Income Tax for Foreign Business in Thailand

 

As a foreign investor or company in Thailand, it is essential for you to know about the income tax obligations in the kingdom. We all know that the Royal Thai government offers various tax and non-tax incentives to foreign investors. Therefore, unless you do your tax planning, you will never be able to assess whether you are eligible for the tax benefits or not. This article will serve as your comprehensive guide by highlighting all you must know about Income Tax for Foreign Business in Thailand.

Overview

The tax obligations on foreign business in Thailand depend significantly on the type of business it is doing here in the kingdom. The reason behind this is the following:

1. There are certain Board of Investment tax incentives that are applicable only to eligible businesses and activities. Check out the list of activities eligible for tax incentives under BOI Thailand. Therefore, if your business falls on this list, you may release yourself from various types of bills and taxes.
2. If you are into manufacturing business, then there are certain tax benefits from the Industrial Estate Authority of Thailand. Although you have to satisfy certain conditions, yet, on qualifying you can enjoy VAT exemptions and export-import tax exemptions. Check out the eligibility and tax benefits under IEAT Thailand.
3. There are double tax treaties between Thailand and 61 countries. These tax treaties remove the mandates of paying tax to foreign companies for the same income in both Thailand and the native nation. Therefore, it is always wise to check whether you are liable to pay double tax or not. These privileges of tax deduction also sometimes depend on the type of business you are planning to do in Thailand.

Note that, to ascertain the tax liability of your business in Thailand, you must check through the above three points. It might be somewhat tricky for you to review and consider all the aspects associated with the same. Therefore, you must go on consultation with a professional Thai tax law firm to clear your mind on this.

Types of Income Tax for Foreign Business in Thailand

Foreign companies operating in Thailand may be subject to various types of taxes. Here are some of the main taxes that foreign companies may be required to pay in Thailand:

Corporate Income Tax (CIT)

Foreign companies that generate income in Thailand are generally subject to CIT at a standard rate of 20%. However, specific tax incentives may apply based on the type of business and industry. Check out the Corporate Income Tax rates of Thailand below:

Value Added Tax (VAT)

VAT is applicable to the sale of goods and services in Thailand. The standard rate is 7%, but certain goods and services may be subject to a reduced rate or exemption. However, the general rate of VAT applicable to various products and services in Thailand is as follows:

Withholding Tax

Foreign companies making payments to individuals or other entities in Thailand may be required to withhold tax on certain types of income, such as interest, dividends, royalties, and payments for services. The withholding tax rates vary depending on the payment type and the recipient’s tax status. Following are the updated rates of withholding Tax in Thailand:

Specific Business Tax (SBT)

Certain types of businesses, such as financial institutions, may be subject to SBT in addition to CIT. SBT rates vary depending on the type of business.

Property Tax

If a foreign company owns property in Thailand, it may be subject to property taxes. These taxes can include land and building taxes. Check out here to know all about Property Tax Regulations and Rates in Thailand.

Stamp Duty

Stamp duty may apply to various documents, contracts, and transactions, such as property transfers and certain legal agreements.

Excise Tax and Custom Duties

Certain products, such as alcohol, tobacco, and petroleum, may be subject to excise tax. Foreign companies involved in producing or importing such products may need to pay excise tax.

Moreover, if a foreign company engages in international trade with Thailand, customs duties may apply to the import and export of goods.

Transfer Pricing Regulations

Thailand has transfer pricing regulations to ensure that transactions between related entities are conducted at arm’s length prices for tax purposes. Foreign companies must comply with these regulations when dealing with Thai affiliates. Go through our article to learn more about transfer pricing in Thailand.

Income Tax Payment Deadlines for Foreign Business in Thailand

In Thailand, tax deadlines can vary depending on the type of tax and the taxpayer’s circumstances. Here are some general guidelines for tax payment deadlines in Thailand:

The Bottomline

This article has covered a majority of the nooks and corners of income tax applicable to foreign businesses or companies in Thailand. We hope that it will help you in your understanding of the tax regime of Thailand for your business.

