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Thailand

Country Name: Kingdom of Thailand
Currency: Thai Baht (THB)
Primary Tax Authority: The Revenue Department, Ministry of Finance
Key Legislation:

  • Revenue Code of Thailand
  • Investment Promotion Act
  • Customs Act
  • Value Added Tax (VAT) Act
  • Land and Building Tax Act

Fiscal Authority Allocation

Centralized Fiscal System:
Thailand operates a centralized tax system with the Revenue Department, Ministry of Finance, responsible for administering and collecting taxes, including corporate income tax (CIT), personal income tax (PIT), value-added tax (VAT), and other indirect taxes. Local authorities collect property and land taxes.

Corporate Income Tax (CIT)

Standard Rate: 20%
Thailand imposes a flat corporate income tax rate of 20% on net taxable income. Small and medium-sized enterprises (SMEs) benefit from reduced rates.

SME CIT Rates:

  • Net profit up to THB 300,000: Exempt
  • Net profit from THB 300,001 to THB 3,000,000: 15%
  • Net profit above THB 3,000,000: 20%

Corporate Forms and Taxation:

  1. Resident Companies: Taxed on worldwide income.
  2. Non-Resident Companies: Taxed only on Thailand-sourced income.

Exemptions and Incentives:

  • Board of Investment (BOI) Promotion: Companies that qualify under Thailand’s Investment Promotion Act receive tax holidays of up to eight years, exemptions from import duties on machinery and raw materials, and CIT reductions.
  • Research & Development (R&D): Companies investing in R&D can receive additional tax deductions or credits.

Goods and Services Tax (GST) / Value-Added Tax (VAT)

Standard Rate: 7%
Thailand imposes VAT at a standard rate of 7% on most goods and services. VAT is levied on domestic consumption and on imports of goods and services.

Exemptions:
Certain goods and services, including healthcare, education, and financial services, are VAT-exempt. Exports are zero-rated, allowing businesses to reclaim VAT on inputs used to produce export goods.

Personal Income Tax (PIT)

Progressive Rates:
Thailand applies a progressive personal income tax system on residents’ worldwide income. Non-residents are taxed only on Thailand-sourced income.

Resident Tax Rates for 2023 (Annual Income):

  • Up to THB 150,000: 0%
  • THB 150,001 to THB 300,000: 5%
  • THB 300,001 to THB 500,000: 10%
  • THB 500,001 to THB 750,000: 15%
  • THB 750,001 to THB 1,000,000: 20%
  • THB 1,000,001 to THB 2,000,000: 25%
  • THB 2,000,001 to THB 5,000,000: 30%
  • Above THB 5,000,000: 35%

Non-Resident Tax Rate:
Non-residents are taxed at a flat rate of 15% on Thailand-sourced income, except for employment income, which is taxed under the progressive rates.

Deductions and Allowances:
Taxpayers can claim deductions for mortgage interest, charitable donations, and medical expenses. Personal allowances are available for the taxpayer, spouse, children, and dependent parents.

Additional Mandatory Contributions

Social Security Fund (SSF):
Employers and employees are required to contribute to Thailand’s Social Security Fund, which provides pensions, healthcare, and unemployment benefits.

  • Employer Contribution: 5% of gross salary (up to a maximum of THB 750 per month).
  • Employee Contribution: 5% of gross salary (up to a maximum of THB 750 per month).

Withholding Taxes

  • Dividends: 10%
  • Interest: 15%
  • Royalties: 15%
    Thailand imposes withholding taxes on dividends, interest, and royalties paid to non-residents. These rates may be reduced under Thailand’s double taxation agreements (DTAs).

Transfer Pricing Rules

Thailand follows OECD guidelines on transfer pricing. The Revenue Department requires companies to apply the arm’s-length principle for related-party transactions and maintain transfer pricing documentation if annual income exceeds THB 200 million.

Special Tax Regimes

  • Board of Investment (BOI) Promotion: Companies investing in promoted sectors such as high-tech industries, renewable energy, and advanced manufacturing can benefit from tax holidays, CIT reductions, and customs duty exemptions.
  • Eastern Economic Corridor (EEC): Companies operating in the EEC benefit from tax incentives, including tax holidays of up to 13 years, reduced CIT rates, and customs duty exemptions on machinery and raw materials.
  • International Headquarters (IHQ): Companies registered as International Headquarters or International Trading Centers (ITCs) in Thailand may qualify for reduced or exempt CIT rates on income derived from qualifying regional or global operations.

Other Taxes

  • Land and Building Tax: Thailand imposes an annual tax on the ownership of land and buildings, with rates depending on the type of property (e.g., residential, agricultural, commercial). Rates range from 0.01% to 0.7%.
  • Stamp Duty: Stamp duty is levied on certain legal documents, including leases and loan agreements, with rates varying depending on the type of transaction.
  • Excise Taxes: Excise duties are levied on goods such as alcohol, tobacco, fuel, and luxury products.

Double Taxation Agreements (DTAs)

Thailand has signed over 60 double taxation agreements (DTAs) with countries such as the United States, Japan, China, and Singapore. These DTAs help reduce withholding taxes on dividends, interest, and royalties, and prevent the double taxation of income earned in Thailand and abroad.

Local Taxes

Local governments in Thailand may impose minor fees such as business license fees and local property taxes. However, most significant taxes, including CIT, PIT, and VAT, are centrally administered by the Revenue Department.

Compliance and Reporting

Annual Filing:
Corporate tax returns must be filed by May 31st for companies with a fiscal year ending December 31st. Personal income tax returns are due by March 31st. VAT returns are filed monthly, and businesses are required to remit VAT collected to the Revenue Department.

Penalties for Late Filing:
Penalties for late filing or non-compliance include fines, interest on unpaid taxes, and additional penalties for underreporting or misreporting income. Late filing penalties are generally 1.5% per month of the unpaid tax amount.

Recent Developments

Digital Economy and E-Commerce Taxation:
Thailand has introduced new tax measures to regulate the digital economy. Foreign digital service providers earning more than THB 1.8 million from Thai customers annually must register for VAT, collect the tax, and remit it to the Thai Revenue Department.

Environmental and Green Economy Initiatives:
The Thai government has been promoting green investment and sustainability initiatives by offering tax incentives for companies that invest in renewable energy, electric vehicles, and environmentally friendly projects. These incentives include tax deductions and extended tax holidays.

Transfer Pricing and BEPS Compliance:
In response to global trends, Thailand has strengthened its transfer pricing regulations to align with the OECD’s Base Erosion and Profit Shifting (BEPS) framework. Companies are now required to maintain detailed transfer pricing documentation to substantiate related-party transactions.

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