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Minimum Maximum Tax Rate
The first 150,000 baht 0%
150,001 baht 300,000 baht 5%
300,001 baht 500,000 baht 10%
500,001 baht 750,000 baht 15%
750,001 baht 1,000,000 baht 20%
1,000,001 baht 2,000,000 baht 25%
2,000,001 baht 5,000,000 baht 30%
All income above 5,000,000 baht 35%

Overview - Company Financial Administration
Overview - Company Financial Administration
Overview - Company Financial Administration

What follows is an overview of the most common aspects of Thai taxation encountered by small businesses.

To view the 2017 Personal Income Tax Table - Click here.

Personal income taxes are withheld from salary by your company each month, and are then paid to Revenue Department by the fifth day of the following month. Your accountant will generally tell you the correct NET compensation amount to pay each employee each month, based on your input to the accountant the gross compensation amount. To see what personal income tax would be based on various scenarios, Visit our on-line Personal Income Tax Calculator in the References & Links section or click here.

The "default" calculation rule used by most accountants is: each month, tax is calculated based on assuming that monthly compensation for all future months of the current calendar year will be the same amount as was paid in the most recent month. The computation is as follows:

  1. Assume pay for all remaining months of the year at the level of the most recent month - and calculate total annual estimated earnings.
  2. Calculate total personal income tax due at end of year, based on that estimate.
  3. Subtract all personal income tax already withheld, in previous months, Year-To-Date, from the total estimated tax due at end of year.
  4. Divide the remaining tax due to be collected by the number of remaining months of the year, to determine the average monthly tax amount to be withheld, each month.
  5. Withhold that calculated average amount for the present month

In general, any Thai employee earning 26,583 baht per month or less, pays no personal income tax.

Another personal tax paid each month is Social Fund tax. This tax is deducted from employee salaries and paid to the Social Security Office not later than the last business day prior to the fifth working day of each month. The withholding amount is 5% of employee salary, but applies to only the first 15,000 baht per month of earnings (so - the maximum monthly withholding amount is 750 baht). Whatever the amount withheld from each employee's salary, the company must contribute a matching amount each month - paid along with the withholding amounts.

Any employee who is a company director, or who is a direct family member of a company director, is not eligible, nor enrolled in the Social Fund system - and thus pays no Social Fund tax. A secondary significance of this fact is that for purposes of a company being able to sponsor work permits or Immigration extensions for foreign employees, only employees on the company's Social Fund tax roll can be counted toward the four Thai employees needed, per each permit (so - Thais who are directors or family members of directors, do not count).

Next, let us address VAT. VAT is currently 7% - which has been at that same rate since 1998. Prior to 1998, the rate was 10% - and the government has stated that it may eventually return to that 10% rate. The basic rule is that VAT must be charge and collected by only two types of companies:

  1. Businesses whose revenues equal or exceed 1,800,000 baht per year (which is why most small Thai vendors do not charge VAT).
  2. Any business that sponsors a foreign work permit (company must have VAT registration in order to sponsor a work permit), regardless of annual revenues

VAT applies to most - but not all - products and services. For B-2-B transactions, the main items that are exempt from VAT are: rent, fresh foods, medical services, and most transportation services. VAT is also charged on all imported trade goods.

Please note: Many property owners divide monthly lease payments into two portions: a "rent" portion - on which VAT is not charged, and "services" portion - on which VAT is charged. The "services" part pays for trash removal, security guards, elevator maintenance, and similar common expenses.

VAT is not charged to customers outside Thailand for exported products, or for services rendered from Thailand that are not used in Thailand. Examples:

  1. Thai company makes a website for a restaurant in Paris, France. VAT is not to be charged on that invoice.
  2. Thai company provides staff for a trade show exhibition booth at BITEC for a French company - with invoice going to Paris. VAT will be charged to that overseas customer, as the services were delivered and used within Thailand.

IMPORTANT: For B-2-B transaction within Thailand, VAT costs nothing to the company paying the VAT (other than a brief cash flow delay), as long as that company is reselling everything that it buys for a higher price than it paid.

Example: In a given month, your company purchases products and services with total value of 100,000 baht - and you pay out 7,000 baht in VAT. In that same month your company records sales of 150,000 baht, and collects 10,500 baht in VAT. What your company forwards to the government is 3,500 baht (10,500 baht minus 7,000 baht). Basically, as your company collects VAT it first "pays itself back" for any VAT paid out during that month - and it then forwards only the EXCESS amount collected to the Revenue Department. VAT must be paid not later than the last work day prior to the 15th of each month.

VAT is not actually calculated on a current month (isolated) basis - it is calculated based on a cumulative, Year-To-Date (YTD) basis, comparing VAT collected YTD, vs VAT paid out YTD - and you continually pay out whatever excess VAT is collected, on a cumulative basis

If - for any reason - a company pays out more VAT than it collects during a calendar year, then the company may apply for (and receive) a refund of excess VAT paid. The two most common scenarios for this are:

  1. Company is an export company that pays VAT on products purchased in Thailand, which it then exports - charging no VAT to the overseas customer.
  2. Company starts late in the year, and has high start-up costs - for furniture and computer work stations, and for office fit-out and refurbishment - but it achieves only slight sales during that initial (partial) calendar year (and it thus collects only a trivial amount of VAT).

