One of our accounting and tax clients wants some clarification regarding how withholding taxes in Thailand work particularly the withholding taxes on software license transactions.

Question:

Could you kindly confirm whether the 3% withholding tax rate applies universally to all software license orders? And in the event that we are required to pay the withholding tax at 3% rate for any type of software, are there any provisions or exceptions that would allow us to reduce the withholding tax rate to 1%?

Answer:

The 3% withholding tax rate is standard across all software licenses bought or paid for usage in Thailand. When you buy a software from overseas, you will need to submit the withholding tax (rates depending on the country) and 7% VAT on behalf of the overseas vendor(s) too.

Additionally, the Thai tax laws require buyers or users of software to withhold 3% tax. In your case, you should withhold it from the payment when you pay your vendors. You should not pay the withholding tax from your pocket. Anyway, you can check with us before making any payment to your new vendors to make sure you withhold the right amount accordingly.

MSNA can provide consultation on Thai taxes and accounting. And if you use our monthly services, our fees include consultation with our directors on tax and accounting issues. For instance, some vendors do not want you to withhold tax, we can discuss with you on what to do for withholding taxes from vendors in Thailand.