Introduction
Thailand’s tax system consists of a range of direct and indirect taxes that impact both individuals and businesses. For companies operating in Thailand, understanding the different types of taxes and the legal framework that governs them is crucial for compliance and effective tax planning.
Main Taxes in Thailand
The main taxes in Thailand are:
Direct Taxes:
- Personal Income Tax
- Corporate Income Tax
- Inheritance Tax
- Petroleum Income Tax
Indirect Taxes:
- Value Added Tax (VAT)
- Specific Business Tax
- Customs Duties
- Excise Tax
- Stamp Duty
- Land and Buildings Tax
The primary legal framework for taxation in Thailand is the Revenue Code, which regulates personal and corporate income taxes, VAT, specific business taxes, and stamp duties. In addition, the Inheritance Tax Act governs the Inheritance Tax, the Customs Act oversees customs duties, the Excise Act applies to excise taxes, and the Petroleum Income Tax Act addresses the petroleum income tax.
This overview will focus specifically on corporate taxes in Thailand, detailing the key obligations, rates, and incentives that businesses need to be aware of.
Corporate Income Tax (CIT) in Thailand
Corporate Income Tax (CIT) in Thailand is a direct tax levied on the net profits of companies and juristic partnerships. The tax applies differently to entities based on their incorporation status and business activities.
Taxable Entities and Their Obligations
- Thai Incorporated Companies:
- Companies incorporated under Thai law are considered tax residents and are subject to CIT on their worldwide income. This includes income derived from both domestic and international sources.
- Foreign Incorporated Companies:
- Doing Business in Thailand: Foreign companies that carry out business in Thailand are taxed on profits earned from activities conducted within Thailand. The presence of an employee, agent, or representative in Thailand that generates income qualifies as “doing business.”
- Not Doing Business in Thailand: Foreign companies not carrying on business in Thailand are only subject to withholding tax (WHT) on certain types of income derived from Thai sources, such as interest, dividends, royalties, rents, and service fees.
CIT Rates and Special Conditions
The corporate income tax rates in Thailand vary depending on the type of taxpayer and their business status. Here’s a breakdown of the applicable rates:
| Taxpayer | Tax Base | CIT Rate (%) | Notes |
|---|---|---|---|
| Standard Rate | Net Profit | 20% | Applies to most companies operating in Thailand. |
| Small Businesses | Net Profit ≤ 300,000 Baht | 0% | Registered capital ≤ 5 million Baht; annual income ≤ 30 million Baht. |
| Net Profit 300,001 to 3 million Baht | 15% | ||
| Net Profit > 3 million Baht | 20% | ||
| Foreign Companies (Non-operating in Thailand) | Dividends Received | 10% | Income from dividends paid from or in Thailand. |
| Other Income (Interest, Royalties, etc.) | 15% | Income types include interest, royalties, rents, service fees, etc. | |
| Foreign Companies (Withdrawing Profits from Thailand) | Amounts Withdrawn | 10% | Applies when profits are transferred out of Thailand. |
| International Business Centers (IBC) | Net Profit | 3%, 5%, 8% | Rates depend on annual operating expenses in Thailand: – 3% (60-300 million Baht) – 5% (300-600 million Baht) – 8% (>600 million Baht). |
| BOI Promoted Companies | Net Profit | 0% | Subject to specific BOI promotion conditions. |
| Companies in Special Economic Zones | Net Profit | 0% | Subject to specific conditions in designated economic zones. |
Reduced Tax Rates for Small Businesses
Small businesses in Thailand benefit from reduced CIT rates, offering substantial tax relief to encourage growth and sustainability. The eligibility criteria and tax rates are outlined below:
Criteria for Small Business:
- Registered Capital: Not exceeding 5 million Baht at the end of the accounting period.
- Annual Income: Total income from sales of goods and/or services not exceeding 30 million Baht.
Reduced CIT Rates for Small Businesses:
| Net Profit (THB) | CIT Rate (%) |
|---|---|
| Up to 300,000 | 0% |
| 300,001 to 3 million | 15% |
| Over 3 million | 20% |
Tax Filing and Payment Requirements
- Annual Filing:
- All companies must file their CIT returns (Form PND 50) within 150 days after the end of their accounting period. Any tax due must be paid at the time of filing.
- Tax Prepayments:
- Companies are required to make a prepayment (Form PND 51) based on an estimated annual net profit within two months after the first six months of the accounting period. This prepayment is credited against the annual CIT liability.
- Withholding Tax for Foreign Companies:
- For foreign companies not operating in Thailand but receiving income from the country, withholding tax must be deducted at the source. The payer must file a return (Form PND 54) and submit the withheld amount to the Revenue Department within seven days of the month following the payment.
Value-Added Tax (VAT) in Thailand
Value-Added Tax (VAT) is an indirect tax in Thailand, applied to the sale of goods and services and certain imports. It is crucial for businesses to understand VAT rates, registration requirements, exemptions, and filing procedures to comply with Thai tax laws.
Standard VAT Rate
The standard VAT rate in Thailand is 10%, currently reduced to 7% until 30 September 2024, subject to possible extension. This rate applies to most goods and services sold and imported.
