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Whether you are an individual or a company, Thai or foreign, you are subject to Thai law for activities, property and income located in Thailand. Thus, the various laws applicable in tax and accounting matters are applicable to you. For individuals, Thai law imposes various tax and social obligations but no accounting obligation limited to only legal persons. In fact, individuals are subject to the payment of income tax based on their status of resident or income located in Thai territory. As long as they have the status of employee, they are also subject to the payment of monthly social contributions. For companies, from their incorporation, they must keep proper accounts and comply with the tax, accounting and other regulatory laws of Thailand. As soon as it is created, the company must register with the “Revenue Department” within 60 days in order to obtain a tax identification number necessary for compliance with the legal obligations.
Table of contents
What are the accounting obligations?
In terms of accounting obligation, each company must keep its accounts regularly and after the end of the financial year, it must prepare the financial statements including balance sheet and income statement. It must then proceed with the approval of the financial statements by the general meeting within four months of the end of the financial year and send them to the “Department of Business Development (DBD)“.
In terms of accounting and tax liability, each company is required to pay various taxes, on an annual basis for corporation income tax and, on a monthly basis for VAT, “withholding tax” or social contributions. Each company must thus make various accounting declarations and submit them to the “Revenue Department” within the time limit set by the Thai Tax Code depending on the category of income imposed. Failure to comply with the filing of the accounting declaration and the payment of the tax is punished by a fine by the tax authorities.
In terms of social obligation, companies are subject to the provisions of the law on social security requiring them and all their employees to register with the Social Security Office so that employees benefit from coverage for the various incidents of life including accident, death, unemployment, maternity, invalidity, old age and children. Social contributions are paid monthly by the government, the employer and the employee. Employee contributions are deducted by the employer directly from the employee’s salary. The accounting declaration and payment are sent monthly to the social security office. Any delay or omission in the payment of social contributions is sanctioned by a penalty.
A company subject to Thai law must comply with the accounting obligations established by the accounting law. An accounting period must be 12 months. Unless otherwise stipulated in the articles of association, a newly created company must close its accounts within 12 months of its registration. Thereafter, the accounts must be closed every 12 months. If a company wishes to change its fiscal accounting year, it must obtain the written approval of the Managing Director of the Revenue Department.
Every company has the obligation to keep its accounts regularly allowing at the end of the financial year to produce a balance sheet and an income statement. Accounting should be done in Thai or any other language with Thai translation. It must be performed by a qualified accounting experts.
At the end of each accounting year, the financial statements including the income statement and the accounting balance sheet of the company must be certified by an external accounting expert. Once the accounts have been verified, they must necessarily be approved by the shareholders at an extraordinary general meeting within 4 months of the end of the financial accounting year. For the general meeting to be valid, all shareholders must be convened by registered letter with acknowledgement of receipt and a notice of meeting must be published in a local newspaper.
The approved and certified accounting statements must be submitted to the “Department of Business Development” within one month of the approval of the accounts by the general meeting.
What is the income tax?
Income tax, also called in accounting, “personal income tax“, is the taxation of the income of individuals and unincorporated companies. There are two categories of people: residents and non-residents. Residents are defined as any person staying in Thai territory for a period totaling more than 180 days in the accounting year. In this case, the resident is taxed on all income he receives both within Thailand and abroad. Unlike the resident, the non-resident is taxed in Thailand on the only income he receives from Thailand, whether as rental income received by a property located in Thailand, a salary in return for work performed in Thailand or income from movable property in return for holding shares in a Thai company.
Anyone earning income in Thailand in this way is subject to income tax under the Thai Tax Code. To this end, it must make the annual accounting declaration to the “Revenue Department” no later than March 31 of the following year. The accounting declaration is made by online filing or by mail. The “PND 90” form must be duly completed and signed by the taxpayer. Any delay in filing the accounting declaration is penalized by a late penalty of 1.5%.