However, it is always wise to have a professional Thai tax consultant by your side. In addition to tax payments, we also specialize in helping Thai and foreign businesses with bookkeeping, accounting, and payroll management support. To get all the services under one roof, email us at officer@konradlegal.com for expert support.

Do Foreigners have to Pay Income Tax in Thailand?

 

Yes, foreigners do have to pay income tax in Thailand if they gain the status of being tax residents here in the kingdom. Read through this article to learn about your eligibility to pay tax and the types of tax you may have to pay in Thailand.

Types of Income that Make Foreigners Tax-liable in Thailand

Before you check your tax eligibility, it is essential to check whether your income supports tax compliance or not. In many cases of double tax treaties between your nation and Thailand, you may have to pay tax in your home country but not in Thailand. In general, the following types of income in Thailand make you tax-liable:

Salary and Employment Income

Foreigners working in Thailand are typically subject to income tax on their salaries and employment income they earn here. The tax rates may vary based on income levels. 

Check out the Income Tax slab for foreigners in Thailand.

Rental Income

If you own property in Thailand and earn rental income from it, this income is generally subject to taxation.

Business and Self-Employment Income

If you operate a business or engage in self-employment activities in Thailand, the income from these sources is typically taxable.

Interest and Dividends

Income earned from bank interest, dividends from Thai companies, or other investment income may also be subject to taxation.

Capital Gains

Depending on the circumstances, capital gains from the sale of certain assets in Thailand. Note that, it can be real estate or securities that are taxable in your case.

Pensions and Annuities

Foreigners receiving pensions or annuities from sources in Thailand may have tax obligations.

Royalties

If you receive royalties from intellectual property or other sources in Thailand, this income may be taxable.

Other Sources of Income

Any other income earned in Thailand, including prizes, awards, or other windfalls, may also be subject to taxation.

As stated earlier, if your country holds any type of tax treaty or bilateral trade agreement with Thailand, your income may be subject to tax deductions or exemptions. Therefore, it is recommended that you should consult with a reliable tax firm in Thailand to get this eligibility checked.

Income Tax Eligibility for Foreigners in Thailand 

Income tax for foreigners in Thailand varies depending on several factors, including your residency status and the type of income you earn in the country. Here’s a general overview:

Residency Status

Thailand distinguishes between resident and non-resident foreigners for tax purposes. Your residency status is determined by how many days you spend in the country within a tax year.

• Resident: If you stay in Thailand for 180 days or more in a tax year, you are considered a tax resident.
• Non-Resident: If you stay in Thailand for at least 180 days in a tax year, you are considered a non-resident.

Taxable Income

Tax residents are generally taxed on their worldwide income, while non-residents are taxed only on income earned in Thailand.

Tax Rates

Thailand uses a progressive tax rate system for personal income tax, which ranges from 0% to 35%. Please note that tax rates and brackets may change over time, so it’s essential to check the latest tax rates from the Thai Revenue Department or consult a tax professional in Thailand.

Tax Deductions and Exemptions

Thailand offers certain deductions and exemptions for both residents and non-residents. These may include deductions for specific expenses, allowances, and exemptions for certain types of income.

Filing and Payment

Tax residents must file a personal income tax return by the end of March each year. Non-residents must file a return within seven days of departing Thailand if their income is subject to withholding tax.

Double Taxation Agreements (DTAs)

Thailand has entered into Double Taxation Agreements with many countries to prevent double taxation. If you’re a foreigner, check whether your home country has a DTA with Thailand, as it can affect your tax liability.

Tax Identification Number (TIN)

Foreigners who work or earn income in Thailand should obtain a Tax Identification Number, which is used for tax-related purposes.