Zero-Rated VAT
A 0% VAT rate applies to:
- Exported goods
- Services provided in Thailand but consumed outside Thailand
- International transport by air or sea
- Transactions between bonded warehouses or within duty-free zones
- Sales to international organizations and foreign governments under specific agreements
VAT Exemptions
Certain goods and services are exempt from VAT:
| Goods/Services | VAT Status |
|---|---|
| Businesses with annual turnover less than 1.8 million Baht | Exempt |
| Unprocessed agricultural products | Exempt |
| Newspapers, magazines, and textbooks | Exempt |
| Educational services | Exempt |
| Healthcare services | Exempt |
| Domestic transportation | Exempt |
| Professional services (e.g., auditing, legal in court) | Exempt |
| Rental of immovable property | Exempt |
| Imports qualifying for exemptions (e.g., duty-free zones) | Exempt |
VAT Registration
Businesses must register for VAT if their annual turnover exceeds 1.8 million Baht. Registration involves submitting Form VAT 01:
- Before starting operations, or
- Within 30 days after exceeding the turnover threshold.
For businesses with multiple locations, registration should be submitted to the Revenue Office near the main office.
VAT Invoicing
A valid tax invoice must include:
- “Tax Invoice” label
- Seller’s name, address, and taxpayer ID
- Buyer’s name and address
- Invoice serial number
- Description and value of goods or services
- VAT amount separate from the goods or services value
- Date of issuance
- Indication of head office or branch
Invoices issued in foreign currencies must show both the foreign currency and Thai Baht amounts and the exchange rate used.
VAT Filing and Payment
VAT returns must be filed monthly:
- Form VAT 30: Due by the 15th of the following month; extended to the 23rd for e-filers.
- Form VAT 36: For services from foreign providers, due by the 15th.
VAT on imports is payable to the Customs Department upon entry. If excise tax is also applicable, VAT returns are filed with the Excise Department.
VAT Refunds
If input VAT exceeds output VAT, businesses can claim a refund or carry the excess forward as a credit. Zero-rated businesses are generally eligible for refunds. Refund claims must be filed within three years.
Penalties for Non-Compliance
Penalties for failing to comply with VAT regulations include:
- Late Filing Fines: 300 Baht within 7 days; 500 Baht thereafter.
- Late Payment Penalty: Up to twice the amount of VAT due.
- Monthly Surcharge: 1.5% of the unpaid tax.
Compliance with VAT obligations is essential to avoid these penalties.
Specific Business Tax (SBT) in Thailand
Specific Business Tax (SBT) is an indirect tax in Thailand, applied to certain businesses that are not subject to Value-Added Tax (VAT). SBT is calculated based on gross receipts from specific business activities.
Businesses Liable to SBT
The following businesses are subject to SBT:
- Commercial Banks and financial institutions
- Life Insurance companies
- Pawnshops
- Real Estate Sales conducted for profit
- Businesses similar to banking (e.g., lending, currency exchange)
- Securities Sales in regulated markets
- Other businesses specified by royal decree
SBT Exemptions
Entities exempt from SBT include:
- Government financial institutions (e.g., Bank of Thailand, Government Savings Bank)
- Savings cooperatives (for loans to members)
- Provident funds
- National Housing Authority (for property sales or hire-purchase)
- Pawnbroking by government entities
- Other exemptions as defined by royal decree
SBT Rates and Tax Bases
SBT rates vary by business type:
| Business Activity | Tax Base | SBT Rate (%) |
|---|---|---|
| Banking, Finance, and Similar Businesses | Interest, discounts, service fees, profits from financial instruments | 3% |
| Life Insurance | Interest and service fees | 2.5% |
| Pawnbroking | Interest, fees, sales of pledged items | 2.5% |
| Real Estate Sales | Gross receipts | 3% |
| Businesses with Banking-like Transactions | Interest, discounts, service fees, profits from financial instruments | 3% |
| Sale of Securities in a Securities Market | Gross receipts | 0.1% |
An additional 10% municipality tax is levied on the calculated SBT amount.
SBT Registration and Filing
Businesses subject to SBT must register within 30 days of starting operations by submitting Form P.T.01 to the relevant Revenue Office.
SBT returns must be filed monthly using Form P.T.40 by the 15th of the following month. Separate filings are required for each branch.
If the SBT due is less than THB 100 for the month, no payment is required, but a return must still be filed.
Stamp Duty in Thailand
What is Stamp Duty?
Stamp Duty is a tax on certain legal documents, known as instruments, used in business and financial transactions in Thailand. This tax is crucial for giving these documents legal validity under Thai law. The duty is charged on the documents themselves, rather than on the transaction or the parties involved. The specific documents that require Stamp Duty are listed in the Thai Revenue Code, and the tax must be paid by those who sign, hold, or benefit from the document.
