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Thailand Tax

Tax Withheld from a Thai Company by another Company Overseas

Today, we answer a question from one of our accounting clients regarding the tax withheld by overseas-based company. Can they recover this cost?

In theory, the tax withheld by another country should be a tax credit to the Thai company, but only if the company makes profit and will have to pay tax, then this tax credit will lower the amount of tax check it has to pay to the Revenue Department.

Hence, to use the withholding tax as tax credit, the company needs the following documents to prove it:

  1. The withholding tax certificate issued by the client overseas, and has to attach its Thai translation too.
  2. The proof of payment for the service on the transaction.

Know more about Thailand withholding tax and how it works. Contact MSNA for your Thailand accounting and tax questions.

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Double Taxation

What is double taxation? How to avoid its effects to individuals and business entities?

Answer:

Double taxation is a case where tax is being levied twice from the same amount of income in two or more states, e.g. Thailand and other countries.

In order to avoid or eliminate double taxation, Thailand has entered into Double Taxation Agreement with other countries. Currently, Thailand has agreement with 55 countries whereas both residents of Thailand and the contracting states will benefit from the agreement.

In a double taxation agreement, there are credit and exemption methods. It also covers taxes on income and capital of individuals and juristic entities as well as the petroleum income tax. The petroleum income tax and the local development tax (i.e. Property tax) are covered under some treaties but Value Added Tax, Specific Business Tax and Municipal Tax are not covered under any tax treaties.

Thai double taxation treaties generally place a resident of the Contracting State in a more favorable position for Thai tax purposes than under the domestic law, i.e. the Thai Revenue Code. Thus, in the event that the rate of tax stipulated in the Revenue Code is different from that of a double taxation agreement, the rate which is more beneficial to the taxpayer will be applied.

Thai double taxation treaties in general provide income tax exemption on business profits (industrial and commercial profits) earned in Thailand by a resident of a Contracting State if it does not have a permanent establishment in Thailand. Moreover, the withholding taxes on payments of income to foreign juristic entities not carrying on business in Thailand may be reduced or exempted under the double taxation treaties.

Contact MSNA for your Thai accounting and tax questions and other business needs.

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Application for Registered Exporter in Thailand

The exporter who wants to become a Registered Exporter and receive certain privileges should submit the Registered Exporter Application Form (SorTor.1) along with the required documents to the following offices:

  1. For a company under supervision of Bureau of Large Business Tax Administration can submit the application at Planning and Evaluation Division of the Bureau of Large Business Tax Administration.
  2. Other companies can submit the application at Area Revenue Branch Office

2.1 For a VAT registered company located in the jurisdiction of Area Revenue Office within Bangkok area, the application must be submitted at Withholding Tax and Refunds Sub-division.

2.2 For a VAT registered company located in the jurisdiction of Area Revenue Office outside Bangkok area, the application must be submitted at Tax Processing and Refunds Sub-division.

Once the application documents are submitted, the following approval process will take place:

  • The Bureau of Large Business Tax Administration or Area Revenue Office (depending on the case), will verify the credibility of the exporter who submitted the Registered Exporter Application Form.
  • Then, the opinion will be sent to the Registered Exporter Classification Committee to review and send to the Director of Bureau of Large Business Tax Administration or the Director of Area Revenue Office for approval.
  • The Bureau of Large Business Tax Administration or Area Revenue Office (depending on the case) will then notify the result to the exporter.

Interested in setting up an exporting company and become a Registered Exporter in Thailand? ThaiLawyers can help you for company registration, visa and work permit application. MSNA’s Thai Tax Advisors can help you coordinate with the Thai Revenue Department for Registered Exporter application.

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Passenger car – lease or buy

When your Thailand company buys a passenger car of not more than 7 seats (cash or installments), the cost of the car allowed to be depreciated over 5 years is not more than Baht 1,000,000. This cost includes VAT, interest paid (in case of installments), registration fee and the car itself. So basically, when you acquire the car, it is booked as a fixed asset with the amount of all the costs previously mentioned combined. If your accountant calculates the depreciation expense of the car for the year using the straight-line method, the depreciation expense allowed by the Thai tax law is not to exceed Baht 200,000 a year (to be prorated to the exact number of days in the first and the last years). Whatever amount exceeding Baht 200,000 becomes non-tax deductible and will be added back to your bottom line profit when filling out the end of year corporate income tax return.

The expenses like a driver, car maintenance, gasoline and yearly vehicle tax can be tax deductible only if they are proven to be related to the business operation.

In case your company leases a passenger car of not more than 7 seats (including leasing with a driver), where the company will not own it at the end of the lease term, the lease expense allowed by law is not more than Baht 36,000 per month (or Baht 1,200 per day). For the expenses like insurance premium, car maintenance, gasoline and yearly vehicle tax can be tax deductible only if they are proven to be related to the business operation and it is advised that there should be an agreement with the lessor that the lessee is responsible to those items otherwise the Revenue Department may view it as the lessor’s responsibility and thus your company should not pay for them so they should become non-tax deductible for your company.

Contact MSNA for your Thailand tax and accounting questions.

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Thailand tax measures to promote development of capital market in the country

The Thai cabinet approved tax measures to promote the development of the capital market in the country. Details of such tax measures are as follows:

1) The tax rate is to be reduced and personal income tax is to be exempted on dividends received by Thai tax residents from a foreign company or partnership in respect of securities listed on the Stock Exchange of Thailand; and

2) Income tax is to be exempted for income from sales of securities listed on stock exchanges in ASEAN member countries, provided that the sale is made through the system of the Stock Exchange of Thailand.

Contact MSNA for your Thai accounting and tax questions.

