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Why is the Tax Code in Thailand essential for international companies operating in Thailand?
The Thailand Tax Code or Revenue Code of Thailand is the legal basis for taxation in the country. First enacted in 1938 as Revenue Code B.E. 2481, the code was designed to reorganise and modernise the country’s tax system, which until then consisted of a number of disparate tax laws.
Since its initial introduction, the Tax Code in Thailand has been extensively amended to reflect economic and technological developments and Thailand’s international commitments.
For example, the Income Tax Code Amendment Act (No. 53) B.E. 2564 (2021) introduced VAT provisions on electronic services provided from abroad, reflecting the growing importance of digital commerce. In addition, the Income Tax Code Amendment Act (No. 54) B.E. 2564 (2021) was adopted to promote the international exchange of tax information following Thailand’s accession to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters in 2020.
These reforms demonstrate Thailand’s commitment to aligning its tax system with international standards, particularly those established by the Organisation for Economic Co-operation and Development (OECD) and the G20, in terms of transparency and the fight against tax evasion.
For foreign companies, it is crucial to understand the key provisions of Thailand’s Tax Code in order to comply with tax obligations and avoid penalties for non-compliance.
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Table of Contents
What are the main components of the Tax Code in Thailand?
Personal income tax (PIT)
- Tax residence and scope:
The Tax Code in Thailand distinguishes between tax residents and non-residents. The law defines a resident as an individual who has spent at least 180 days in Thailand during a calendar year. The tax system subjects residents to tax on their worldwide income, while it taxes non-residents only on income sourced in Thailand.
- Progressive tax scale:
Personal income tax rates in Thailand are progressive, ranging from 0% to 35%, depending on annual taxable income brackets.
- Tax changes in 2024:
Since 1 January 2024, all Thai tax residents must declare foreign-source income that they transfer to Thailand, even if they generated that income before that date. In addition, the law introduces an exception under which authorities do not tax foreign income received before 1 January 2024 and transferred to Thailand after that date.
Corporate income tax (CIT)
- Standard tax rates and reductions:
In Thailand, the standard corporate income tax rate is 20%. However, reduced rates apply to small and medium-sized enterprises (SMEs) and vary according to their annual net profit.
- Foreign companies and withholding tax:
Non-resident companies registered in a third country that carry out activities generating income in Thailand pay a withholding tax of 15%, except for dividends, which the law taxes at 10%.
- Implementation of the global minimum tax:
From 1 January 2025, Thailand will apply a global minimum tax of 15% on multinational companies with annual global turnover exceeding €750 million, in accordance with OECD guidelines.
Value added tax (VAT)
VAT is collected by businesses on behalf of the government and paid by end customers. The Tax Code B.E. 2481 (1938) and its subsequent revisions establish the legal basis for VAT, with Section 77/1 clearly defining it as a tax on the value added at each stage of manufacture or distribution.
- Current rates and exemptions:
Currently, the standard VAT rate in Thailand stands at 7%, which is lower than the statutory rate of 10%. The government has reduced this rate until 30 September 2025.
- Registration requirements:
Companies with an annual turnover of 1.8 million baht must register for VAT. In addition, foreign electronic service providers that supply services to non-VAT-registered customers in Thailand must also register and collect VAT.
Registration fees (stamp duty)
- Documents subject to tax:
Stamp duty is applicable to various legal documents such as lease agreements, property transfers, share transfers and loan agreements. The applicable amounts differ depending on the type of document; a table of stamp duty rates is appended to Chapter V of Title II of the Thailand Tax Code.
For the full list, please consult the Revenue Code on the website of the Thailand Revenue Department.
- Payment terms and penalties:
The parties must pay the registration fee within 30 days of the date of execution of the document. If they fail to pay the amounts due or pay an insufficient amount, the authorities may impose penalties of up to six times the initial amount due.
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How does the Tax Code in Thailand affect foreign companies?
Establishing a presence in Thailand
The Tax Code in Thailand taxes companies on income generated within the country, including foreign entities with a “permanent establishment” in Thailand. The concept of permanent establishment does not depend solely on the presence of a locally registered entity. It also covers activities carried out on a regular or significant basis, even without a formal legal structure.
A permanent establishment in Thailand is recognised when the foreign company:
- Has an office, a dependent agent, a factory or a long-term construction site;
- Provides services in Thailand for a continuous or cumulative period exceeding six months;
- Generates income from Thai sources through a regular operational presence.
International tax treaties
Thailand has signed double taxation agreements with many countries to avoid taxing the same income twice. These agreements provide reduced withholding tax rates on dividends, interest, and royalties. Foreign companies must check whether their country of origin has such an agreement with Thailand.
A tax treaty was signed between France and Thailand on 27 December 1974 to avoid double taxation and prevent tax evasion in relation to income tax.
Withholding tax obligations
Companies must withhold tax at source on certain payments made to non-residents, such as dividends, interest, and royalties. The applicable tax rates depend on the type of payment and any relevant tax agreements. If companies fail to comply with these obligations, authorities may impose penalties.
