Taxation of transactions involving services provided to foreign companies, as well as services received from foreign companies, has its own specifics. If you are engaged in the import/export of services, it is important to carefully consider VAT and withholding tax obligations.
If these aspects are not taken into account when structuring a deal and pricing services, the taxes may have to be paid at your own expense.
VAT
Please note that once a company’s annual turnover reaches 1.8 million baht, it must register for VAT and pay 7% on all income from goods and services.
If a company provides services that are fully or partially used outside Thailand, the VAT rate on such services (or the portion used abroad) is 0%.
Services used within Thailand are subject to 7% VAT.
When making payments abroad for services, 7% VAT is withheld from the payment amount. The Thai company records this amount as input VAT and uses it to reduce its monthly VAT liability.
Withholding Tax
Withholding tax (tax on income earned by a foreign company in Thailand) is deducted when making payments abroad for services. The Thai company acts as a withholding agent.
The tax must be remitted to the Revenue Department no later than the 7th day of the month following the month in which the transaction took place.
The standard withholding tax rate is 15%. However, Double Taxation Agreements between Thailand and the recipient country may provide for reduced rates or exemptions.
After paying the withholding tax, it is important to obtain a withholding tax certificate from the tax authorities. This document can be used by your foreign counterparty in their home country as proof of tax paid in Thailand.
Author: Alexandra Agapitova.
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