Instruments Subject to Stamp Duty and Applicable Rates
The following table provides a comprehensive list of instruments subject to Stamp Duty in Thailand, along with the applicable rates:
| Instrument | Duty Rate | Person Liable |
|---|---|---|
| Hire of Work Contracts | 1 Baht per 1,000 Baht of the contract value | Contractor |
| Lease of Land, Buildings, etc. | 1 Baht per 1,000 Baht of the total rent or key money for the entire lease period | Lessor |
| Transfer of Shares, Debentures, or Bonds | 1 Baht per 1,000 Baht of the paid-up value or nominal value, whichever is higher | Transferor |
| Hire-Purchase Agreements | 1 Baht per 1,000 Baht of the total value | Person providing hire-purchase |
| Loan or Bank Overdraft Agreements | 1 Baht per 2,000 Baht of the loan amount; maximum 10,000 Baht | Lender |
| Insurance Policies (Life Insurance) | 1 Baht per 1,000 Baht of the insured amount | Insurer |
| Insurance Policies (Marine Insurance) | 0.4% of the premium amount | Insurer |
| Powers of Attorney | 10 to 30 Baht depending on the type and scope of authority | Principal |
| Proxy Letters for Voting | 20 Baht per meeting (one-time); 100 Baht for multiple meetings | Authorizer |
| Bills of Exchange or Promissory Notes | 3 Baht per 1,000 Baht of the amount or fraction thereof | Maker or issuer |
| Share Certificates or Debentures | 1 Baht per 1,000 Baht of the value | Holder |
| Cheques | 3 Baht per cheque | Drawer |
| Letter of Credit | 1 Baht per 1,000 Baht of the amount | Issuer |
| Receipts (not otherwise exempted) | 1 Baht per 2,000 Baht of the amount received | Recipient |
| Bills of Lading | 2 Baht per bill | Issuer |
| Warehouse Receipts | 1 Baht per 1,000 Baht of the value | Issuer |
| Carrier Receipts | 1 Baht per 1,000 Baht of the value | Issuer |
Methods of Paying Stamp Duty
Stamp Duty can be paid using the following methods:
- Affixing Stamps: Physical stamps are affixed directly to the instrument, and the payer must cancel the stamps by signing across them.
- Cash Payment: Required for certain high-value agreements. For example:
- Lease agreements with a total rental value of 1 million Baht or more.
- Hire-of-work agreements with a service fee of 1 million Baht or more.
- Payments are made using Form Or. Sor. 4 at the area Revenue Department office.
- e-Stamp Duty System: For electronic instruments (e-instruments), Stamp Duty must be paid through the e-Stamp Duty system. This system has been mandatory since July 2019 for e-instruments, and also available for some paper instruments during a grace period until 31 December 2025. Payment involves filing Form Or. Sor. 9 online and completing the payment electronically.
Penalties for Late Payment
Failure to pay Stamp Duty on time can result in significant penalties, including:
- No surcharge if paid within 15 days after the due date.
- 2 times the amount of Stamp Duty if paid 16 to 90 days late.
- 5 times the amount if paid more than 90 days late.
- 6 times the amount if identified during a tax investigation.
Exemptions and Special Cases
Certain transactions and entities are exempt from Stamp Duty, such as:
- Transactions involving government agencies.
- Transfers of shares within a company group under certain conditions.
- Specific transactions as outlined by royal decree or other legal provisions.
Petroleum Income Tax
Petroleum Income Tax is imposed on companies engaged in the exploration or production of oil and gas in Thailand under concessions or production sharing agreements. This tax also applies to companies that purchase crude oil for export from concession holders.
Companies operating in the petroleum industry under service contracts are not subject to petroleum income tax; instead, they are subject to income tax under the Tax Code. Additionally, petroleum income tax does not apply to activities in the downstream sector, which includes refining, distribution, and sales.
Companies with oil concessions are taxed at a rate of 50 percent of their annual net profits derived from petroleum operations. This includes profits from the transfer of concession interests and other activities related to petroleum operations. Deductions are permitted for “ordinary and necessary” business expenses, as well as for the amortization of capital expenditures, oil royalties, and other charges. However, certain types of expenses, including interest, are not eligible for deductions.
Producers participating in production sharing agreements are subject to a tax rate of 20 percent on their annual net profits derived from the petroleum business. This encompasses profits from the transfer of interests, rights, annuity payments, or any other regular recurring income.
Land and Building Tax
The Land and Building Tax law came into effect on January 1, 2020. This law replaced previous taxes that primarily pertained to rental income rather than property tax.
Read details here
Land and Buildings Tax in Thailand
Reporting deadlines
| Frequency | Tax / Reporting Type | Form | Deadline |
|---|---|---|---|
| Monthly | Withholding Tax | PND 1, 3, 53, 54, PP 36 | By the 7th day of the following month |
| VAT | PP 30 | By the 15th day of the following month | |
| Social Security | Sor Por Sor 1-10 | By the 25th day of the following month | |
| Semi-Annually | Corporate Income Tax (Prepayment) | PND 51 | Within 60 days after the semi-annual period (starting from the second year of operation) |
| Annually | Corporate Income Tax | PND 50 | Within 150 days after the end of the period |
| Personal Income Tax | PND 90, 91, 94 | By March 31 of the following year |
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