Taxes at a glance : A guide for navigating the Thai tax system
Major tax categories in Thailand include the following:
- Corporate income tax: Entities incorporated in Thailand are subject to tax on worldwide income. Foreign incorporated companies are subject to tax on income derived from business activities in Thailand or certain categories of income paid from Thailand;
- Petroleum income tax: Petroleum and natural gas operations are subject to petroleum income tax;
- Personal income tax: individuals are subject to tax on Thai-sourced income. Tax residents of Thailand are also subject to tax on foreign-sourced income that is remitted to Thailand in the same year it is received;
- Value-Added Tax (VAT): Imposed on certain goods sold and services performed in Thailand. Specified goods imported into Thailand are also subject to VAT, as are services performed abroad that are used in Thailand;
- Specific Business Tax: Imposed on the gross receipts of businesses that are exempt from VAT, including;
- Banking and similar businesses;
- Finance, securities and credit foncier;
- Life insurance;
- Pawn broking;
- Sale of immovable properties in a commercial manner or for profit; and
- Stamp duty: Imposed on certain documents executed in Thailand, or brought into Thailand;
- Customs duty: Imposed on importation of dutiable goods and export of certain goods comprising of rawhide and wood; and
- Excise tax: Imposed on specified products such as alcohol and passenger cars, and certain services.
Tax incentives: The Board of Investment grants a wide range of fiscal and non-fiscal incentives and guarantees to qualifying investment projects:
- Exemption from corporate income tax for three to eight years with permission to carry forward losses and deduct them as expenses for up to five years after the end of the income tax holiday period;
- Exemption from tax on dividends paid out of promoted profits during the income tax holiday period; and
- Exemption or reduction of import duties on imported machinery or raw materials and components.
Additional tax incentives are available to investment projects located in Thailand’s special investment promotion zones, including a 50% reduction in corporate income tax after the income tax holiday period ends.
A regional operating headquarters (ROH) can have a tax exemption on income derived from foreign operations and a concessionary tax rate of 10% on other qualifying net profits. Dividends received by an ROH from Thai or foreign subsidiaries can qualify for an exemption from corporate income tax, as can dividends paid by an ROH to foreign shareholders that do not carry on business in Thailand. Concessionary tax treatment is also granted to expatriate employees of an ROH.
Tax losses: Tax losses incurred can be carried forward for five years for corporate income tax purposes and 10 years for petroleum income tax purposes. Tax losses cannot be transferred to related companies.
Withholding taxes: Thailand requires withholding tax to be deducted from specified domestic and international payment, like royalty payments, dividends, interest and rents.
Foreign tax credits: Thai incorporated companies can claim a foreign tax credit for tax paid in a foreign country on income also subject to Thai corporate income tax. The foreign tax credit cannot exceed the amount of Thai corporate income tax payable on the income.
Transfer pricing: Transfer pricing guidelines have been issued by the Revenue Department based on the “arm’s-length” principle, supplementing the requirements under Thai tax law for market rate pricing in relation to both related and unrelated party dealings.
Anti-avoidance rules: Thai tax law has limited general anti-avoidance provisions for which the Revenue Department may deny a tax deduction for artificial or fictitious expenses or expenses not exclusively expended for a business purpose or acquiring profits.
(Page 242 of the Report : Thailand 2012, published by Oxford Business Group)