Types of Income Tax Payable by Foreigners in Thailand

Foreigners in Thailand may be subject to various types of income tax depending on their specific circumstances. Here are the main types of income tax that foreigners may be liable for in Thailand:

Personal Income Tax (PIT)

Foreign individuals who earn income in Thailand are generally subject to PIT. The tax rates vary based on the amount of income earned, with progressive rates ranging from 0% to 35%. Deductions and exemptions may apply depending on the nature of income and personal circumstances. Know about the recent updates on Personal Income Tax in Thailand.

Corporate Income Tax (CIT)

Foreigners who own or invest in Thai companies may be subject to CIT on their corporate income. The standard CIT rate is 20%, but certain incentives and exemptions may apply to specific industries or activities. Click to file your corporate income tax in Thailand today!

Withholding Tax

Foreigners who receive certain types of income from Thai sources may have withholding tax obligations in Thailand. This can include dividends, interest, royalties, and payments for services. The rates vary depending on the type of income and the tax treaty, if any, between Thailand and the foreign individual’s home country.

Value Added Tax (VAT)

While not an income tax per se, VAT is an indirect tax that can impact foreigners doing business in Thailand. It applies to the sale of goods and services and is typically collected by businesses. Foreigners who engage in business activities in Thailand may need to register for VAT and comply with its regulations.

Specific Business Tax (SBT)

SBT is a tax that applies to specific types of businesses and activities, such as liquor, tobacco, and entertainment establishments. Foreigners involved in such businesses may be subject to SBT.

Property Tax

Foreigners who own property in Thailand may be subject to property taxes, including the land and buildings tax and the local development tax.

Check out whether you have to pay property tax in Thailand or not!

Stamp Duty

Stamp duty may apply to certain legal documents and financial transactions in Thailand, and foreigners could be subject to it depending on their activities.

The Bottomline

Income tax, be it personal, corporate, withholding, or of any type in Thailand is guided by some country-specific protocols. Thailand typically follows Thailand Financial Reporting Standards (TFRS) as the governing guidelines in the process of reconciliation, filing, and payment of income taxes. However, if you need to show the same in your country, that may need International Financial Reporting Standards (IFRS).

Therefore, it is crucial that you consult a reputed tax firm in Thailand to get things properly aligned. For a complete solution, email us at officer@konradlegal.com and get to know all about your eligibility to pay tax. Our professionally qualified Thai tax professionals will surely ensure a smooth tax filing and payment process in Thailand.

Income Tax Exemptions in Thailand: 2023 Updates

 

There is an announcement of a Royal Decree (“RD”) giving income tax exemptions in Thailand. This is applicable to all investments in target businesses. Noteworthily, this RD is part of ongoing government efforts to encourage social and scientific growth. The Revenue Decree Governing Exemption of Taxes and Duties (No. 750) B.E. 2565 (2022) went into force on June 15, 2022, and will be effective until June 30, 2032. This decree is applicable for both Personal and Corporate Income Tax in Thailand.

The main purpose of this RD is to exclude gains made by individuals, businesses, and legal partnerships. These exclusions are for investments in the target industries leading to the formation of “Target Companies“. The exemption also applies to investments made in eligible Thai Venture Capital Trusts (“VCT”) and Private Equity (“PE”) companies.

• Which Businesses are Eligible for Income Tax Exemption in Thailand?
• Case-specific Income Tax Exemptions in Thailand
  • Direct Investments
  • Investment through Private Equities (PEs)
    • Share Transfer Gains
    • Dissolution Gains
  • Investment through Venture Capital Trusts (VCTs)
    • Unit Transfer Gains
    • Dissolution Gains
• How can we help with Tax Exemption in Thailand?

Which Businesses are Eligible for Income Tax Exemption in Thailand?

