Once again, we return to the topic of taxation—always relevant and inexhaustible. In this article, we will review the main types of taxes paid by legal entities in Thailand and provide recommendations for creating a company’s tax plan.
Corporate Income Tax
Definition: A direct tax levied on companies conducting business in Thailand or earning income from Thailand.
Calculation formula:
(Revenue – Expenses) × Tax rate
Standard rate: 20%
The current rate was introduced in 2013. Previously:
- 2012 — 23%
- Before 2012 — 30%
Progressive scale for SMEs (small and medium enterprises):
| Profit (THB) | Tax Rate |
|---|---|
| 0 – 300,000 | 0% |
| 300,001 – 1,000,000 | 15% |
| Over 1,000,000 | 20% |
SMEs are defined as companies with registered capital under 5 million baht and annual revenue up to 30 million baht.
Reporting period: 1 year
Payment deadline: Within 150 days after the end of the reporting period, together with financial statements submission
Withholding Tax
Definition: A tax withheld by the client from certain types of payments and credited against corporate income tax.
Rates:
| Type of Income | Rate |
|---|---|
| Dividends | 10% |
| Interest | 1% |
| Royalties | 3% |
| Advertising | 2% |
| Services (Thai company or foreign with presence) | 3% |
| Services (foreign company without presence) | 5% |
Example calculation:
If a company provides advertising services and is not an SME:
- Annual profit: 1,000,000 baht
- Corporate tax: 1,000,000 × 20% = 200,000 baht
- Withholding tax (2%): 20,000 baht
- Tax payable: 200,000 – 20,000 = 180,000 baht
Value Added Tax (VAT)
Definition: An indirect tax applied at all stages of production and sale, collected from manufacturers, suppliers, and intermediaries.
Rate: 7%
0% rate applies to:
- Export of goods
- Services provided in Thailand but used abroad
- International transportation
- Sales to international organizations, embassies, etc.
Mandatory VAT registration:
- Annual turnover exceeding 1.8 million baht
- All importers
- Foreign companies providing services in Thailand
Reporting period: 1 month
Calculation formula:
(Output VAT) – (Input VAT)
= (Sales × 7%) – (Purchases × 7%)
Payroll Tax (Personal Income Tax)
Definition: Personal income tax withheld from employees’ salaries and paid monthly by the employer.
Rates: Progressive depending on annual income
| Annual Income (THB) | Taxable Amount | Rate |
|---|---|---|
| 0 – 150,000 | 150,000 | 0% |
| 150,001 – 300,000 | 150,000 | 5% |
| 300,001 – 500,000 | 200,000 | 10% |
| 500,001 – 750,000 | 250,000 | 15% |
| 750,001 – 1,000,000 | 250,000 | 20% |
| 1,000,001 – 2,000,000 | 1,000,000 | 25% |
| 2,000,001 – 4,000,000 | 2,000,000 | 30% |
| Over 4,000,000 | — | 35% |
Formula:
Salary – deductions – allowances × tax rate
Example:
- Foreign employee salary: 35,000 baht/month
- Annual income: 420,000 baht
- Standard deduction (40%, max 60,000): 60,000 baht
- Standard allowance: 30,000 baht
- Taxable income: 330,000 baht
Tax calculation:
| Amount | Rate | Tax |
|---|---|---|
| 150,000 | 0% | 0 |
| 150,000 | 5% | 7,500 |
| 30,000 | 10% | 3,000 |
Total: 10,500 baht/year
Monthly: 875 baht
Social Security
Employers must contribute to the Social Security Fund:
- Rate: 10% of salary
- 5% paid by employer, 5% by employee
- Maximum: 1,500 baht per month
- Payment deadline: by the 15th of the following month
How to Create a Tax Plan
For manufacturing and multi-functional companies, it is recommended to involve an auditor, economist, and lawyer. For small businesses, the director can prepare the plan independently.
Three key indicators:
- Expected revenue (including VAT)
- Expected expenses (including salaries and input VAT)
- Tax liabilities
Basic steps:
- Determine all expected income (bank transfers and cash)
- Calculate output VAT
- Record all documented expenses and input VAT
- Include salaries only for corporate income tax purposes
- Calculate VAT and corporate tax using the formulas above
Author: Alexandra Agapitova.
All rights reserved.
Copying and use of materials without written permission from the owner is prohibited.