Taxation is a system of raising money to support the government on financial matters. All governments require payments of taxes from people or any legal entity. These taxes are used by government to pay public employees, to build government infrastructures, public schools and hospitals, to provide food and medical care to the poor and elderly, and for other government purposes. It is true that tax is very important because without these taxes to support its activities, a government could not exist.
Taxation is the main source of government's revenue. A large part of tax collection comes from three main agencies under the Ministry of Finance. These are the Revenue Department, the Excise Department, and the Customs Department - which collectively account for about 85-90% of the government's revenue. The Revenue Department itself collects more than half of the total tax collection. Aside from collecting taxes, the Revenue Department is also responsible for ensuring that the administration of the tax collection is carried out in accordance with the government's policies.
Thailand has many kinds of business identities. The tax rates and tax benefits of an individual or entity are affected by the type of its business. In general, the most common types of businesses here are Thai company and Foreign Company. Thai company is a company registered under Thai law. A foreign company can be a company carrying on business here in Thailand but registered under foreign law or a company not carrying on business in Thailand but deriving income from here.
Panwa Group provides taxation services for both foreign and local clients who need someone that have specialization, expertise, knowledge and innovative ideas in the complexity of taxation here in Thailand. From business analysis, we will be able to help client understand all the tax concern and guide them on the way on how can they save tax by tax planning by assisting them to minimize their tax liabilities.
You are in good hands when you put your trust on our professional and licensed accountants and auditors with a wealth of specialization and expertise. Our complete taxation services covers Personal income tax, Corporate Income tax, VAT, Withholding Tax, and Specific Business Tax (SBT).
An overview of Tax in the Kingdom of Thailand:
Personal Income Tax
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, a deceased person and an undivided estate. In general, a person liable to PIT has to compute his tax liability, file tax return and pay tax, if any, accordingly on a calendar year basis.
Liability to tax depends on the concept of residence, and there is a liability to income tax if an individual is present in Thailand for at least 180 days or more in a tax year. Individuals and ordinary partnerships are liable to pay personal income tax in graduated rate bands of 5%-37% of net income. Tax is due on all forms of income earned in Thailand. The income liable to tax is income from all sources, less allowable expenditure and personal allowances.
Corporate Income Tax
Corporate Income Tax (CIT) is a direct tax levied on a juristic company or partnership which is established under Thai or foreign law and carries on business in Thailand or derive certain types of income from Thailand.
Corporate income tax is payable by companies and registered ordinary or limited partnerships. It is imposed on the net profits of a business during a tax year, after deduction of permitted depreciation and allowable expenditure. Tax is payable on the net profits arising from a business carried on. Foreign companies or partnerships are liable to pay tax on income originating in Thailand.
The corporate tax rate is 30% of net income. The tax is paid in two stages. A company must file interim accounts and an interim tax return within two months of the end of the first six months of its accounting period, and pay 50% of the tax estimated to be due. The final accounts and the year end tax return must be filed within 150 days of the close of the accounting period and the balance of the tax paid, taking into account the interim payment made half way through the accounting year.
Value Added Tax ("VAT")
Value Added Tax (VAT) has been implemented in Thailand since 1992 replacing Business Tax (BT). VAT is an indirect tax imposed on the value added of each stage of production and distribution.
VAT is payable on the provision of taxable services by an entity registered for VAT. The Thailand VAT system is very similar to that in the United Kingdom. The main differences are: (i) the Thailand VAT rate is a flat rate of 10%, but temporarily reduced to 7% at present; and (ii) VAT returns are filed and the VAT due is paid monthly, within the 15th day of the month following the month of assessment.
Certain types of income paid to companies are subject to withholding tax at source. The withholding tax rates depend on the types of income and the tax status of the recipient. The payer of income is required to file the return (Form CIT 53) and submit the amount of tax withheld to the District Revenue Offices within seven days of the following month in which the payment is made. The tax withheld will be credited against final tax liability of the taxpayer. The following are the withholding tax rates on some important types of income
Withholding personal income tax must be deducted from an employee's wages paid by his employer and paid to the Revenue Department on a monthly basis. Credit is given against the employee's annual tax bill for any tax earlier withheld and paid.
There are many other occasions when liability to withhold and pay tax arises, for example, on the payment of interest, rent or service fees. When a Thai company pays an invoice for services to another Thai company, 3% of the invoice amount is deducted and paid to the Revenue Department as withholding tax. The issuer of the invoice then has a tax credit for this amount, which he can utilize in his own tax return. International withholding taxes can also arise (see below).
Specific Business Tax ("SBT")
Specific Business Tax (SBT) is another kind of indirect tax introduced in 1992 to replace Business Tax. Certain businesses that are excluded from VAT will instead be subject to SBT.
Certain types of business, including banking and pawn broking, are not subject to value added tax, but are subject to SBT. SBT also arises on the sale of land.
Stamp duties are taxed on instruments and not on transactions or persons. For the purposes of stamp duty, an instrument is defined as any document chargeable with duty under the Revenue Code. The stamp duties rules are contained in Chapter VI of Title II of the Revenue Code. These explanations of different taxes are adapted from the Revenue Department of Thailand. Tax computation and other related responsibilities are very complicated especially when you are not familiar with the taxation system. For your personal assessment and assistance for your tax requirements, please feel free to contact us.