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Archives for Thailand Taxation

Income Tax Payment Certificate for Foreigners in Thailand

What is an Income Tax Payment Certificate? When foreigners work in Thailand, they have to pay taxes here. Your Thai employer must get a work permit for you to be able to pay you legally. Every month when they pay you salary, they need to withhold your personal income tax and submit it to the Thai Revenue Department by the 7th of the following month (or 15th if they do it online). At the end of the year (or at the time you leave the company during the year), the employer must give you a document called 50 Tawi, or withholding tax certificate. The document has the detail of the total income you earned that year from this company, the total tax and the total social security amounts they withheld from you that year. However, it is not your Income Tax Payment Certificate.

When you prepare your personal income tax return at the beginning of the following year (31 March is the deadline), you will have to fill out the amount of tax withheld that is written in the withholding tax certificate. This tax is your tax credit. It is the tax you paid during the year by the employer’s withholding it from your income. If you did not have other sources of income from anywhere else, most likely you will not have to pay more taxes if your employer’s payroll team calculated your monthly withholding tax correctly. In some cases you will get a tax refund.

When you file your personal income tax return (PND90 or PND91 depending on whether you have income sources other than from work), you will get a receipt issued by the Revenue Department. This receipt is not enough of a proof to the Inland Revenue Service in your home country. You will need to request the Thai Revenue Department to issue an “Income Tax Payment Certificate”, which is in English and it is accepted as the proof that you paid taxes in Thailand.

An “Income Tax Payment Certificate” is not the same as a “Tax Resident Certificate”. The latter is the certificate issued by the Thai Revenue Department to certify that you were a tax resident in Thailand in the year it is issued for. Only when you have stayed in Thailand for 180 days or more in a calendar year can you request for a Tax Resident Certificate.

If you need Thai tax service, or an “Income Tax Payment Certificate” or a “Tax Resident Certificate”, contact MSNA Group for assistance. We are the official accountant of the American Chamber of Commerce in Thailand and have served the international community for over 25 years.

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Thai Personal Income Tax on Dividends

According to the Revenue Department, a taxpayer who resides in Thailand and receives dividends from a juristic company or partnership registered in Thailand is entitled to a tax credit of 3/7 of the amount of dividends received. In computing his assessable income, the taxpayer should gross up his dividends by the amount of the tax credit received. The amount of tax credit is creditable against his personal income tax liability of the same year.

Moreover, a taxpayer who resides in Thailand and receives dividends or shares of profits from a Thai registered company or a mutual fund whose tax has been withheld at source at the rate of 10% may choose to exclude such dividends from his assessable income when calculating his Personal Income Tax. However, in doing so, the taxpayer will be unable to claim any refund or credit as explained in the above paragraph.

Thai personal income tax returns must be filed within 31st March of the year following the year in which the income was received. Contact MSNA for computation and filing of your PIT returns before the due date and further consultation on Thai taxation.

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Thailand Personal Income Tax for Married Couples

Previously, our Thai Tax Expert talked about the changes made by the Revenue Department in the Thai tax laws, particularly in the Personal Income Tax rule for married couples. In this post, we want to give more information about the allowed deductible expenses, allowances and filing options for married couples.

Deductible Expenses

The expenses are divided equally among the spouses as the joint income proportion.

Allowances

Each spouse can use these allowances to calculate their income tax as follows:

  1. Child allowance – each spouse can use Baht 15,000 (if the child is studying at the qualified level, each spouse can use Baht 17,000)
  2. Home Loan Interest Deduction – each spouse is entitled up to Baht 100,000 of interest deduction. However, if they entered into a loan agreement together, each of them is entitled to Baht 50,000 of interest deduction.

Filing Options

A married couple may have 5 options in submitting their tax returns:

  1. Each spouse files his/her tax returns separately;
  2. They file their returns jointly, combining the wife’s income with the husband’s income and submit the tax returns under the husband’s name;
  3. They file their returns jointly, combining the husband’s income with the wife’s income and submit the tax returns under the wife’s name;
  4. They file their returns jointly but the husband files his Section 40(1) income separately;
  5. They file their returns jointly but the wife files her Section 40(1) income separately.

Need help in filing your Thailand personal income tax returns? Contact MSNA now.

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Types of Tax Clearance Certificate in Thailand

In one of our previous posts, we talked about Tax Clearance Certificate, which is a certificate issued by the Revenue Department to a non-Thai tax resident who is departing Thailand to indicate that he has already paid taxes or that he has provided a guarantor or securities as guarantee for tax liabilities and tax payable. In this post, we want to give more information about the types of tax clearance certificate in Thailand.

There are 2 types of Tax Clearance Certificate:

  1. P. 3 Tax Clearance Certificate

This is issued to a foreigner who is temporarily departing Thailand. It is valid for a single departure and must be used within 15 days from the issuance date. If he/she could not depart Thailand within the specified period, P.3 Tax Clearance Certificate becomes invalid unless he/she renewed it before the expiry date.

  • P.3.1 Tax Clearance Certificate

This is issued to a foreigner who enters and leaves Thailand on a regular basis due to his/her business or profession. It is valid for multiple departure within the specified period in the Tax Clearance Certificate but not exceeding 180 days from the issuance date. P.3.1 Tax Clearance Certificate cannot be renewed.