The “PND 90” form distinguishes eight categories of income comprising salaries and wages, income from independent personal services, income from business and intellectual property rights, income from interest, dividends and more. Examples of other types of income include income from rental of real estate, income from self-employed professionals, entrepreneurial income and income from other unspecified activities, including business, commerce, industry, agriculture and transportation.
Depending on the category of income you receive, there is an allowance and exemption scheme that allows you to calculate your taxable income. So, for example, if you receive rental income, you benefit from a 30% exemption on the amount of income you receive. This means that only 70% of the income you receive from rentals will be taxable. It is necessary, depending on the category of income received, to apply the exemption regime specific to that category.
For any category of income, each taxpayer receives an allowance of THB 60,000 before tax and various other allowances based on the family quotient and dependents. Once the taxable income is determined, it is possible to know the amount of tax payable by applying the scale of the progressive regime. The income tax rate is progressive according to the amount of taxable income starting at 5% up to 35% for the part of the income that is over 5 million baht.
🔗 Are you earning income in Thailand and subject to income tax? Please consult the page Personal Income Tax for more details and download the “PND 90” form for your annual accounting declaration to the “Revenue Department”.
What is the corporation tax?
Corporate income tax is the taxation of profits made by a Thai company or a foreign company doing business in Thailand. All types of companies are subject to the payment of corporation tax with the exception of unincorporated companies subject to income tax.
Taxable income is determined by the profits made during the accounting year deducted from the deductible expenses of the company. For the expenses to be deductible, they must be provided for in the Thai Tax Code and the company must justify the expense by a receipt that must include the mandatory information. The profit made is that established by the financial statements at the end of the accounting year.
Once the taxable income is determined, it is possible to apply the tax rate to calculate the amount of tax payable. The tax rate is in principle 20% but it is progressive for Small and Medium Enterprises (SMEs) ranging from 15% for a result less than 3 million baht and to 20% if the result is greater than 3 million baht.
The corporation tax declaration is made within 5 months of the end of the accounting year to the “Revenue Department” using the “PND 50” form. The company must also report its half-year result up to August 31 of the current year using the “PND 51” form. The taxation of the half-year result will be the subject of a credit on the annual accounting declaration at N + 1. Any absence or delay of accounting declaration is penalized by a late penalty.
🔗 Are you doing business in Thailand and making profits? Please consult the page Corporate Income Tax for more details and download the “PND 50” and “PND 51” forms for your half-year and annual accounting declaration to the “Revenue Department”.
What are the tax incentives for businesses?
Under the provisions of the income tax law relating to research and development (R&D), companies or legal partnerships may benefit from a double deduction of corporation tax for payments made as eligible R&D costs to government or private bodies that are approved R&D service providers. In addition, for machinery and equipment acquired for use in R&D activities, an initial deduction of 40% of the cost is granted on the date of their acquisition, and the residual value may be depreciated over their effective useful life.
What is the withholding tax?
Withholding tax is a tax levied by some companies on payments they make to their service providers, employees or shareholders. Beneficiaries of the payment receive an amount lower than that provided for in the contract. The payer thus pays the tax on behalf of the recipient. The beneficiary of the payment then has a tax credit during his annual accounting declaration.
The amount deducted at source depends on the income category paid. For example, the rate is 10% for dividends, 5% for rental income, 3% for rental costs, professional costs or fees and parking costs. The withholding tax is made on the amount of the service before the VAT is calculated.
Each company having carried out deductions at source must report these deductions to the “Revenue Department” the following month at the latest within the first seven days.
There are four types of accounting declaration depending on the income category as well as the beneficiary of the payment:
|Form PND 1 for taxes withheld by the company on salaries paid to employees|
|Form PND 2 for taxes withheld by the company on interest and dividends paid to beneficiaries|
|Form PND 53 for taxes withheld by the company from vendors who are legal entities|
|Form PND 3 for taxes withheld by the company on sellers who are natural persons|