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Corporate income tax

Understanding Corporate Income Tax in Thailand

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Exploring the Nuances of Corporate Income Tax in Thailand

Navigating the complexities of tax laws can be a challenging task for businesses in Thailand. Understanding the nuances of the Thai taxation system is critical for ensuring that your business remains compliant and avoids unnecessary tax exposures, surcharges, and penalties. AO provides comprehensive corporate direct and indirect taxation services as outlined in the following overview of tax compliance and filing procedures in Thailand, offering insights into deadlines, audit processes, and current topics of interest for tax authorities.

Corporate Income Tax in Thailand (CIT) is a direct tax levied on a juristic company/person that is established Thai or foreign companies carrying on business in Thailand &/or deriving certain types of income from Thailand. Resident companies are those incorporated for engaging in general business activities in Thailand. They are subject to CIT on taxable net profits by considering their worldwide income for each 12-month accounting period.

Corporate taxable profits will be based on the audited accounts of the company with certain adjustments made to reported net income on their year-end income statement. A Thai resident company is subject to CIT on its worldwide income and gains. Non-resident companies are subject to CIT on their Thai sourced income and gains. The current CIT rate is 20%.

For Thai branches of foreign companies, a 10% profit remittance tax is imposed on profits, regardless of whether or not any such profits are transferred out of Thailand, being treated in the same manner as a deemed dividend. Furthermore, such branches are not technically a tax resident company in Thailand, thus they cannot access treaty benefits under Thailand’s Double Tax Treaties.

Tax Period and Duration

The corporate income tax In Thailand, tax year corresponds with the company’s annual accounting period, which cannot exceed 12 months, the only exceptions occur in a company’s first year the first accounting period after incorporation and the accounting period in which a company dissolves. Any changes to the timing of an annual accounting period require approval from both the Revenue Department and the Business Development Department (under the Thai Ministry of Commerce).

Value Added Tax (VAT)

VAT is an indirect tax levied on the supply of goods and provision of services in Thailand, irrespective of where the service is used, and the import of goods into Thailand. A service performed abroad but made use of in Thailand is also deemed to be a provision of services in Thailand.

Any person or entity that regularly supplies goods or provides services in Thailand and has an annual turnover exceeding THB 1.8 million is subject to VAT registration in Thailand. Suppliers of goods and services collect VAT output tax. Purchasers of goods and services pay VAT input tax. Input tax is deducted from output tax to determine the VAT liability, which is required to file by companies via tax return (Form PP 30).

A foreign supplier temporarily carrying on VAT-able business in Thailand is subject to VAT on a reverse charge basis. In such cases the payer is required to self-assess any applicable VAT and remit it to the Thai Revenue Department (TRD) via tax return (Form PP 36).

VAT is currently levied at a rate of 7% on gross receipts, although a zero rate applies to exported goods and services (that are totally used abroad). The official VAT rate is actually 10%, not 7%. However, the VAT rate was reduced to 7% in 1997 and this reduced rate has since been extended by the TRD continuously thereafter. There appears to be no suggestion that the VAT rate will increase in the foreseeable future.

Withholding Tax (WHT)

Certain types of income (typical related to services) paid to companies/persons residing in Thailand are subject to WHT at source. The WHT rates depend on the types of income and the tax status of the recipient.

The payer of income is required to file the return typically via Form PND 53 (or Form PND 1, 2, or 3 as the case may be) and submit the amount of tax withheld to the TRD within seven days of the month following the month in which the payment the company/person is made. The tax withheld is credited against the final tax liability of the taxpayer. The following are the WHT rates on some important types of income:

  • 1% on interest payments other than to banks or finance houses
  • 1% on bond or debenture interest paid to banks or finance houses
  • 1% on ship rentals used for international freight transport
  • 1% on transportation fees
  • 1% on non-life insurance premiums
  • 2% on certain advertising fees
  • 3% for professional service fees
  • 3% on fees for the hire of labour
  • 3% on rebates or benefits from sales promotion unless goods are for buyer’s own consumption
  • 3% on royalties for use of intangible assets such as patents, copyrights etc.
  • 3% on service fees other than services by hotels and restaurants, fares for public transport, fees for hire of labor, and life insurance premiums
  • 5% on prizes won in contests, lucky draws or other competitions
  • 5% on amounts paid for services received in Thailand from a foreign company which does not have a permanent branch office in Thailand
  • 5% on hire of assets (excluding capital lease contracts, normally more 3 years and allowing the lessee to buy the asset at the end of the contract)
  • 10% on shareholder dividends
  • 0 – 35% on salary, benefits and other income paid to employees
 