A firm or legal partnership conducting business in one or more of the following “Target Industries” is a Target Company. The Committee on Policy for National Competitiveness Enhancement for Target Industries has chosen the following industries as targets:

• Next generation automotive
• Intelligent electronics
• Advanced agriculture and biotechnology
• Food for the future
• High-value and medical tourism
• Automation robotics
• Aviation and logistics
• Medical and comprehensive healthcare
• Biofuels and biochemicals
• Digital development
• Defense
• Education and human resource development

Case-specific Income Tax Exemptions in Thailand

Direct Investments

Gains from the sale of shares in a Target Company will not be subject to personal or corporate income taxes. Conditions that are crucial include:

1. Before the capital gain is realized, the investor must have owned the shares for at least twenty-four (24) months.
2. In each of the two (2) consecutive accounting periods prior to realizing gains from the transfer of shares, at least 80% of the operating revenue of the Target Company must have come from business operations in the Target Industries.

Investment through Private Equities (PEs)

Share Transfer Gains

Gains from the transfer (disposal) of PE shares that invest in a target company are free from PIT and CIT if the investor-owned the PE shares for at least twenty-four (24) months prior to the capital gain’s occurrence. Furthermore:

1. The capital gain exemption is only proportionate to the PE’s participation in the Target Companies if the PE has no retained earnings. Additionally, in each of the two (2) prior accounting periods to the day gains are generated from the transfer of shares, at least 80% of the Target Company’s operational revenue had to have come from business operations in the Target Industries. The Director General (“DG”) of the Revenue Department shall establish the required percentage of investments by the PE into Target Companies.
2. The entire gain earned by the investor in the PE will be exempt from PIT or CIT if the PE has retained earnings and at least 80% of those retained earnings were derived from gains as described above, in each of the two (2) accounting periods prior to the date on which the investor in the PE receives income from the transfer of shares (of the PE).
3. Legal reserves cannot be included in the calculations of retained earnings in clauses 1. and 2. above.

Dissolution Gains

According to RC, Section 40(f), a shareholder’s excess return on investment upon dissolution comes under the taxable income slab. However, under RD, the PE investor need not recognize the excess return of capital from the dissolution of a PE. Because it can only be used in proportion to the PE’s interest in the Target Companies, the exemption is restricted. Additionally, for the two consecutive accounting periods prior to the dissolution of the PE, at least 80% of the Target Company’s operating revenue had to come from Target Industries.

Investment through Venture Capital Trusts (VCTs)

Unit Transfer Gains

If the investor held the shares for at least twenty-four (24) months prior to the gain occurring, gains from the transfer (disposal) of VCT units that were invested in a target company will be exempt from PIT and CIT. Furthermore:

1. The capital gain exemption only applies in proportion to the VCT’s investment in Target Companies if it had no retained earnings. In addition, in the two (2) consecutive accounting periods prior to the gain from the transfer of units, at least 80% of the operating revenue of the Target Company is in each of the Target Industries. The Director General (“DG”) of the Revenue Department shall establish the required percentage of investment in Target Companies by the VCT.
2. The entire gain from the transfer of units will be exempt from PIT or CIT if the VCT has retained earnings, and it did so in each of the two (2) accounting periods prior to the unit transfer, which resulted from investment in a Target Company that derives at least 80% of its total income from operations in target industries.

Dissolution Gains

When a VCT dissolves, a unit holder’s income is free from income recognition. However, it is only to the extent of VCT investment in Target Companies. In addition, during the two (2) consecutive accounting months prior to the VCT’s dissolution, at least 80% of the operating revenue of the Target Company must come from Target Industries.

How can we help with Tax Exemption in Thailand?

Although this article is an attempt to explain to you the new announcement of the Royal Decree for Income Tax exemption, yet, is not enough to cover the entire concept. Therefore, you will need a reliable Accounting and Taxation firm in Thailand by your side to guide you throughout. When that firm is Konrad Legal, we assure you of the following benefits:

• Dedicated Accounting team to track the books and accounts of your business in Thailand
• Planned, Requested, or Statutory, get professional Internal & External Audit Services
• Complete support for Personal and Corporate Income Tax Payment & Return Filing

So, if you want to manage your accounting, audit, and taxation requirements from a single point of contact, then do count on us. Email us your requirements at officer@konradlegal.com