Costs of Business in Thailand - Taxation
Updated: Feb 22
Typically, we will advise our clients to analyze the potential costs of running a business in Thailand. Like all countries in the world, there are different types of costs required to run a business in Thailand. For this article, we will cover the Revenue Code Law in Thailand. The code covers three key segments: 1) Corporate Income Tax, 2) Value Added Tax (VAT), and Personal Income Tax.
1) Corporate Income Tax in Thailand
Corporate income tax in Thailand is a direct tax placed on a legal entity or partnership doing business in Thailand, or not doing business in Thailand but earning certain types of income there.
Thai & foreign entities operating their business in Thailand are required to file their tax returns (Form CIT 50) within 150 days from the closing date of their accounting periods. Tax payment must be submitted together with the tax returns. Any company transferring profits out of Thailand is also required to pay tax on the sum so disposed within 7 days from the transferred date (Form CIT 54).
In addition to the annual tax payment, any company subject to CIT on net profits is also required to make tax prepayment (Form CIT 51). A company is obliged to estimate its annual net profit as well as its tax liability and pay half of the estimated tax amount within 2 months after the end of the first 6 months of its accounting period. The prepaid tax is creditable against its annual tax liability.
Any income paid to foreign company not carrying on business in Thailand is required to be taxed. The payer must file the return (Form CIT 54) and make the payment to the Revenue Department within 7 days of the following month in which the payment is made.
Double Taxation Agreement DTA
A Double Taxation Agreement is a bilateral agreement between two countries to avoid double taxation which may arise as a result of the application of their respective domestic tax laws.
Currently, Thailand has concluded tax treaty agreements with 60 countries: Armenia, Australia, Austria, Bahrain, Bangladesh, Belarus, Belgium, Bulgaria, Canada, Chile, China P.R., Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Great Britain and Northern Ireland, Hong Kong, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, Korea, Kuwait, Laos, Luxembourg, Malaysia, Mauritius, Myanmar, Nepal, the Netherlands, New Zealand,Norway, Oman, Pakistan,the Philippines, Poland,Romania, Russia, Seychelles, Singapore, Slovenia,South Africa, Spain, Sri Lanka, Sweden, Switzerland, Taiwan, Tajikistan, Turkey, Ukraine, United Arab Emirates, United States of America, Uzbekistan, and Vietnam
Thailand Revenue Department www.rd.go.th
2) Value Added Tax (VAT)
Value Added Tax (VAT)has been implemented in Thailand since 1992 replacing Business Tax (BT). VAT is an indirect tax imposed on the value added of each stage of production and distribution.
Any person or company with an annual turnover of more than 1.8 million Baht who regularly supplies goods or provides services in Thailand is liable to VAT. The tax registration must be completed within 30 days of the day that the company's turnover surpasses 1.8 million Baht.
If a service is performed in Thailand regardless of where it is used, or if it is conducted elsewhere and used in Thailand, it is considered to be supplied in Thailand.
Any person or company that intends to sell products or offer services and has purchased items and services that are subject to VAT before starting their business is subject to VAT. At least 6 months before to the event, the tax registration must be completed.
The construction or business operation, unless there is proof that the construction or company activity will begin within a reasonable amount of time.
In Thailand, whether or not an importer is a registered person, he or she is subject to VAT. The Customs Department will collect VAT at the moment products are imported.
Certain types of enterprises are exempt from VAT and will instead be subject to SBT (SBT). Taxable products are any tangible or intangible property that is accessible for sale, personal use, or any other purpose under the VAT regime. It also includes any articles that are brought into Thailand. Any activity carried out for the benefit of a person or an organisation that is not a delivery of products is referred to as a service.
The current value added tax (VAT) rate is 7%. (The 7% rate cut has been extended until September 30, 2019.) The following items are subject to a zero percent rate:
• Goods exported from Thailand;
• Services rendered in Thailand and used outside Thailand
• Aircraft or sea-vessels engaged in international transportation;
• Supply of goods and services to government agencies or state-owned enterprises under the foreign-aid program;
• Supply of goods and services to the United Nations
• Supply of goods and services between bonded warehouses or between enterprises located in EPZs.
Every time a transaction is performed, a VAT registered person or business is required to submit tax invoices detailing the nature and value of the products sold or services rendered, as well as the amount of VAT owed. In order to claim input tax credit, a tax invoice is required.
• The word "Tax invoice" in a prominent place,
• The issuer's name, address, and tax identification number,
• The purchaser's or customers' names and addresses,
• The serial numbers of tax invoices and tax invoice books (if applicable),
• The description, value, and quantity of goods or services;
• The amount of VAT chargeable, and
• The date of issuance
3) Personal Income Tax in Thailand
Personal Income Tax (PIT) is a direct tax levied on the income of a person. A person means an individual, an ordinary partnership, a non-juristic body of person and an undivided estate. In general, a person liable to PIT has to compute his tax liability, file tax returns and pay tax, if any, accordingly on a calendar year basis
Income chargeable to the PIT is called “assessable income.” The term covers income both in cash and in kind. Therefore, any benefits provided by an employer or other persons, such as a rent-free house or the amount of tax paid by the employer on behalf of the employee, are also treated as assessable income of the employee for the purpose of PIT.
Assessable income is classified into 8 main categories:
Earnings from personal services rendered to employers;
Earning by virtue of jobs, positions or services rendered;
Earnings obtained from goodwill, copyright, franchise, other rights, annuity, or periodic payments resulting from a will or any other legal act or court ruling;
Dividends, interest on deposits with Thai banks, shares of profits or other benefits from a juristic company, juristic partnership, or mutual fund, payments received as a result of a capital reduction, a bonus, an increased capital holding, gains from amalgamation, acquisition, or dissolution of juristic companies or partnerships, and gains from transferring of capital are all examples of income.
Earnings from property rentals and contract breaches, installment sales, or hire-purchase agreements;
Earnings from liberal occupations;
Earnings from construction and other contracts of work;
Earnings from a variety of sources, including business, commerce, agriculture, industry, transportation, and any other activity not before mentioned.
Eastern Economic Corridor Office of Thailand (EECO) www.eeco.or.th