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The legal framework of taxation in Thailand
Tax deduction in Thailand is governed primarily by the Revenue Code B.E. 2481 (1938), which sets out the structure for personal and corporate income tax, as well as other forms of taxation such as value-added tax (VAT), specific business tax, and stamp duty. The Revenue Department, under the Ministry of Finance, is the principal authority responsible for tax collection and enforcement.
The Thai tax system is primarily based on the principle of source-based taxation. This means that any income derived from or in Thailand is subject to Thai tax, regardless of the residence of the taxpayer. However, residents of Thailand, defined as individuals residing in the country for 180 days or more in a calendar year, are taxed on both Thai-sourced and foreign-sourced income that is brought into Thailand.
Tax deductions in Thailand are critical for both individuals and corporate taxpayers, as they directly reduce the amount of taxable income and, therefore, the ultimate tax liability. The availability and scope of these deductions are strictly regulated under the Revenue Code, ministerial regulations, and notifications issued by the Director-General of the Revenue Department. This article provides an in-depth legal analysis of tax deductions available to individual and corporate taxpayers in Thailand as of the 2024/25 fiscal year.
Table of Contents
Tax deduction in Thailand for individuals
Tax deduction in Thailand : deductible expenses on income
Thai law categorizes assessable income under eight classifications according to Section 40 of the Revenue Code. This is key for tax deduction in Thailand. The deductibility of expenses depends on the type of income received. For income falling under Categories (1) and (2), which include employment income and income from hiring services, taxpayers may deduct fifty percent of the income, with a ceiling of one hundred thousand baht. Regarding income categorized under Category (3), which encompasses goodwill, copyrights, and other intellectual property rights, the same fifty percent deduction applies, subject to the same cap. Alternatively, taxpayers may opt to deduct actual expenses, provided they can submit proper documentation.
In the case of income from rentals, which is classified under Category (5), the deductible portion varies between ten percent and thirty percent, depending on the type of property rented. For income falling under Categories (6), (7), and (8), which include liberal professions, contractual work, and business income, the deductible percentages range from thirty to sixty percent, contingent on the income or business type. When supported by sufficient documentation, taxpayers may instead choose to deduct actual expenses.
Tax deduction in Thailand : allowable allowances and tax reliefs
After applying standard deductions, Thai tax residents may claim personal and specific allowances as provided under Sections 47 bis and 48 of the Revenue Code. This is key for tax deduction in Thailand.
- Personal allowances
Each taxpayer is entitled to a personal allowance of sixty thousand baht. A similar allowance of sixty thousand baht is granted for a non-income-earning spouse. For each legitimate child of the taxpayer or the spouse, an allowance of thirty thousand baht is provided, with no maximum limit. Additionally, for each legitimate child born from 2018 onwards, starting from the second child, an extra allowance of thirty thousand baht is granted. Adopted children also qualify for a thirty thousand baht allowance each, up to a maximum of three children. In situations where both legitimate and adopted children are present, the total allowance applies to a maximum of three children combined.
Each parent of the taxpayer or the spouse qualifies for a thirty thousand baht allowance, provided they are financially dependent. A sixty thousand baht allowance is granted for each disabled or incapacitated family member under the taxpayer’s care. The same amount is also applicable for each non-family member who is disabled or incapacitated and cared for by the taxpayer. Furthermore, any resident individual who is sixty-five years of age or older enjoys a personal income tax exemption on income not exceeding one hundred ninety thousand baht per annum.
- Specific allowances and deductions
Taxpayers may claim life insurance premiums paid for their own benefit, up to one hundred thousand baht annually, provided that the policy term is not less than ten years and that the insurer is licensed in Thailand. However, if the policy includes a savings element offering an annual return exceeding twenty percent of the premium, the premium becomes fully non-deductible. Deposits with banks in schemes similar to life insurance, also with a minimum term of ten years, qualify for deduction up to one hundred thousand baht per year, but when combined with qualified life and health insurance premiums, the total deductible amount must not exceed one hundred thousand baht.
Premiums paid for life insurance for a non-earning spouse, up to ten thousand baht per year, are also deductible, provided the couple remains legally married throughout the tax year. A health insurance premium of up to twenty-five thousand baht paid to a licensed insurer in Thailand for personal coverage is deductible, subject to the total limit of one hundred thousand baht when combined with life insurance and bank deposits. A further fifteen thousand baht is deductible if paid for the taxpayer’s parents or the spouse’s parents.
To encourage long-term retirement savings, the law permits deductions for contributions up to five hundred thousand baht per year. This includes qualified pension life insurance premiums up to fifteen percent of assessable income, with a maximum of two hundred thousand baht, contributions to registered provident funds up to fifteen percent of wages with a cap of five hundred thousand baht, investments in retirement mutual funds up to thirty percent of assessable income with a cap of five hundred thousand baht, national savings fund contributions in the actual amount with a cap of five hundred thousand baht, and investments in super savings funds up to thirty percent of assessable income, limited to two hundred thousand baht annually.
Mortgage interest incurred for the purchase or construction of residential property located in Thailand is deductible up to one hundred thousand baht. Expenses for prenatal care and childbirth are deductible up to sixty thousand baht per pregnancy. Contributions to the government social security fund are fully deductible.
