Understanding Thai Taxes : Filing of returns, tax payment and corporate tax

Filing of Returns & Payment of Tax:

A company may choose any 12-month period to be its accounting period. Any subsequent changes in the accounting period must be approved by the director-general of revenue.

An annual corporate income tax return accompanied by audited accounts must be filed within 150 days of the end of the accounting year. A mid-year tax return must also be filed and tax paid on half of either the actual or estimated profit for the year, depending on the business of the taxpayer.

The tax paid on the mid-year return, as well as domestic withholding tax deducted from income during the year, is allowed as a tax credit against the tax payable on the annual tax return. Thai companies are also entitled to claim a foreign tax credit for tax paid in a foreign country on income that is subject to corporate income tax. The foreign tax credit cannot exceed the amount of the corporate income tax payable on the income.

Taxes due should accompany the submission of the return. A refund of tax overpaid may be requested within three years, and a request will generally be subject to tax audit before the refund is made.

Branches of foreign incorporated companies that are operating in Thailand are subject to the same filling requirements as Thai incorporated companies.

The Revenue Department has the power to issue a summons to conduct a tax audit within two years from the date the return is filed. The two-year prescription period can be extended by up to five years where there is documentary evidence or reason to suspect the taxpayer had an intention to evade tax. If tax deficiencies are found, the Revenue Department can assess additional taxes, provided that the assessment is made within 10 years of the date upon which the tax was required to be paid.

Corporate Tax Rates:

Thailand’s headline corporate income tax rate was reduced from 30% to 23% for 2012 and will then be further lowered to 20% by January 1, 2013 for a total of two consecutive accounting periods.

For small and medium-sized enterprises (SMEs), the first BT150,000 ($4785) of net profit is exempt from income tax while the next BT850,000 ($27,115) is subject to a 15% tax. The new tax rate of 23% will apply to profits exceeding BT1m ($31,900) for the accounting period commencing on or after January 1, 2012 and will then decrease to 20% for accounting periods commencing on or after January 1, 2013.

To be eligible for the SME rates, the following conditions must be met:

• The company’s paid-up share capital must not exceed BT5m ($159,000) on the last day of its accounting period; and
• The income derived from the sale of goods or provision of services during the accounting period must not exceed BT30m ($957,000)

A regional operating headquarters in Thailand may obtain a tax exemption on income derived from foreign operations and a concessionary tax rate of 10% on other qualifying net profits. A qualifying international procurement centre is subject to corporate income tax of 15% on qualifying income for five consecutive accounting periods.

Furthermore, a tax rate of 10% applies to qualifying net profits derived by companies that have been approved by the Ministry of Energy to conduct oil trading activities in Thailand.

Foreign companies engaged in international transportation are subject to 3% tax on gross receipts.

A foreign company carrying on business in Thailand is also subject to 10% tax on the disposal of profits out of the country. This tax may be exempted under an applicable double tax agreement, such as the one made with Hong Kong.

Petroleum income tax rather than corporate income tax is levied on the net profits and the disposal of profits out of Thailand by businesses engaged in petroleum exploration and production.

(Page 244-245 of The Report : Thailand 2012, published by Oxford Business Group)