Consult with MSNA how to get a Tax Clearance Certificate.

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Withholding tax certificate for overseas vendors

If you are a company operating in Thailand and pay overseas vendors for services, you will have to withhold some tax from the payments and submit it to the Thai Revenue Department within the 7th of the following month using form P.N.D. 54. The tax rates depend on the double taxation treaty between Thailand and vendors’ countries. If there is no such treaty, tax rate will be as stipulated in Thailand Revenue Code. Within the same period, paying to overseas suppliers, it also has to submit VAT return, form P.P. 36, which is the form that you submit 7% VAT on behalf of the vendor overseas. After you withhold the tax from the payment you make to the foreign vendors, sometimes you are requested by them to issue a withholding tax certificate for overseas vendors so that they can use the amount of tax withheld by you as a proof of their prepaid income tax.

How to get a withholding tax certificate for overseas vendors: You will have to get the withholding tax certificate in English from the Revenue Department and send it to them so they can use their tax credit in their country. The process will take 10-15 business day. You, as the payer, have to submit the following documents to Regional Revenue Office.

  1. A copy of the filed withholding tax return i.e. P.N.D 54. and VAT return, P.P. 36
  2. A copy of tax receipt issued by the Revenue Department
  3. A copy of document indicating overseas remittance of payment and exchange rates.
  4. A copy of service invoice
  5. A copy of your company affidavit issued not over 1 month
  6. Power of Attorney
  7. Other relevant documents, such as copy of royalty agreement, passport or ID card copy of the authorized signatory and the agent’s.

Contact MSNA your Thailand accountant for tax and accounting needs.

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Thailand inheritance tax and gift tax

Thailand inheritance tax and gift tax will start taking effect on 1 February, 2016. It is the first inheritance tax law in the country. 5% for ascendants or descendants and 10% for others are to be levied on inherited assets worth more than Baht 100 M. In order to prevent avoidance of the newly announced inheritance tax, Thailand gift tax is also introduced by amending the types of tax exempt income in the Thai Revenue Code. The gift tax will be enforced on the same day as the Inheritance Tax.

The inheritance tax is levied on heirs, both individuals and juristic persons. It is also applied to non-Thai nationals who are considered residents in Thailand according to Thailand immigration law and non-Thai inheriting assets which are located in Thailand.

The gift tax: Before 1 February 2016, the types of income exempt from personal income tax include income derived from maintenance, income derived from moral obligation, inheritance or a gift received in a ceremony or on other occasions in accordance with established custom. However, starting from 1 February 2016, only the following types of income are exempt from personal income tax:

1. The portion of inheritance income not more than Baht 100 M;

  1. Income derived from the transfer of ownership or possessory right in an immovable property without consideration by the parent to a legitimate, non-adopted child, only for the portion not more than Baht 20 M per tax year;
  2. Income derived from maintenance or gift from ascendants, descendants or spouse, only for the portion not more than Baht 20 M per tax year;
  3. Income derived from maintenance under moral purposes or gift received in a ceremony or on occasions in accordance with custom and tradition from persons who are not ascendants, descendants or spouse, only for the portion not more than Baht 10 M per tax year; and
  4. Income from gift received for use for religious, educational or public purposes according to the rules and conditions under a ministerial regulation yet to be issued.

    For the taxpayers receiving income stated in No. 2 to 4 above, which exceeds the thresholds, may choose to pay tax at the rate of 5% and do not have to include those incomes in their annual personal income tax calculation/filing.

Consult with MSNA for your Thailand accounting and tax needs.

 

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Exemption for tax audit by the Thai Revenue Department

The businesses in Thailand welcomed a new law announced by the Thai government on 1 January 2016 that they may be eligible for being exempt from an audit by the Revenue Department on their income incurred within the accounting periods beginning before 1 January 2016. Here are the conditions:

  1. Being a company or juristic partnership that did not have gross income exceeding THB 500 Million in the accounting period of 12 months ended within 31 December 2015;
  2. Being a company or juristic partnership that is not being audited by the Revenue Department before 1 January 2016; and
  3. Not being a company or juristic person that issues or uses fake VAT invoices or presents false expenses to the Revenue Department.

What do you have to do to enjoy this measure?

The company or juristic partnership must register for this measure on the website of the Thai Revenue Department between 15 January to 15 March 2016.

After the registration on the website, the company or juristic partnership must:

  1. prepare its accounts and financial statements to reflect the real position of its business operation from the accounting period beginning on or after 1 January 2016;
  2. file all tax returns applicable to its operation and submit taxes and duties completely from 1 January 2016 onward; and
  3. not do anything to avoid paying taxes and duties.

If you do not fully comply with the above, the Revenue Depart will have the right to audit you.

Please note that even though your company has complied with all the above, if you seek a tax refund, the Revenue Department is empowered by the law to audit you for the purpose of processing the tax refund.

Consult with MSNA for your accounting and tax needs in Thailand.

