Thailand’s economic outlook is improving, thanks to a strong growth momentum in both tourism and manufacturing exports. In 2017, the economy grew at its fastest pace since 2013 - an estimated 3.9 per cent - a pace the International Monetary Fund expects will continue this year and next.
But scaling up public investment - fiscal spending on large scale infrastructure projects - will be critical to spur domestic demand and make economic growth more broad-based, the IMF added.
This may be, in part, why Thailand has been actively tweaking its laws to stem tax leakages and boost its tax takings. These included moves to introduce taxes on e-commerce and require foreign businesses to pay VAT on goods sold to Thai consumers, as well as fast-tracked legislation to enforce taxes on cryptocurrency investing.
Apart from changes to the tax rates, Thailand’s tax authorities also intend to use data analytics and artificial intelligence to weed out tax evaders and boost overall tax revenues.
Here are the key tax rates:
Corporate Tax: 20% standard rate
The standard corporate income tax rate that applies to most companies operating in Thailand is 20 per cent. The tax is imposed on a company’s net taxable profits: business or trading income, passive income. and capital gains or losses, minus expenses incurred in generating those profits.
Thai resident companies - those incorporated in Thailand - are subject to corporate tax on their worldwide income. Non-resident companies and branches of foreign corporations are subject to Thai tax only on their Thailand-source income.
Reduced rates for SMEs
Locally incorporated small and medium-sized enterprises (SMEs) - those with paid-up capital of no more than 5 million Thai baht, and revenue of no more than 30 million Thai baht (S$1.28 million) a year - face a progressive set of corporate income tax rates of 0 per cent, 15 per cent, or 20 per cent, depending on the SME’s profitability.
Thailand’s Board of Investment offers tax holidays of between three and eight years for specific business activities being promoted in Thailand or businesses investing in key economic zones and industrial parks. Details of the incentives (based on activities, technologies, areas and merit) can be found here.
Companies that site their regional operating headquarters in Thailand benefit from a lower 0 per cent to 10 per cent rate on net taxable profits. Their foreign expatriate employees may also benefit from a fixed personal income tax rate of 15 per cent.
Under its International Headquarters (IHQ) and International Trade Center (ITC) regimes, Thailand also grants privileges such as a 15-year corporate income tax exemption, a personal income tax reduction to a flat fee for expatriate employees, and a specific business tax exemption.
Indirect Tax: VAT of 7%
Thailand levies a value added tax (VAT) on the supply of goods, provision of services, and import of goods. The current standard rate of VAT is 7 per cent. This is a temporary rate, reduced from a standard rate of 10 per cent, and meant to be valid till Sept 30, 2018.
In May 2018, Thai government officials said that the VAT rate would be kept at 7 per cent till the end of the next fiscal year (September 2019) to support domestic economic activity.
Companies with an annual turnover of 1.8 million baht or less are exempted from VAT. Specific activities are also exempted, including certain agricultural products and chemicals, newspapers, healthcare or education services, certain professional services and cultural services such as libraries, museums and zoos.
There has been a flurry of activity of late surrounding Thailand’s VAT.
First, there was the drafting of an e-business tax bill, which introduces taxes for online shopping and also requires foreign businesses to pay VAT on goods sold to Thai consumers. Then, the Revenue Department said it is considering a law to mandate that foreign e-commerce websites report their Thai sales, to ensure they are paying the amount of VAT they ought to.
There was also a fast-tracked piece of legislation to enforce taxes on cryptocurrency related investments in May (imposing both the 7 per cent VAT and 15 per cent capital gains tax on them). This was quickly tempered by the outcry against it, and Thailand’s need to reduce investors’ tax burden. So the government now intends to waive the 7 per cent VAT for individuals trading in cryptocurrencies, The Nation reported.
Dividends: Whether they are paid to another Thai company, a non-resident company or to an individual, dividends are re subject to a 10 per cent withholding tax.
Interest: Interest paid to a non-resident company is subject to 15 per cent withholding tax.
Royalties: Royalties paid to a another Thai company are subject to 3 per cent advance withholding tax (can be credited against final corporate income tax bill for each period). Royalties paid to a non-resident are subject to a 15 per cent withholding tax.
Thailand taxes both residents and non-residents on income derived in Thailand. Residents (individuals present in Thailand for 180 days or more in a calendar year) are taxed on foreign-source income only if the income is remitted into Thailand in the same year that it is received.
Personal tax rates follow a progressive schedule that rises to a top marginal rate of 35 per cent. This applies to income of five million Thai baht or more.
Need more information?
Official: The Revenue Department of Thailand
KPMG: Thailand Tax Profile (Updated June 2015)
PwC: Thailand Tax Summary
Here are our other TAX GUIDES: