The categories of taxable income differ depending on the type of company:
|➤ A company or legal partnership incorporated in Thailand is subject to corporate income tax on all profits from domestic and foreign sources|
|➤ A company incorporated under a foreign law and operating in Thailand is subject to corporate income tax for profits made in Thailand. The expression "to carry on a business activity in Thailand", within the meaning of Thai law, is a broad concept including the presence of an employee, a representative or an intermediary who allows the foreign company to make income. or earnings in Thailand|
|➤ A company incorporated under a foreign law and not carrying on business in Thailand, but which derives certain categories of income in Thailand, is subject to final withholding tax unless it is exempt under a double taxation agreement. The categories of taxable income are brokerage, service charges, royalties, interest, dividends, capital gains, rental of real estate, etc.|
The Corporate Income Tax of a company operating in Thailand is calculated from the realized net profit of the company on the basis of its financial year. A company must take into account all income resulting from activities undertaken during the year deducted from all expenses permitted by the Tax Code.
Various expenses made by the company are deductible from income as follows but not limited to this list:
|➤ Start-up costs, such as incorporation fees and registration fees, are deductible when incurred|
|➤ All expenses incurred exclusively for the purpose of producing profits or for the needs of society are deductible|
|➤ Royalties, management fees and interest charges may be deducted provided that they are incurred exclusively for the purpose of producing profit or for the purposes of society in Thailand and that they do not exceed an amount reasonable|
|➤ Donations to approved charities or for purposes of public interest, for sport or education for the amount paid limited to 2% of net profit|
|➤ Cash donations to political parties up to 50,000 baht|
|➤ Depreciation deductions are allowed as a percentage of the cost set by the Tax Code. For example, machines and equipment intended for research and development (R&D) can be initially depreciated at 40% of their cost, the balance being depreciated at the maximum rate of 20% per year|
|➤ Written off bad debts are deductible|
The following expenses are not deductible from pre-tax income:
|➤ Fines, penalties and surcharges imposed under all tax laws are not deductible|
|➤ Value Added Tax (VAT)|
|➤ Personal expenses and gifts|
|➤ The portion of the salary paid to a director that exceeds a reasonable amount|
|➤ Fictitious expenses|
|➤ Interest on the capital, reserves or funds of the company|
|➤ Written off bad debts are deductible|
|➤ Any damage recoverable under insurance or an indemnity contract|
Thai private limited companies that receive dividends from another Thai company are only required to include half of the amount of the dividend received in taxable income.
There are tax exemptions on dividends for:
|➤ Companies listed on the stock exchange|
|➤ Limited liability companies which own at least 25% of the company which pays the dividends, if the company which pays the dividends does not hold shares of the company which receives them|
Thai law requires companies operating in Thailand to withhold withholding tax when paying their employees a salary, making a payment to a service provider, or making title or rental income to a beneficiary. The amount withheld is a Corporate Income Tax credit that the beneficiary must pay during the year. The applicable withholding tax rate varies depending on the category of income paid.
|Income category||Withholding tax rate|
|Service charges and professional fees||➤ 3% if paid to a Thai company or a foreign company with a permanent branch in Thailand.
➤ 5% if paid to a foreign company that does not have a permanent branch in Thailand.
The standard Corporate Income Tax rate in Thailand is 20% on net profits. A graduated tax rate applies to small and medium-sized enterprises (SMEs), as follows:
|Net income (Baht)||Tax rate|
|< 300 000||0%|
|300 001 - 3 000 000||15%|
|> 3 000 000||20%|
An SME is a company whose paid-up capital at the end of any accounting year does not exceed THB 5 million and whose revenue from the sale of goods or the provision of services in any accounting year does not exceed THB 30 million.
A foreign company that does not carry on business in Thailand will be subject to withholding tax on certain categories of income from Thailand by the company paying the income. Withholding tax rates may be reduced or exempted depending on the income category, in accordance with bilateral conventions in order to avoid double taxation.
|Income category||Withholding tax rate|
|Payment of profits||10%|
|Other income such as interest, royalties, capital gains, rents and professional fees||15%|
Currently, Thailand has concluded tax treaties with 60 countries: Armenia, Australia, Austria, Bahrain, Bangladesh, Belarus, Belgium, Bulgaria, Canada, Chile, China PR, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany , Great Britain and Northern Ireland, Hong Kong, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, Korea, Kuwait, Laos, Luxembourg, Malaysia, Mauritius, Myanmar, Nepal, Netherlands, New Zealand, Norway, Oman, Pakistan, Philippines, Poland, Romania, Russia, Seychelles, Singapore, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Taiwan, Tajikistan, Turkey, Ukraine, United Arab Emirates, United States of America, Uzbekistan and Vietnam.
