Corporate Taxes: The Full Cycle

How much tax will you pay before receiving net profit from your business? Let’s calculate the maximum scenario using an example of a large company (non-SME) that is a VAT payer.

VAT — 7%

Many consider VAT a personal expense, but legally it is added on top of the price of goods or services.

For example, if the price is 100,000 THB, a VAT-registered company issues an invoice for 107,000 THB. In this case, the tax burden is effectively passed on to the customer.

However, not always. For example, if your counterparty refuses to bear VAT costs (because they are not VAT-registered), and the deal is important, you may need to adjust the price so that the final amount remains 100,000 THB including VAT:

Service value: 93,457.95 THB
VAT: 6,542.05 THB

Corporate Income Tax — 20%

This tax is calculated after VAT has been accounted for — the two should not be mixed.

Company profit is calculated as:
total income minus total expenses.

The resulting profit is taxed at 20%.

There are certain exceptions (e.g., dividend income), which require separate consideration.

Dividends — 10%

After corporate income tax is paid, the remaining profit can either be:

reinvested in the business
or distributed to shareholders as dividends

In case of dividend distribution, the company acts as a withholding agent and deducts 10% tax before payment.

The shareholder may choose to treat this rate as final and not include dividend income in their annual personal tax base.

Example calculation

Company revenue: 10,700,000 THB
Company expenses: 3,000,000 THB
Profit: 7,000,000 THB

Taxes paid:

VAT: 700,000 THB (paid throughout the year)
Corporate income tax: 1,400,000 THB
Remaining profit: 5,600,000 THB
Dividend tax: 560,000 THB

Net amount received by shareholders:
5,040,000 THB

Total taxes paid:
2,660,000 THB

Conclusion

Understanding the full tax cycle — from VAT to corporate tax and dividends — is essential for accurate financial planning and evaluating the real profitability of a business.