The taxation in Thailand is governed by the Thai Revenue Code. Being the central government as the main taxing authority taxes are imposed both at national and local levels in Thailand. The majority of tax collections is administered by the Ministry of Finance. The Revenue Department under the following categories collects the income tax:
- Corporate Income Tax
- Value Added Taxes (or Specific Business Taxes)
- Stamp duty
Personal Income Tax
Apart from this the basic tax collecting authorities in Thailand are:
- The Customs Department, responsible for collection of import and export duties and
- The Excise Department, which collects excise tax.
property tax and municipal tax are collected by local authorities.
PERSONAL INCOME TAX
Personal Income Tax is levied on every individual, resident or non-resident, who derives assessable income from employment or business in Thailand, or has assets located in Thailand, whether such income is paid in or outside of Thailand.
Exemptions are granted to certain persons, including United Nations. officers, diplomats and certain visiting experts, under the terms of international and bilateral agreements.
An individual who lives in Thailand for more than the period or periods totaling at least 180 days in any tax (calendar) year is deemed to be a resident of Thailand. He is subject to tax on all assessable income derived from sources within the country, whether paid within or outside Thailand.
Tax may be levied on the followings viz:
- Wages paid in Thailand or abroad
- Income (wages, interest, dividends, etc.) from abroad brought into Thailand in the year earned by a person who reside in Thailand for a total of 180 days or more in any one taxable calendar year
- Housing and meal allowances or their value
- School fees for dependents paid for by employer
- Cost of home leave for taxpayer and dependents.
- Capital gains arising from transfer of assets,
- Pensions and retirement pay brought into Thailand.
The tax due is assessed on the net taxable income at progressive rates ranging from 5% to 37%.
In contravention with the provisions of the Tax law if an individual fails to file his/her annual tax return is subject to a penalty of twice the amount of the tax due plus a certain percentage of surcharge on monthly basis of the due amount. In the case of improperly filed tax return, the individual will have to pay a one-time penalty in the amount of the tax due and with a certain percentage of monthly surcharges.
CORPORATE INCOME TAX
The companies and partnerships established under Thai laws are subject to income tax on income earned from sources within and outside of Thailand. The juristic companies and partnerships for income tax purposes include, but are not limited to:
- Limited companies.
- Registered ordinary and limited liability partnerships.
- Joint ventures.
- Foundations and associations
A branch of a foreign corporation earning from sources within Thailand.
Corporate Income Tax is imposed on the net profits as per the generally accepted accounting principles and according o the conditions described in the Revenue Code of Thailand.
Corporate Taxpayer shall bear in mind that:
- Every return must be accompanied by audited financial statement.
- Shall file a half-year return and pay 50 percent of the estimated annual income tax by the end of the eighth month of the accounting period.
If it fails to pay the estimated tax or under-payment by more than 25 percent may subject the taxpayer to a fine amounting to 20 percent of the amount in deficit.
However the Corporate gets some kind of exemption on dividend
- Dividends received by Thai companies or foreign companies carrying on business in Thailand are taxable as ordinary income. It is entitled to include in its taxable income only one-half of the dividends received from another Thai company, provided that shares have been held for a period of at least three months before and three months (Holding period) after receipt of such dividends.
- A Thai company will be exempt from taxation on all dividends received from another Thai company if the recipient company holds at least 25% of the total shares with voting rights in the paying company and has so held such shares in compliance with the holding period, and the paying company does not hold any shares of the recipient company, either directly or indirectly.
Thai companies listed on the Stock Exchange of Thailand are exempt from taxation on all dividends received from other Thai companies if they merely comply with the defined holding period.
If the Corporate taxpayer fails to file a tax return, late filing or filing a return containing false or inadequate information may subject the taxpayer to various penalties. Failure to file a return, and sub-sequent non-compliance with an order to pay the tax assessed, may result in a penalty equal to twice the amount of tax due. Penalties are due within 30 days of assessment.
An annual income tax return must be filed within 150 days after the end of each accounting period, and must be accompanied by audited financial statements.
PETROLEUM INCOME TAX
Income derived from petroleum operations of a company owning interest in a petroleum concession granted by the Thai government and of a company purchasing oil for export from a concession holder is subject to income tax imposed by the Petroleum Income Tax Act.
