Settlements with Thai and Foreign Agents: Recipient’s Taxation

When paying for services, a Thai company acts as a tax agent:
it is required to withhold tax (Withholding Tax), remit it to the tax authorities, and issue a withholding tax certificate to the recipient.

How Withholding Tax Is Treated

The withheld tax amount can be used:

for corporate income tax calculation — if the recipient is based in Thailand
under a Double Taxation Agreement (DTA) — if the recipient is abroad
as a final withholding tax — for foreign companies

VAT When Working with Foreign Companies

A Thai company may also be required to:

pay VAT on behalf of a foreign service provider

This applies if the services are considered to be rendered in Thailand.

Calculation Examples (Service Fee — 100,000 THB)

Services are rendered in Thailand. The client is a Thai company.

1. Service Provider — Thai Company

Withholding Tax: 3% = 3,000 THB
VAT: 7,000 THB

Net payment to the provider: 104,000 THB

2. Service Provider — Company in Kazakhstan

(no Double Taxation Agreement applies)

Withholding Tax: 15% = 15,000 THB
VAT (paid by the client): 7,000 THB

Important: clarify in advance whether VAT is included in the service fee.

Net payment to the provider: 85,000 THB

3. Service Provider — Company in the UAE

(Double Taxation Agreement applies)

Withholding Tax: 0%
VAT (paid by the client): 7,000 THB

Net payment to the provider: 100,000 THB

Key Considerations

Withholding Tax rates depend on:
- the recipient’s tax residency
- the existence of a DTA
VAT when working with foreign companies:
- is often paid by the client
- is not always included in the contract price
the overall tax burden may vary significantly depending on the deal structure

Conclusion

The same contract amount may result in different net income for the recipient depending on:

country of incorporation
applicable tax treaties
contract structure

Therefore, tax planning should be done before entering into the contract, not after payment.