Thailand income tax system applies to both individuals and corporations, with tax obligations determined by residency and the source of income.
1. Personal Income Tax (PIT)
a) Residency and Tax Scope
A person is considered a tax resident if they spend 180 days or more in Thailand during a tax year. Residents are taxed on their worldwide income, while non-residents are taxed only on Thailand-sourced income.
b) Progressive Tax Rates
Thailand imposes a progressive tax scale from 0% to 35% on individuals, depending on annual earnings. Tax rates start from 0% for income up to THB 150,000 and rise to 35% for income above THB 5,000,000.
c) Taxable Income
The taxable income for individuals includes employment earnings, business income, rental income, dividends, and capital gains. Taxpayers may also deduct personal allowances for themselves, their dependents, and contributions to approved retirement schemes.
2. Corporate Income Tax (CIT)
a) Tax Scope
Corporate Income Tax applies to both domestic and foreign companies operating in Thailand. Companies registered in Thailand are taxed on their global income, while foreign companies with Thai operations are taxed only on income derived from Thai sources.
b) Corporate Tax Rate
The standard CIT rate is 20% on net taxable income. However, small and medium-sized enterprises (SMEs) may benefit from reduced tax rates, such as 0% tax on the first THB 300,000 of net profits and 15% on profits up to THB 3,000,000.
3. Withholding Tax (WHT)
Withholding Tax is collected on payments such as dividends, interest, and royalties. The applicable WHT rates for residents and non-residents depend on the nature of the payment, with dividends taxed at 10% and interest at 15%. Double Taxation Agreements (DTAs) can often reduce withholding tax rates for residents of countries with which Thailand has a DTA.
4. Value-Added Tax (VAT)
Thailand imposes a Value-Added Tax (VAT) at a standard rate of 7% on most goods and services. Businesses with annual revenue exceeding THB 1.8 million are required to register for VAT. Certain goods and services, such as healthcare, education, and exported goods, are VAT-exempt.
5. Foreign Nationals and Taxation
Foreign nationals residing in Thailand are subject to Personal Income Tax on their Thailand-sourced income. For non-residents, income derived from outside Thailand is not taxed unless remitted into Thailand within the same calendar year. Foreign workers in BOI-promoted companies may qualify for tax benefits.
6. Double Taxation Agreements (DTAs)
Thailand has signed DTAs with over 60 countries, preventing double taxation and often reducing withholding tax rates on income such as dividends, interest, and royalties.
Conclusion
Thailand’s tax structure includes both Personal Income Tax (PIT) and Corporate Income Tax (CIT) with progressive rates and various deductions available. The system is designed to account for local and international tax obligations, supported by double taxation agreements and withholding taxes on cross-border transactions. Proper understanding and compliance with these tax regulations are vital for individuals and businesses operating in Thailand.
