Whilst this article isn’t tax advice, it will be a basic guide for expats about taxes in Thailand.
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Expatriate – The term ‘Expatriate’ or ‘Expat’ refers to an individual who is residing outside their country of origin (either on a temporary basis or a permanent basis). The term is derived from the Latin language where ‘Ex’ means ‘Out Of’ and ‘Patria’ means ‘Country or Fatherland’.
Usually, individuals referred to as Expats are the people who are Professionals in some field, skilled employees who have been employed outside their country either by the employer or according to their own intentions, artists (such as actors or musicians), etc. People who choose to retire in some other country are also referred to as Expats.
Tax – Tax is the revenue/charges collected from the individuals to carry out the expenditures of a government, while in return, the government provides certain rights and privileges to the people. Any person who tries to avoid the taxes is liable for the punishment. Taxation is the process of collecting taxes from individuals.
Taxes can be collected either on a state/regional level or national (country) level. Mostly tax rates are decided by the central government and only in few cases, the rates are declared by the state government occasionally. In most countries, taxes are imposed on individuals who are not even the citizens of that country.
Types of taxes – There are many types of taxes that are imposed upon individuals by governmental organizations. The types of taxes are generally categorized into three major types. They are ‘Proportional Taxes’, ‘Progressive Taxes’, and ‘Regressive Taxes’.
Proportional Tax is the type of tax that is imposed on every individual equally. This means the tax percentage is the same for all the individuals regardless of the factors such as wealth and income. This helps to keep the taxation constant. Even if a person’s income increases the tax percentage remains the same.
Progressive Tax is the type of tax, where an individual with a higher income is levied with higher tax rates. Progressive Taxes operate on the basis of marginal rates for the income, where if the income exceeds a certain margin or limit, the tax rates increase.
Regressive Tax is the type of tax, where the individual with a lower income is more affected when compared to the person with higher income. A good example is the sales tax. If a sales tax is 5%, the people with higher income might not take it into consideration but the people with considerably lower income might find it to be a burden.
Examples of taxes – There are many taxes that can be imposed on an individual. A few general taxes are ‘Income Tax’, ‘Payroll Tax’, ‘Property Tax’, ‘Excise Tax’, ‘Corporate Tax’, ‘Capital Gains Tax’ ‘Wealth Tax’, ‘Value Added Tax’, ‘Sales Tax’, etc. Now let us take a brief look at each of these taxes.
‘Income tax’ – This is the type of tax that is generally imposed on the income earned by the individual on a regular basis. The income tax can be levied on either individuals or businesses/corporations. Income tax is applied to different types of income earned such as salary, wages, or commissions. It is also applicable to the unearned income such as dividends, interests, rents, etc.
‘Property Tax’ – Property tax is the tax that is imposed on the individual’s property. This can either be immovable property such as land or movable property such as car collection, jewelry, etc. In most cases, property tax is referred to as the tax applicable on the real estate property i.e., lands, houses, etc.
‘Corporate Tax’ – also known as ‘Corporation Tax’, or ‘Company Tax’, Corporate Tax is the type of tax imposed on companies/business corporations. Corporate Tax is applicable to the income or capital earned by those respective countries. Corporate Taxes are generally levied on a national level but occasionally levied on a state or local level.
‘Capital Gains Tax’ – The profits earned on an asset when it is sold for a price higher than the actual price are referred to as Capital Gains. It is a common term used in stocks, bonds, precious metals, real estate, etc.
‘Wealth Tax’ – Wealth Tax is the type of tax that is generally imposed on the net value of the assets. Some examples for the assets on which wealth tax is imposed are Cash, Bank Deposits, Stocks, Fixed Assets, Car Collection, Jewelry, Real Estate, etc.
‘Value-Added Tax’ – This is a type of consumption tax imposed on products from the beginning of manufacturing the product to its final retail price. For example, if the VAT of a product is 10% and the price of the product is $100, then the whole price that has to be paid to the merchant would be $110.
‘Sales Tax’ – it is another type of consumption tax which is a direct tax, unlike the VAT. For example, if the Sales Tax of a specific region is 10% and a person purchases a product for $500, then the sales tax would be $50.
Any country, in general, would impose taxes on individuals in such a way that the citizens could benefit from them by paying a lower amount than any foreign individual would have to pay. However, most countries, in order to contribute to the global co-ordination and maintain their relations with other countries, reduce the tax rates for the expats living in their country. Anyhow, it depends on the country.