What are the reporting requirements under the Tax Code in Thailand?
- Tax returns:
Companies must file periodic tax returns, including monthly VAT returns and annual corporate income tax returns. The deadlines and forms required are specified by the Revenue Department. Failure to meet the deadlines may result in fines.
- Accounting:
In accordance with the Tax Code in Thailand, companies’ accounts must be kept in accordance with Thai standards. Accounting records must be kept for at least five years and be available for inspection by the tax authorities. Sections 8 to 14 of the Code specify these obligations.
- Tax audits:
The Revenue Department may conduct tax compliance audits. Companies must provide all necessary information and cooperate with the authorities. If they fail to do so, the authorities may impose tax adjustments and fines.
What tax benefits does the Tax Code in Thailand offer?
- Investment incentives
To attract foreign investment, the Thai government offers numerous tax incentives, ranging from corporate tax exemptions to customs duty reductions and additional tax deductions. The Board of Investment (BOI) generally grants these incentives and subjects them to specific conditions. The Investment Promotion Act B.E. 2520 provides these tax benefits, and the Competitive Enhancement Act B.E. 2560 reinforces them. For certain sectors of activity, companies may obtain up to eight years of exemption.
- Special economic zones
Certain special economic zones offer additional tax benefits, such as reduced tax rates and VAT exemptions on certain goods. These zones aim to promote regional economic development and attract specific industries.
- Deductions for specific expenses
The Tax Code in Thailand also allows, under certain conditions, tax deductions for certain expenses, such as research and development, staff training and donations to approved charities. These deductions can significantly reduce the tax burden on businesses.
How to ensure compliance with the Tax Code in Thailand?
- Consult with local experts
It is best to consult local tax specialists to ensure compliance with the Tax Code in Thailand. Tax legislation can be complex and change frequently. Such an advisor can help avoid costly mistakes.
- Set up effective accounting systems
Companies must also keep strict accounts to track their transactions and generate accurate reports, which will facilitate the preparation of their tax returns and audits.
Conclusion
The Thailand Tax Code stands as an essential pillar for any foreign company wishing to establish itself or invest long term in the country. It strictly regulates applicable taxation, both on local income and international flows, and it sets out specific obligations relating to reporting, withholding tax, and accounting.
In a constantly evolving tax environment—particularly with the implementation of the global minimum tax and the integration of OECD standards—companies must rely on experts to ensure compliance and optimize their tax structure. A solid understanding of the Code provides the key to a secure and profitable investment.
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FAQ
The Thailand Tax Code, formally known as the Revenue Code of Thailand (B.E. 2481), is the primary legal framework governing taxation in Thailand. It sets out the rules for personal income tax, corporate income tax, VAT, withholding tax, and stamp duty, as well as compliance and enforcement procedures.
The Thailand Tax Code determines how and when foreign companies are taxed on income connected to Thailand. It defines permanent establishment, withholding tax obligations, VAT registration for foreign service providers, and reporting requirements. Non-compliance can lead to significant penalties.
Under the Thailand Tax Code:
Individuals are tax residents if they stay in Thailand for 180 days or more in a calendar year.
Companies are taxed on income sourced in Thailand, and foreign companies may be taxed if they have a permanent establishment in the country.
The standard corporate income tax (CIT) rate is 20%. Reduced rates apply to qualifying SMEs. Foreign companies earning Thai-source income without local incorporation are generally subject to withholding tax, usually at 15%, unless reduced by a tax treaty.
A foreign company may be considered to have a permanent establishment (PE) under the Thailand Tax Code if it:
Has an office, factory, agent, or construction site in Thailand
Provides services in Thailand for more than six months
Conducts regular income-generating activities in Thailand
Having a PE triggers Thai corporate tax obligations.
VAT is governed by the Thailand Tax Code and currently applies at a 7% rate (temporarily reduced from 10% until 30 September 2025). Businesses with annual turnover exceeding 1.8 million baht must register. Foreign electronic service providers supplying services to Thai customers may also be required to register and collect VAT.
Recent amendments to the Thailand Tax Code require foreign digital service providers to charge and remit VAT on electronic services supplied to non-VAT-registered customers in Thailand. This aligns Thailand’s tax system with international digital economy standards.
The Thailand Tax Code requires withholding tax on certain payments to non-residents, including:
Dividends (generally 10%)
Interest
Royalties
Rates may be reduced under double taxation agreements (DTAs) signed by Thailand.
Yes. While incentives are mainly granted under separate legislation (e.g. BOI laws), the Thailand Tax Code allows for:
Expense deductions (R&D, training, donations)
Tax exemptions linked to investment promotion schemes
In some cases, companies can benefit from up to 8 years of corporate tax exemption.
Companies must comply with:
Monthly VAT filings
Annual corporate income tax returns
Withholding tax filings
Accounting record retention for at least five years
The Revenue Department has audit powers, and penalties apply for late filing or inaccurate reporting.