INCOME UNDER THIS HEAD
Income under this head includes:
- gross income from sale or disposal of petroleum,
- gross income arising from transfer of any property or right-related petroleum business,
- any other income arising from conducting petroleum business.
value of petroleum delivered as a royalty payment to the government
Petroleum income tax is charged on net profit at the rate of 50% after allowing deductions.
DOUBLE TAXATION AVOIDANCE
The tax treaties entered by the Thai Government are mainly concerned with the avoidance of double taxation. The principle of Double Taxation Avoidance is that a person will not be subjected to tax in another country where he resides if he is already paid the tax in the country where he earns the income. It saves the person from paying tax twice. The treaty aims at providing for cooperation between governments in preventing the evasion of taxes. The scope of the Thai tax treaties covers taxes on income and on the capital of individual and juristic entities. The provisions of these tax treaties minimize or exempt certain types of income from taxation.
VALUE ADDED TAX (VAT)
The Value Added Tax (VAT) is generally imposed to goods and services supplied in or imported into Thailand. VAT includes municipal tax, which is charged at the rate of one-ninth of the VAT rate. Under the this tax regime, value added at every stage of the production process is subject to tax. This tax affects: Producers, providers of services, wholesalers, retailers, exporters and importers. A zero per cent rate applies to certain businesses, for example, the Export Of Goods Or Services, international transportation by sea or air, and the sale of goods and services to United Nations-related organizations. The trader will charge VAT on the sale of goods or provision of services to the consumer. The businesses which are excluded from VAT subject to specific business tax, businesses necessary for maintenance of life and social welfare (i.e. health care services, educational services, domestic transportation, sale of unprocessed agricultural products), cultural services, religious and charitable services. Traders who do only zero-rated supply business will not be required to collect VAT on their supplies, but can refund all VAT paid for purchase of goods and services from others. Services provided by traders residing abroad and utilized in Thailand are regarded as being rendered in Thailand and subject to VAT.
The VAT payer is required to file a monthly VAT return and pay the tax monthly, on or before the fifteenth day of the following month.
Failure to register as a VAT payer, file a VAT return, or issue a tax invoice to a customer, is subject to a penalty of twice the amount of the tax due. A monthly surcharge of certain percentage for failure to pay the VAT is levied on the tax due. In addition, punishment for noncompliance with VAT regulations allows for a maximum punishment of imprisonment up to seven years and a fine of up to Baht 200,000.
SPECIFIC BUSINESS TAX (SBT)
This tax is imposed on certain types of businesses whose value added is difficult to define such as banking, finance, life insurance, pawnshops, and real estate. Such businesses are considered to be outside the VAT system and therefore are not subject to VAT. Specific business tax is computed on monthly gross receipts which do not include municipal tax.
When specific business tax is paid, municipal tax is paid at the rate specified by the Government is imposed thereon. When VAT is paid, one-ninth of its rate goes to municipal tax.
Stamp duty can be imposed on the instruments listed in the Stamp Duty Schedule of the Revenue Code at different rates specified therein. The instruments are such as promissory notes, bills of exchange, powers of attorney, letters of credit etc. If the instrument is executed in Thailand, the stamp duty is due within 15 days after the execution date. However, if the instrument is executed outside Thailand, the stamp duty is due within 30 days after arrival of the instrument in Thailand.
This tax is imposed mainly on luxury items such as gasoline and petroleum products, tobacco, liquor, soft drinks, playing cards, crystal glasses etc. Excise tax will be computed according to the Excise Tax Tariff on an ad valorem basis or at a specific rate, whichever is higher. All goods subject to excise tax also remain subject to VAT. The excise tax is collected by the Excise Department and usually imposed at the time of delivery of the goods from factories.
Customs duty is mainly imposed on import and some export goods specified in the Customs Tariff statute. Exported goods that are subject to customs duty include rice, rubber, leather, and teak. In general, the invoice price is the basis for computation of duty and normally applied to CIF (Cost, Insurance, Freight) value for import and FOB (Free On Board) for export.
Thailand being a member country of the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) adopts practices and standards in accordance with the GATT codes in determining customs price.