Amounts withheld, based on supporting Withholding Tax Certificates, may be used by the supplier/recipient to offset against their own tax liabilities (e.g., deducted from the supplier’s corporate income tax liabilities).Payments to non-resident companies by default attract WHT at 15% (apart from dividends, which attract withholding tax at 10%) that the payer of income is required to file via tax return (Form PND 54). 

In particular, this non-resident default withholding tax of 15% applies to payments made to non-Double Tax Treaty countries on income including: interest, royalties, rent, management fees, consultancy payments and capital gains. These rates of WHT may be reduced for non-resident companies residing in countries that have a Double Tax Treaty (DTT) with Thailand (Please see the below table of DTT countries for your reference).

Capital Gains Tax

There is no separate capital gains tax in Thailand. Capital gains are treated as assessable income for purposes of calculating CIT.

Stamp Duty

Stamp Duty is payable on most documents filed by companies with Thai Government agencies or entities and on official documents of the company, including: transfers of land, leases, stock transfers, debentures, mortgages, life assurance policies, annuities, Powers of Attorney, promissory notes, letters of credit, cheque, etc.

Stamp Duty is levied on instruments and not on transactions or persons. For the purposes of Stamp Duty, an instrument is defined as any document chargeable with duty under the Thai Revenue Code (TRC). The Stamp Duty rules are contained in Chapter VI of Title II of the TRC.

Stamp Duty rates vary according to the class of the instrument. Non-compliance can result in a penalty or surcharge of tax. For certain categories of instruments, the liable person may pay Stamp Duty in cash instead of affixing stamps on the instruments, including: the lease of land, building, other construction or floating house (where the rental fee for the entire lease period is at least THB 1,000,000 or where registration by a Land Department Officer is required under Thai land law) and a hire-of-work service agreement for which the service fee is at least THB 1,000,000.

Tax Returns and Self-assessment System

Thailand operates on a self-assessment tax system. Companies are expected to prepare and file their tax returns by specified due dates while also making any necessary tax payments. Annual CIT returns are due 150 days after the accounting period ends.

In addition, at the half-year point of a company must submit a half-year CIT return based on (i) one half of the estimated annual profit, or on (ii) the actual profit for the first six months. If the second option is chosen, then the accounts for the period must be reviewed by an approved auditor.  If the actual profit for the year exceeds the estimated profit by more than 33⅓% then the tax shortfall for the first six months is subject to a surcharge of 20%.

Payment of Tax

Corporate Income Tax in Thailand is generally paid twice a year: at the time of filing the half-year CIT return and the annual year-end CIT return. Businesses are expected to settle their annual CIT within 150 days after the end of their accounting period.

Transfer Pricing Rules and Related Party Transactions

The Thai Revenue Department (TRD) has issued transfer pricing guidelines, which explain the permitted transfer pricing methods and define acceptable market pricing. The guidelines also cover transfer pricing documentation requirements and provide for advance pricing agreements.

Furthermore, there is a year-end Related Party Disclosure Form that must be submitted together with the year-end CIT return for all companies who have total revenues in an accounting period exceeding THB 200 million and have related company(s) according to the specified characteristics mostly based on definitions of “control” between related companies.

TRD Officers have clear powers to request transfer pricing documents for review and assessment and/or adjustment of income and expenses that result from transfer pricing transactions, for which adjusted income or expenses will be applicable for calculating net profit for Corporate Income Tax in Thailand calculation, plus penalties and surcharge.

In addition to applicable tax assessments, penalties and surcharge, a taxpayer who does not submit, or files, incomplete or incorrect reports, documents or evidence of transfer pricing transactions without justifiable reasons will be subject to fines of THB 200,000 per case. 

