Taxation in Thailand

It is important to familiarize yourself with the taxation system in Thailand before deciding to relocate or register a legal entity, as this can affect your financial obligations and tax burden. Ignorance of local tax rules can lead to unexpected financial consequences and legal problems.

In Thailand, there are the following types of taxes:

• Personal income tax: progressive scale from 0% to 35% depending on the level of income.
• Corporate tax: the standard rate is 20% of net income.
• Value Added Tax (VAT): the standard VAT rate is 7%.
• Property and land tax: depends on location and type of property.
• Inheritance and gift tax: the maximum inheritance tax rate can be as high as 10%.
• Special taxes: vary depending on the field of activity. (tax on alcoholic beverages, tobacco products, gambling, oil and gasoline tax, and taxes on certain types of luxury goods and services.)

Payroll tax in Thailand varies depending on the level of income. The tax rate starts at 0% for incomes up to 150,000 Thai Baht per year and can go up to 35% for incomes above 5,000,000 Baht per year. This is a progressive scale where the tax rate increases as income increases.

Thailand has the following tax rates for individuals:

• Income from 0 to 150,000 baht - exempt from taxation.
• Income between 150,001 and 300,000 baht - 5% tax.
• Income between 300,001 and 500,000 baht - 10% tax.
• Income between 500,001 and 750,000 baht - 15% tax.
• Income from 750,001 to 1,000,000 baht - 20% tax.
• Income between 1,000,001 and 2,000,000 baht - 25% tax.
• Income between 2,000,001 and 5,000,000 baht - 30% tax.
• Income over 5,000,001 baht - 35% tax.

Persons over 65 years of age are entitled to an additional tax deduction on the first 190,000 baht of income. These rates apply to both residents and non-residents who earn income in Thailand.

What taxes do foreigners with a Thai residence permit pay?

When a foreign national opens a company in Thailand, the main taxes include:

• Corporate income tax - the standard rate is 20% of the company's net income.
• Value Added Tax (VAT) - the standard VAT rate in Thailand is 7%.
• Payroll taxes - include social security, health insurance contributions and personal income tax.

The following taxes apply when foreigners purchase real estate in Thailand:

• Transfer Tax - charged at 2% of the assessed value of the property.
• Stamp Duty - is 0.5% of the registered value of the property.
• Withholding Tax - for legal entities is 1% of the sale price or the appraised value of the property (whichever is higher). For individuals, a progressive scale from 0% to 35% is applied.
• Special Business Tax (Special Business Tax) - applies to the sale of real estate, the ownership of which was less than five years, and is 3.3% of the transaction value.
• Rental Income Tax - charged at 12.5% of annual rental income.

Thailand will start levying tax on residents' foreign income from 2024.

Businesses need to file regular reports, undergo audits and pay taxes on profits of up to 20%. Small and medium-sized enterprises (SMEs) may qualify for lower tax rates depending on the size of their annual profits. But in general, Thailand cannot be said to be low-tax, and it is not on the lists of similar jurisdictions. If a firm's turnover exceeds 1.8 million baht, a certificate for VAT will be required.

For 2023, the following tax rates apply to small and medium-sized enterprises (SMEs) in Thailand depending on their annual profits:

Profit up to 300,000 Thai Baht - The tax rate is 0%.

Profit between 300,001 and 3,000,000 Thai Baht - The tax rate is 15%.

Profit over 3,000,000 Thai Baht - Standard tax rate of 20%.

The main criteria for small and medium-sized enterprises (SMEs) in Thailand include:

1. Manufacturing sector:
   • Small Enterprise: Up to 50 employees and annual turnover or assets up to 50 million baht.
   • Medium Enterprise: 51 to 200 employees and annual turnover or assets of 50 million to 200 million baht.
2. Services and Trade Sector:
   • Small Enterprise: Up to 30 employees and annual turnover or assets up to 30 million baht.
   • Medium Enterprise: 31 to 100 employees and annual turnover or assets of 30 million to 100 million baht.

If you plan to buy a business in Thailand or set up a new one, the decision needs to be evaluated together with the following features of business taxation in the country:

In Thailand, withholding tax is levied at source. This means that tax is withheld from certain types of payments at the time they are made. The amount of tax varies depending on the type of income.

In 2023, the following withholding tax rates apply in Thailand:

• Dividends: the rate is usually 10%.
• Interest: the tax rate is generally 15% for residents and 15% for non-residents.
• Rent payments: tax is withheld at the rate of 5%.
• Fees and gratuities for services: the rate varies but is usually around 3% for residents and 15% for non-residents.
• Foreigners' income: rates for non-tax resident foreigners vary depending on the type of income.

Dividends received from foreign companies are exempt from tax if the holder has held at least 25% of the voting shares of that company for at least six months and provided that the profits of that foreign company have been taxed in their home country at a rate of at least 15%.