Dej-Udom & Associates advises on all matters pertaining to taxation in Thailand and offers tax advisory and tax compliance guidance on corporate and personal tax, customs and excise tax, value added tax, and other specific tax issues. The firm successfully helps clients to modify their operations and implement tax saving measures, comply with new tax laws, and utilize offshore tax planning facilities, and has also served as a tax advisor to a number of overseas banking institutions with respect to inter-banking transactions. The Dej-Udom & Associates Tax Calendar for 2016
Thailand Tax Overview
Under Thailand’s Revenue Code, there is Value Added Tax (VAT), Personal Income Tax, Corporate Income Tax, and Stamp Duty along and there are also separate acts on Customs and Tariffs, Excise Tax, Leased Land Tax, Municipal and Locality Tax, and Sign Board Tax. Thailand has Double Tax Treaties on income tax in force with 60 countries, and seven ASEAN members – Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, and Vietnam – are included in this number. The Thai government has approved nine new tax treaties between Thailand and Brunei, Estonia, Ireland, Kenya, Lithuania, Morocco, Papua New Guinea, Tajikistan, and Zimbabwe that will come into effect when the diplomatic procedures are complete. Regarding a Double Tax Treaty between Thailand and Cambodia, in a press release by the Director-General of the Revenue Department in May 2012, he stressed the importance of having a tax treaty between Thailand and all AEC members and that negotiations with Cambodia would start as soon as possible.
Value Added Tax (VAT)
Value Added Tax (VAT) is a non-cumulative consumption tax levied on all goods and services at a reduced rate of 7% that will return to 10% in 2016. Individuals and businesses that supply goods or services must register as VAT operators except when annual turnover is less than THB 1.8 million. Some business types are excluded from VAT payment and pay the Specific Business Tax (SBT) that’s 0.1% to 3% of gross receipts.
Personal Income Tax
Personal Income Tax rates apply for tax residents and noon-residents. Residents pay tax on all income from sources within Thailand and any foreign income remitted into the country. Non-residents only pay tax on their Thailand income. Individuals living in Thailand for 180 days or more in a year are considered residents. Thailand recently changed its personal income tax rate structure, and for the 2013-15 tax years, all personal income will be taxed at a progressive rate of 5% up to 35% and tax brackets have been expanded from five to seven. Most capital gains are considered income. The standard deduction for a taxpayer is up THB 60,000 plus up to another THB 60,000 for their spouse along with THB 15,000 a child (limited to 3 children), and other qualified donations aggregating to not more than 10% of the net income before tax
Corporate Income Tax
All juristic persons, entities created or registered according to the law, are subject to Corporate Income Tax which is calculated on a company’s net profit on an accrual basis. For the 2013-2015 tax years, the Corporate Income Tax rate is 20%. Foreign companies carrying on business in Thailand are liable for 20% tax on any profits deriving from business in Thailand.
While filing corporate income tax in Thailand is not necessarily complex, businesses should be careful about matters that could immediately trigger fines, surcharges, or investigations by the Revenue Department. Missing filing dates, wrongly determining which revenue is taxable, or misidentifying what can be claimed as an expense in the Revenue Code are all common mistakes that guarantee prompt attention from the authorities. To avoid the penalties from these oversights, and others, and the extra time needed to resolve them, Dej-Udom & Associates recommends using an experienced Thai tax professional, especially if a business is currently relying on a non-Thai using a translated version of the Revenue Code. This is also true for international companies that have their tax departments located outside of Thailand.
Thailand’s Corporate Income Tax (CIT) is a direct tax levied on a juristic company or partnership carrying on business in Thailand or if not carrying on business in Thailand, deriving certain types of income from Thailand. Taxable entities include companies and juristic partnerships incorporated under Thai law – limited companies, public limited companies, limited partnerships, and registered partnerships; companies and juristic partnerships incorporated under foreign law; joint ventures; and businesses operated in a commercial or profitable manner by a foreign government or its organization. For the 2013-15 accounting periods, the corporate income tax rate for a SME (Small and Medium Enterprise) with a paid-up capital less than THB 5 million at the end of each accounting period is 15% if their yearly net profit does not exceed THB 1 million and 20% if their net profit exceeds THB 1 million.
A Thai private limited company is the most popular business structure in Thailand, and as a limited company carrying on business in Thailand, it must file a half-year and annual corporate income tax return. The tax paid at the half year is a prepayment calculated on the forecasted net profit for the year and is credited against the full-year tax liability. The latest the half-year return can be filed is two months from the last day of the first six months of the company’s accounting period, and the annual return must be filed within 150 days from the last day of the accounting period.
Businesses and investments operating under the Investment Promotion Act, including the Thailand Board of Investment (BOI) and the Industrial Estate Authority of Thailand (IETA), must be careful to separate revenue protected by tax privilege from revenue which is liable for taxation. If the Revenue Department discovers errors of this nature, it will inspect the books, recalculate the tax, and levy fines.
Are the Revenue Code Guidelines for depreciation being used correctly? Is the company’s current accounting system acceptable in regards to the Revenue Code? Has the company requested a report on all company accounts as of the last fiscal day from all of its banks? Are there any pending clarifications on VAT tax with Revenue Department? Is it likely that a net operating loss can be fully utilized prior to the 5-year limitation? The Revenue Department pays close attention to companies operating in Thailand, so these are just a few of the questions that need to be answered before filing a corporate income tax return.
Under the Revenue Code, stamp duty is only taxed on instruments, not transactions or persons. Only instruments listed in the Stamp Duty Schedule are subject to pay stamp duty. If a listed instrument lacks stamp duty, it is not legal and becomes inadmissible in the court system, and fines for failure to stamp documents are very high. Stamp duty rates depend on the nature of the transaction and the listed instruments in the official schedule include:
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