All companies are required to prepare their financial statements for each financial year. The financial statement must be verified and notified by an approved auditor. The balance sheet must first be certified by the auditor of the company, approved by the shareholders and then filed with the Department Business Development (DBD) and the Revenue Department.
For a limited liability company, Article 1197 of the Thai Civil and Commercial Code states that the director is responsible for organizing the extraordinary annual general meeting of shareholders to approve the accounts within 4 months of the end of the fiscal year.
Article 1175 of the same code provides that the director must convene all shareholders registered in the register of shareholders within 7 days before the holding of the general meeting by letter with acknowledgment of receipt. The notice of meeting must include the following information: the place, day, time of the meeting and the agenda. This notice of the general meeting must also be published in a local newspaper at the latest seven days before the date fixed for the meeting.
The deadlines are extended to 14 days as soon as the general meeting deals with a special resolution.
Article 1197 of the Civil and Commercial Code provides that a copy of the financial statements must be sent to all shareholders at least three days before the general meeting. They must also be kept at the company’s head office for the same period for consultation.
When the general meeting is held, the shareholder, who cannot physically visit the site, may vote by proxy, provided that the proxy has been established in writing. Article 1188 of the Code provides that the proxy must be dated and signed by the shareholder and contain the following information:
|1. The number of shares held by the shareholder|
|2. The name of the representative|
|3. The period for which the representative is appointed|
Failure to comply with the rules relating to the convening or holding of the meeting with regard to the provisions of the Civil and Commercial Code is penalized by the invalidity of the resolution taken in violation of said provisions.
The maximum penalties that can be imposed for not having held an annual general meeting for the approval of the accounts within 4 months of the end of the financial year are a fine of 20,000 THB for the company, and a fine of 50 000 THB for administrators.
Following the holding of the general meeting, the limited liability company has a period of one month from the date of the general meeting to file the financial statements approved with the Department Business Development (DBD) by the electronic filing system.
For example, if a company holds its general meeting on April 28, 2020, the last day to file its financial statements with the DBD will be May 29, 2020, because May 28, 2020 is a public holiday.
It must then proceed with the tax declaration using the PND 50 form to the Revenue Department within 5 months of the end of the financial year.
The declaration differs if the Thai or foreign company is doing business in Thailand or if the foreign company only receives income from Thailand.
As long as the company does business in Thailand, the company is required to make two declarations during the fiscal year: the annual declaration and the semi-annual declaration.
Thai and foreign companies doing business in Thailand are required to file their tax returns using PND 50 form within 150 days of their fiscal year end date. The payment of the Corporate Income Tax is concomitant with the filing of the tax declaration. Any company that transfers activities representing profits outside Thailand is also required to pay tax on the amount thus transferred within 7 days of the date of transfer via the PND 54 form provided for withholding tax.
In addition to the annual tax payment, any company subject to Corporate Income Tax is also required to make a semi-annual advance tax payment using the PND 51 form. The company is required to estimate its annual net profit as well as its tax liability and to pay half of the estimated amount of tax within 2 months of the end of the first six months of its financial year. The prepaid Corporate Income Tax is deductible from its annual tax liability.
For income paid to a foreign company not doing business in Thailand, the foreign company is subject to withholding tax by the payer at the time of payment. The payer must file the PND 54 declaration and make the payment to the tax authorities within 7 days of the month in which the payment is made.
For companies operating in Thailand, it is possible to obtain a tax credit when a tax has been deducted at source with regard to a service rendered, a dividend or interest paid or a rent perceived for example. The amount withdrawn will be credited during the annual tax declaration of the beneficiary company.
For income from countries that do not have a double taxation agreement with Thailand, foreign tax credits are allowed. These foreign tax credits are subject to certain criteria and conditions, and can be used up to the amount of Thai tax that would have been due if the income had been derived in Thailand.
Failure to submit audited financial statements approved by the general assembly to the DBD within one month of approval is punished by a fine, the amount of which increases depending on the number of months late.
Below is the penalty table for a Thai limited liability company:
|Number of months late||Fine for the accountant (in baht)||Fine for the director (in baht)||Amount (in baht)|
|Less than 2 months late||1,000||1,000||2,000|
|Between 2 and 4 months late||4,000||4,000||8,000|
|More than 4 months late or no deposit||6,000||6,000||12,000|
In the event of late declaration or absence of annual declaration, a late penalty of 1.5% of the tax payable per month is applied. Concerning the delay of the deposit and payment of the half-yearly declaration, it is sanctioned by a surcharge of 20% of the tax which must be paid.
Each company is taxed as a separate legal entity. Losses suffered by one subsidiary cannot be offset against profits made by another subsidiary. There is no tax consolidation. Losses can only be carried forward for a maximum period of five years.