 7%, and businesses exceeding 1.8 million baht in annual revenue must enroll in VAT filing. VAT is submitted on a monthly basis, requiring companies to report both output VAT collected on sales and input VAT paid on purchases. Surplus input VAT can either be rolled over or refunded depending on circumstances.

Certain transactions exempt from VAT, such as exports, favor businesses involved in international trade.

Specific Business Tax (SBT)

In industries where VAT fails to apply, like banking, real estate, and finance, companies face Specific Business Tax (SBT) instead. The SBT rate varies by industry, typically charging financial services around 3.3%.

IV – Property and Land Taxes

1. Property Tax

Thailand enforces a Land and Building Tax on both landowners and building owners alike. The levy fluctuates based on usage. For instance:

• Residential property incurs 0.01% to 0.03%.
• Commercial property pays 0.3% to 0.7%.

Appraisals determine these taxes, assessed on property value to be paid annually.

While foreigners are commonly restricted from owning land in Thailand, they can purchase condominiums under the Condominium Act if maintaining less than 49% of total condominium space. In property ownership cases, foreigners still must pay relevant transfer taxes, possibly including stamp duties, withholding taxes, and transfer fees.

V – Social Security Contributions

Both employer and employee contribute 5% of an employee’s wage to the Social Security Fund, topping out at 1,500 baht per month for salaries of 15,000 baht or more. These funds finance healthcare, pensions, and unemployment benefits for workers. Larger companies shoulder more of the financial burden to provide a social safety net for citizens.

VI – Double Tax Treaties

1. How do double taxation treaties function?

Thailand has over 60 bilateral agreements preventing the same income from incurring taxes in both Thailand and another nation. For instance, a French person working in Bangkok may qualify for French tax credits already paid. Treaties also exempt or decrease rates for certain income types, like dividends and pensions. This ensures expatriates still benefit from tax relief while living abroad.

VII – Digital Filing Systems

Most taxes require online submissions through Thailand’s digital platform. Personal income, corporate profits, VAT, and withheld sums utilize the Revenue Department’s e-filing site. It simplifies compliance for taxpayers, enabling registration, returns, and payments electronically. Individual forms cover salaries on PND 90 or PND 91. Businesses use PP30 for VAT or PND 50 for yearly corporate taxes. The system modernizes tax administration through accessible paperless procedures.

Conclusion

While Thailand does impose taxes like income tax and VAT on individuals and companies, it offers significant incentives—especially for overseas investors and expats. The tax breaks granted by the BOI and advantageous double taxation agreements render Thailand an alluring place for both living and working. By comprehending and following Thailand’s tax regulations, people and businesses can benefit from the nation’s competitive tax landscape while fulfilling their lawful duties.

The complexities of Thailand’s tax code, however, require cautious maneuvering. With sufficient understanding, one can maximize the fiscal perks while remaining entirely adherent to the law. The incentives make the country a desirable spot for investment and residence, so long as its intricate tax system is navigated prudently using specialized knowledge of the rules and exemptions.