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Tax Deduction for Disabled Person’s Pension

We have received an inquiry from an avid reader of our Blogs. Today, THAI ACCOUNTANT answers his question.

Question:

Hi, allow me to send you a question because I can’t find the answer
in any other place.

On the self declaration to the Thai Revenue Department, is it possible to deduct Baht 190,000 for a person with disability under and over 65 years of age?

I received a 100% disability pension from my home country and have a document in English confirming my situation and the document is verified by the Embassy of my home country. What documents does the Thai Revenue Department require to get the above deduction accepted?

Answer:

Thank you for your question. To be eligible to the disability deduction, you need:

1. to be a Thailand tax resident (residing in Thailand for 180 days or more)
2. to be not more than 65 years old
3. to have a disability card issued by the Department of Empowerment of Persons with Disabilities (DEP), Thailand Ministry of Social Development and Human Security.

We are not sure if the National Office for Empowerment of Persons with Disabilities will issue a disability card for you as you are not Thai. And if you don’t have the card you cannot use 190,000 tax deductions. You may want to contact the Department of Empowerment of Persons with Disabilities (DEP) and see if they can issue you a disability card.

Contact MSNA for your tax questions in Thailand.

 

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Tax relief measures for flood-affected persons and companies

As of January 2012, below is the summary of tax relief measures which the Thai government has implemented for flood-affected persons and companies:

I. Personal income tax allowance for expenditure on repair of damage to houses and cars due to flooding;

II. Additional expense deduction for expenditure on replacement of machines due to flooding and a special depreciation method, for corporate income tax purposes.

I. Here is the summary of personal income tax allowance for expenditure on repair of damage to houses and cars due to flooding-conditions:

1. For immovable properties, including buildings, condominiums, and assets attached to such properties damaged by flooding (‘The properties’)

1.1 Eligible expenses

  • Expenditure on repairing buildings, condominiums and assets attached to such properties, including on equipment and materials used for repair
  • The properties above must have been damaged by the flooding between 25 July 2011 and 31 December 2011 and located in flood-affected areas as announced by the government.

1.2 Tax allowance

  • THB 100,000

1.3 Eligible persons

  • Owner, lessee or person using such properties for residential or business purposes or other benefit, who made payment of such expenses between 25 July 2011 and 31 December 2012.

1.4 Conditions

  • If payment was made for repair of property in more than one place, the tax allowance can be claimed for expenditure on all properties, but in total is capped at THB 100,000.
  • In cases where damage is covered by property insurance, the tax allowance is granted for expenditure in excess of the compensation received from the insurance company, but in total is capped at THB 100,000.
  • The right to the tax allowance must be exercised in the tax years 2011 or 2012, or both, but in total is capped at THB 100,000.

2. Cars under Motor Vehicle Act damaged by flooding

2.1 Eligible expenses

  • Expenditure on car repair, including on equipment and materials used in the repair.
  • The cars must have been damaged by the flooding between 25 July 2011 and 31 December 2011.

2.2 Tax allowance

  • THB 30,000

2.3 Eligible persons

  • Owner or lessee under the hire purchase agreement for the repaired car, who resides in a flood-affected area as announced by government agencies and makes payment of such expenses between 25 July 2011 and 31 December 2012.

2.4 Conditions

  • If payment was made for repair of more than one car, the tax allowance can be claimed for expenditure on all cars but in total is capped at THB 30,000.
  • In cases where damage is covered by property insurance, the tax allowance is granted for expenditure in excess of the compensation received from the insurance company, but in total is capped at THB 30,000.
  • The right to the tax deduction must be exercised in the tax years 2011 or 2012, or both but in total is capped at THB 30,000.

II. Meanwhile, additional expenses deduction for expenditure on replacement of machines due to flooding and a special depreciation method for corporate income tax purposes-conditions are as follows:

a. Additional tax deduction for machine replacement costs

– Tax exemption at 25% of amount paid to acquire machines used for manufacturing or providing subcontract manufacturing services

– The newly acquired machines must have been available for use between 25 July 2011 and 31 December 2012

– The newly acquired machines are to be depreciated over as period of at least 5 years.

b. Special depreciation method for the replacement machines

– Companies or partnerships affected by flooding between 25 July 2011 and 31 December 2011 and located in flood-affected areas as announced by the government, that buy or receive transfer of ownership in machines for use in their business can deduct 40% of the value of the machines on the date of acquisition

– The residual value is to be deducted in accordance with the conditions of the tax code. Hence, 52% of the value will be deducted as depreciation in the first year and 12% in each of the second to fifth years.

– Such machines must have been available for use between 25 July 2011 and 31 December 2012.

Note that the tax measures under a. and b. above are not available to taxpayers who are already entitled to other tax privileges.

Further details of rules/regulation relevant to these measures should be sought.

Contact MSNA for your accounting and tax questions.

 

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Who Should Pay Personal Income Tax in Thailand?

Personal Income Tax (PIT) is a direct tax levied on income of a person. A person means an individual, an ordinary partnership, a non-juristic body of person and an undivided estate. In general, a person liable to Personal Income Tax has to compute his tax liability, file tax return and pay tax, if any, accordingly on a calendar year basis.

Taxpayers are classified into “resident” and “non-resident”.

“Resident” means any person residing in Thailand for a period or periods aggregating more than 180 days in any tax (calendar) year. A resident of Thailand is liable to pay tax on income from sources in Thailand as well as on the portion of income from foreign sources that is brought into Thailand.

A non-resident is, however, subject to tax only on income from sources in Thailand.

Talk to your tax consultant like MSNA to find out if your income is subject to personal income tax in Thailand.

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