Investments in a Thai ESG fund qualify for deduction up to thirty percent of assessable income subject to income tax, with a cap of one hundred thousand baht per year, provided the investor holds the units for at least eight years. From January 2024 to December 2026, a temporary increase allows deductions up to three hundred thousand baht for ESG fund investments, with a reduced holding period of five years, although the new conditions are pending ministerial regulation. From 2027 onward, the previous conditions will resume.
Taxpayers may also deduct expenses up to fifty thousand baht for qualifying purchases made in Thailand between January 1 and February 15, 2024, under the Easy e-Receipt campaign. In addition, a deduction of ten thousand baht per one million baht, capped at one hundred thousand baht, is available for construction fees paid between April 9, 2024, and December 31, 2025, to VAT-registered contractors for the building of a new residential property.
All of the above are prime examples of tax deduction in Thailand.
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Tax deduction in Thailand for corporations
Corporate income tax is imposed under Chapter 3, Part 2 of the Revenue Code. Companies are generally taxed at a flat rate of twenty percent on net profits, which must be calculated using the accrual basis of accounting. This is key for tax deduction in Thailand.
Tax deduction in Thailand : deductible expenses for corporate taxpayers
Section 65 bis of the Revenue Code allows deductions for all expenses that are exclusively incurred for generating income or for business operations, unless otherwise restricted. This is essential for tax deduction in Thailand and it includes operational expenses such as employee wages, rental costs, travel expenses, and advertising fees. Royalties, management fees, and interest payments may also be deducted if they are necessary for the business and are reasonable in amount.
Donations made to approved charities, educational institutions, sports organizations, or public benefit projects are deductible up to two percent of the net profit. Political contributions are also deductible up to fifty thousand baht. Additional deductions of one hundred percent are permitted for the cost of books and IT devices used in in-house libraries, capped at fifty thousand baht. Expenses for employee training at accredited institutions or in-house training, as well as wages paid to workers aged sixty or older, are also eligible, provided the monthly wage does not exceed fifteen thousand baht. Higher education, research and development activities approved by the Director-General of the Revenue Department and conducted in Thailand, also qualify.
Companies may deduct the full amount of expenditures on digital infrastructure made between January 1, 2023, and December 31, 2025. These include e-document preparation, computer equipment, cloud storage, and tax remittance systems, provided they are not developed for commercial resale. Deductions are also allowed for payments to third-party service providers who prepare or remit tax-related e-information.
Moreover, companies can benefit from a combined deduction of up to ten percent of net profit before donations, for educational projects approved by the Ministry of Education, community learning and recreational facilities, public access sports grounds, book and reading promotion materials, cultural and justice development funds, and donations to state hospitals.
Enhanced deductions of two hundred percent, also limited to ten percent of net profit before donations, apply to e-donations made in cash or assets to specific entities. These include the Chaipattana Foundation and IT Foundation under royal initiatives, the Thai Red Cross Society and medical foundations, the Equitable Education Fund, and recognized sports and educational institutions. Donations to state development funds in health, science, and metrology also qualify under this category.
Additional benefits include a twenty-five percent extra deduction for the purchase of certified biodegradable plastics between 2022 and 2024, and a fifty percent extra deduction for salaries paid to highly skilled workers in science and technology in targeted industries. A one hundred fifty percent deduction is permitted for government-approved employee training programs.
Non-deductible expenses for corporate taxpayers
Section 65 ter of the Revenue Code lists several expenses that are not deductible under any circumstances. These include any additions to provisions and reserves, contributions to non-registered funds, and personal expenses. Income tax payments, VAT (except in limited circumstances), fines, penalties, and surcharges under any tax laws are all non-deductible. Salaries paid to shareholders in excess of reasonable amounts, artificial or unverifiable expenses, and interest on capital or reserve funds are also disallowed.
Furthermore, payments where the recipient cannot be clearly identified, disbursements decided upon and paid out after the end of the fiscal year, and bad debts not written off in accordance with ministerial regulations are not deductible. Damages compensated by insurance or covered under indemnity agreements are similarly excluded from deductible expenses.
Conclusion
Tax deduction in Thailand is an important aspect of tax law to understand for both individuals and businesses. The Thai tax system provides a well-structured and codified framework for tax deductions, allowing taxpayers, both individuals and corporations, to optimize their tax liabilities lawfully. While the scope of deductible items is generous in some categories, it is tightly controlled and subject to specific documentation and timing requirements.
Understanding the breadth and limits of tax deduction in Thailand is essential to ensure compliance with the Revenue Code while legally minimizing the tax burden. Taxpayers are advised to maintain thorough records and seek professional advice where ambiguity exists. As tax policies and deduction schemes evolve, continuous legal review remains imperative to remain within the bounds of lawful deduction and avoid unnecessary tax exposure.
FAQ
Both individuals (Thai residents and non-residents with Thai-sourced income) and corporations can claim deductions, but only within the limits defined under the Revenue Code.
Individuals may deduct employment-related expenses, personal and family allowances, life and health insurance premiums, retirement fund contributions, mortgage interest, childbirth expenses, and social security contributions.
Companies can deduct reasonable business expenses such as salaries, rent, training, R&D, donations, and digital infrastructure costs, provided they are directly connected to income generation and properly documented.
Fines, penalties, personal expenses, excessive shareholder salaries, unverifiable payments, and income tax itself are always non-deductible under Section 65 ter of the Revenue Code.