 

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Thailand corporate income tax rate reduction for 2016 and 2017

The Government just announced Thailand corporate income tax rate reduction for 2016 and 2017 for SMEs. In order to be eligible for the 2016 and 2017 reduced corporate income tax rates, the SMEs must meet the following conditions:

  1. Being a company or juristic partnership registered (or in other words, established) before 1 January 2015;
  2. The paid-up capital on the last day of any accounting period must not exceed THB 5 million; and
  3. The income from the sale of goods and provision of services must not exceed THB 30 million in any accounting period.
  4. The SME must register for this corporate income tax reduction on the website of the Thai Revenue Department between 15 January to 15 March 2016.

The following corporate income tax rates apply:

  • For the accounting period beginning between 1 January and 31 December 2016 – 0% tax.
  • For the accounting period beginning between 1 January and 31 December 2017, – 0% for the net profit of Baht 300,000 and 10% for the amount beyond 300,000

Contact your Thai Accountant at MSNA for any questions on accounting and tax in Thailand.

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Mid-year corporate income tax return

Thai limited companies, representative offices and branch offices of foreign companies in Thailand need to submit a mid-year (or interim) corporate income tax return (Form PND 51) to the Revenue Department within 2 months after the end of the first 6 months of their accounting year. Most of such juristic persons use 31 December as the fiscal year-end, so the deadline to file their interim corporate tax return is 31 August of each year. If your accounting year-end is 30 June, then you need to file PND 51 within the end of February.

Penalties:

If you file PND 51 later than the deadline, you need to pay Baht 1,000 – 2,000 late submission fine (Baht 1,000 if not later than 7 days). Plus you will have to pay 20% on top of the amount of tax owed.

How to calculate mid-year tax for most companies:

In theory, the Thai Revenue Department wants you to prepay your tax at mid year using the best estimates of total revenues and expenses to derive your estimated profit for the year and divide it by two to get half year’s profit. From there, you calculate your corporate tax using the current tax rate. Most companies use the actual operating results from their 6 months’ income statement and forecast the second half of the year’s operating result in order to get the year’s estimated incomes and expenses. However, during the second half of the year sometimes your actual profit turns out to be much higher or lower than what you estimated and reported in the PND 51.

What happens if you under-estimate your mid-year tax?

You may have to pay for some penalties if you underpaid your interim tax. If at the end of the year, your actual profit is more than 125% of your estimated profit that you filed on your mid-year corporate tax return, then you will have to pay 20% fine on the underpaid tax. There are very few exceptions. The one and only that will apply to most cases is that if at mid-year the tax you paid is more than 50% of your last year’s tax, then you will not have to pay for the fine.

Suppose you estimated a mid year tax of THB 70 (or 140 for the year from an estimated profit of THB 700), but at the end of the year, you happen to make a profit of THB 1,000, thus you have a tax of THB 200 for the year. That means at mid year, you should have submitted the tax for the half year of THB 100. So you will have to pay a fine of 20% on THB 30 underpaid tax (100 – 70). However, if last year, your income tax was THB 130, fifty per cent of which is 65, then even though this year’s actual tax is much more than the mid-year tax you paid, you will not have to pay for the fine because your mid-year tax was THB 70 and higher than 50% of last year’s tax.

Now what happens if you over-estimated your mid-year tax? Suppose you thought you would make a profit of THB 1,000 for the year (or THB 500 for half year), so you paid tax of THB 100 (tax rate is 20%) on half year’s profit. At the end of the year it turns out you have a loss. You may seek to get a refund on the tax you paid at mid year. However, asking for a tax refund is essentially inviting the Revenue Department to audit your company. So most companies are willing to let go of their overpaid tax. Therefore, planning your mid-year tax is very important.

The best technique to fill out the mid-year corporate income tax return:

Normally the estimates should be done in a way that the tax to be paid at midyear will be a little over 50% of last year’s tax. This is so that if at year-end you end up having so much profit, there will be no fines for under-estimating your mid-year tax. If your last year’s tax was zero due to the year’s operating loss, you can just estimate your profit of this year using any figures. Let’s use ones that will result in a very little tax to pay at mid-year. This way, whatever real profit you have at year end will not result in a penalty and if you have a loss, you can forego the prepaid tax easily.

Consult MSNA for all your accounting and tax needs in Thailand.

 

 

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Tax on money received from employment settlement

This article is about tax on earnings which an employee received from the employer concerning the agreement of compromise. When the employee whose working period is not less than 120 days is terminated, the employer has to pay the employee the compensation according to the Thai Labor Law. The amount of the compensation depends on how long the employee has been working with the employer. This compensation is not subject to tax.

In the case that there is a dispute on unlawful termination in the labour court, if there is a monetary offer from the employer to settle the case and the employee accepts it, both parties can agree in front of the judge. The amount received according to the agreement of compromise before the judge is subject to tax because it is not considered a compensation stipulated in Labour Protection Act. It is considered an income under Section 40(1) of the Revenue Code, which shall be treated the same way as a monthly salary. Therefore, the employer has to deduct withholding tax at the progressive rate from the amount of settlement.

For questions regarding Thailand labour law, please contact our legal team at ThaiLawyers.com

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