Now, we will turn to corporate tax. Companies pay corporate tax from their own funds only twice per year -

  1. By August 31st, in an amount equal to whatever amount is required to bring the amount paid as of June 30th up to 50% of the estimated total corporate tax due for the full Tax Year.
  2. By May 31st, for the balance of any tax still due, in order to pay the full tax due on end of year profit as of December 31st of the previous Tax Year

Note: I cited calendar months, assuming that your company will specify its Tax Year as matching the Calendar Year. If you use a different Tax Year, then mid-year tax submission is due as of end of the sixth month, payable on or before the last day of the eighth month, and end of year tax is payable at the end of the fifth month, following your Tax Year end date.

For a given year, mid-year tax payment is only made by companies that were incorporated PRIOR TO the current tax year.

Now, I noted above that a company only makes tax payments at its own initiative twice per year. Those are the only times that corporate tax is paid by and collected from:

  1. Companies whose only income comes from selling products (no services).
  2. Companies whose only income comes from customers located outside of Thailand.
  3. Companies whose income comes solely from consumers - no B-2-B transactions
  4. Companies whose only income comes from a combination of the three previous categories.

What remains after those categories are removed is: B-2-B transactions for SERVICES billed to customers within Thailand. For all such billings, corporate tax withholding is accomplished by the business PAYING an invoice, at one of several tax withholding rates. The most common corporate tax withholding rates are:

5% ‐ for rent
3% ‐ for the vast majority of services
2% ‐ for advertising
1% ‐ for interest paid out on loans

There are some other tax withholding rates:

10% ‐ withheld from dividends paid out
5% ‐ withheld from outbound international remittances for services

Now - here is the one thing about Thai taxation that is a bit difficult to understand, and to execute: Every time that your company makes an invoice payment that is subject to corporate withholding tax, and also every time that one of your customers makes an invoice payment to your company that is subject to corporate withholding tax - the correct withholding amount must be withheld, and in place of the withheld amount, the paying company must complete a four-copy tax withholding form/slip - that identifies both parties, the nature of the billing item, and the amount withheld. Two copies of this slip are sent to the seller, two copies are retained. Each party then sends one copy of this slip to their accountant at the end of the month. Upon receipt of the withholding slips, the seller then sends to the buyer a "Tax Invoice" - which is the(bizarre) Thai term for the payment receipt. This document must fully describe the transaction, the amount and date that the payment was received, it must identify any VAT charged/collected, plus any corporate tax withheld, and it must identify both parties by correct (legal) company name, followed by the words "Head Office", and it must include the company tax ID number and correct, legal business address of both parties.

Tax Invoices must also be provided to the buyer by any Thai seller of anything.

If any receipt does not include all the items, then the expense cannot be treated as a deductible business expense. Thus, you cannot deduct as business expense such expenses as taxi fare, motorcycle taxi fare, purchase of postage stamps, purchase of BTS or MRT tickets, highway tolls, fast food meals, etc. - because you get no valid tax Invoice (receipt) for any of these expenses.

Each month, every company must pay to the Revenue Department, by the fifth working day of the month, the consolidated amount for all corporate tax amounts withheld from payment to vendors.

Each month, a company must submit a number of forms. The following are the names of the Thai Revenue Department forms on which each type of tax payment is reported:

Form Name Description
PND.1 Personal income tax
PND.3 Corporate tax withholding on contractors who are NOT registered Thai companies or registered Thai limited partnerships
PND.53 Corporate tax withholding on registered businesses
PP.30 Calculation of VAT due to be paid to Revenue Department
Sales tax Record of VAT charged and collected on sales
Purchase tax Record on VAT paid out on purchases
SSF1 Summary of Social Fund tax paid, vs total taxable salary amount, amount of tax withheld, and company matching amount
SSF2 Summary of Social Fund tax withheld from each enrolled employee

Two notes:

  1. PND.3 is used to record the 3% withholding amounts that apply to private citizens who work for you as "contractors", instead of as employees.
  2. At the end of each month, you and your accountant have only a short period of time to get all computations made, and all taxes paid in to the Revenue Department. What is difficult for most customers to grasp is that of the total amount of tax that your accountant tells you that your company must pay - typically by check, from your company bank account - only a TINY portion of the total is actually being paid from your company funds. The vast majority of the amount coming out of your company bank account is really money belonging to the Revenue Department, which your company withheld from payments to other parties, and has just been holding for the government. The ONLY amount actually being paid from your company funds is the total of the company matching amounts for amounts withheld from employees.

Here is a link to the rules concerning payouts due to employee whose employment you wish to terminate. The key points are:

  1. Any time that you terminate an employee at your initiative, you always owe them normal pay for the current full pay period (month), PLUS for the following full month, and THEN any severance pay owed. This means that it is significant whether you terminate an employee on 31 January or on 1 February. Waiting that one extra day costs you one additional full month of salary to be paid out to the employee. You may, under Thai law, require employee to continue working until the end of the notification period.
  2. No severance pay is due to employees terminated with less than 120 days of employment. Thus it is important that you identify any substandard employees early in their tenure with your company, and get rid of them quickly.

My last comment is about capitalization. Thai Revenue Law specifies that the following expenses MUST be paid from paid-up capital (these expenses cannot be claimed as deductible business expenses, used to offset revenues, in calculating profits):

  1. Capital equipment (any items recorded as depreciable assets on the company balance sheet)
  2. Expenses related to construction, refurbishment, and fit-out of factory, office space, or other company facility

© 2017 by Indo-Siam Technical Services Co., Ltd.