Double Tax Treaty and Non-Treaty Withholding Tax Rates

The table below gives only a general outline of the rates of withholding tax applicable to interest, dividend and royalty payments under Thailand’s DTTs, compared to non-treaty countries. The written text of each DTT should be consulted for more detailed information.

 

Dividends¹

(%)

Interest²

(%)

Royalties³

(%)

Non-treaty countries

10

15

15

Treaty countries:

     

Armenia

10

10/15

15

Australia

10

10/15

15

Austria

10

10/15

10/15

Bahrain

10

10/15

15

Bangladesh

10

10/15

5/10/15

Belarus

10

10/15

15

Belgium

10

10/15

5/15

Bulgaria

10

10/15

5/15

Canada

10

10/15

5/15

Chile

10

10/15

10/15

China

10

10/15

15

Cyprus

10

10/15

5/10/15

Czech Republic

10

10/15

5/10/15

Denmark

10

10/15

5/15

Estonia

10

10

8/10

Finland

10

10/15

15

France

10

3/10/15

5/15

Germany

10

10/15

5/15

Hong Kong

10

10/15

5/10/15

Hungary

10

10/15

15

India

10

10/15

15

Indonesia

10

10/15

15

Israel

10

10/15

5/15

Italy

10

10/15

5/15

Japan

10

10/15

15

Korea

10

10/15

5/10/15

Kuwait

10

10/15

15

Laos

10

10/15

15

Luxembourg

10

10/15

15

Malaysia

10

10/15

15

Mauritius

10

10/15

5/15

Myanmar

10

10

5/10/15

Nepal

10

10/15

15

Netherlands

10

10/15

5/15

New Zealand

10

10/15

10/15

Norway

10

10/15

5/10/15

Oman

10

10/15

15

Pakistan

10

10/15

10/15

Philippines

10

10/15

15

Poland

10

10/15

5/15

Romania

10

10/15

15

Russia

10

10

15

Seychelles

10

10/15

15

Singapore

10

10/15

15

Slovenia

10

10/15

10/15

South Africa

10

10/15

15

Spain

10

10/15

5/8/15

Sri Lanka

10

10/15

15

Sweden

10

10/15

15

Switzerland

10

10/15

5/10/15

Taiwan

5/104

10/15

15

Turkey

10

10/15

15

Ukraine

10

10/15

15

United Arab Emirates

10

10/15

15

United Kingdom

10

10/15

5/15

United States

10

10/15

5/8/15

Uzbekistan

10

10/15

15

Vietnam

10

10/15

15

NOTES:

  1. The lower rate generally applies if certain conditions are met including having a specified minimum percentage of equity in the company paying the dividend.
  2. The lower rate generally applies to interest to which a financial institution is beneficially entitled.
  3. The lower rate generally applies to payments made as consideration for the right to use any copyright of literary, artistic or scientific work.
 
Learn More About Corporate Income Tax 

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Chief Executive Officer

Point Of Contact

John has more than 30 years of professional experience in accounting and business consulting for a wide range of companies and projects in South-East Asia and North America. He holds active licenses as both a Certified Public Accountant in the USA and a Chartered Professional Accountant in Canada. 

Contact

John joined AO in 2022, after building up a strong team at PKF and Baker Tilly where he was in charge of the accounting, tax advisory and corporate legal teams, as well as provision of integrated services to accounting and payroll clients. John first started working in Thailand in 1997 and spent 10 years in corporate advisory services. He began his career based in Canada as a financial auditor for Arthur Andersen.

The Most Frequent Questions

Businesses in Thailand follow a self-assessment system and are responsible for preparing and filing their own tax returns by the stipulated deadlines.

Thailand has a progressive tax structure for individuals and a flat rate for corporations, with various deductions, allowances, and exemptions that can be applied.

The tax base for CIT at a 20% rate typically includes all income, both domestic and foreign, after allowable deductions and allowances have been applied.

If you have more questions?

Small and medium-sized enterprises (SMEs) may be subject to reduced tax rates under certain conditions, but this can vary depending on specific criteria set by the Thai government.

Tax allowances vary by type of income and may include deductions for things like social security contributions, charitable donations, and specific types of business expenditures.

Yes, foreign companies that trade and earn income in Thailand are required to file a tax return and may be subject to Thai income tax laws.