Expat Taxes in Thailand:
Thailand – Thailand is a beautiful country famously known for its diversified culture. It is referred to as ‘Mueang Thai’ by the residents, which means Land of Freedom. Thailand has obtained that name as no country until now has been able to conquer Thailand and establish their rule.
It is also known for the famous ancient structures and artifacts that are rich in Buddhist and Indian cultures. Thailand’s economy is known to be emerging and is among the wealthiest Southeast Asian countries along with Singapore, Malaysia, etc.
Some of the most famous cities in Thailand are ‘Bangkok’, ‘Mueang Samut Prakan’, ‘Mueang Nonthaburi’, ‘Udon Thani’, ‘Chon Buri’, ‘Nakhon Ratchasima’, ‘Chiang Mai’, ‘Hat Yai’, ‘Pak Kret’, ‘Si Racha’, etc. Throughout Thailand, cultures, and traditions can be noticed which are similar to the Indian and Chinese customs.
People in Thailand are quite generous, spiritual, and friendly. The food is quite exquisite and many of the spices and herbs found in other Asian countries like India and China can also be found here. The people show a lot of respect towards elders. People can also find some exotic self-defense styles that are quite effective among the other countries of the world (For example, Muay Thai).
Taxation in Thailand – Any person who resides in Thailand for 180 days or more in a year is considered to be a Resident of Thailand. Any person who has lived for less than 180 days is known to be a non-resident. Just like the United States, Thailand also imposes a tax on the people on their worldwide income. However, only residents in Thailand are taxed on the worldwide income, whereas, the non-residents are taxed on the income earned through the sources in Thailand.
The currency in Thailand is Baht. The tax system in Thailand is a Progressive Tax system. People who earn up to 150,000 baht are exempt from the taxes in Thailand and the tax rates increase with an increase in the income earned. For example, people who earn more than 5,000,001 baht are subjected to a tax of 35%.
Taxation is done in Thailand based on the calendar year and any person would have to file their Personal Income Tax return (PIT) by the 31st of March every year (for the previous year). This means for the year 2020, PIT must be filed before 31st March of 2021. If an individual is a public entertainer or happens to earn income in the form of an advertising fee, they would have to file the PIT by September 30th, which is known as a mid-year return.
Expat Taxes in Thailand –Expats who have started their employment in Thailand are subjected to certain tax rules as well as some visa requirements. The rules and requirements for the expats in Thailand are given below.
Procedure prior to arrival – Expats who want to work in Thailand require a work visa and should apply for it before that start employment in Thailand. Hence, people who want to work in Thailand as expats should make sure whether the employment contract and the benefits are tax-efficient before they submit their contract to the Thai Immigration Bureau. If the contract is not tax-efficient, people might have a chance of losing more money in the form of taxes.
Employment Visa – As we have discussed earlier, any person who wants to work in Thailand as an expat must have to obtain a visa. They should apply for a Non-immigrant visa for this according to the requirements of the Thai Immigration Bureau before they can start working in Thailand.
Thai Immigration Bureau, however, decides whether or not to give this visa based on the education level and skills of the respective individual. They also consider the advantages of employing the individual and how it might be able to benefit the economy of Thailand.
If the spouse or dependent family member of the expatriate also wants to relocate to Thailand, they would have to acquire dependent visas.
However, they can even take up employment if they can acquire a separate employment visa that has been obtained from the employer that they are willing to work with.
Tax Year – As we have discussed, the tax year in Thailand is a calendar year starting from 1st January to 31st December. The income tax returns have to be filed before March 31st of the following year.
An expat who earns income from the sources that are based in Thailand is required to file their personal income tax returns by the 31st of March in the following year. A tax that has been withheld is creditable against the annual tax liabilities and any of the excessive tax that has been withheld is refunded.
Income Tax Rates and Calculation – The Income tax rates in Thailand and the tax calculation is given below.
Income Tax Rates:
|Income (Baht)||Tax Rate|
|0 – 150,000||0%|
|150,001 – 300,000||5%|
|300,001 – 500,000||10%|
|500,001 – 750,000||15%|
|750,001 – 1,000,000||20%|
|1,000,001 – 2,000,000||25%|
|2,000,001 – 5,000,000||30%|
|5,000,001 or more||35%|
Sample calculation of Taxes:
For example, if the gross income of an individual is 6,000,000 baht, then the allowable deductions and allowances on the income are as follows.
Deductible Expenses are 40% (should not exceed 60,000 baht) – 60,000
Self-allowance – 30,000
Contributions for Social Security (5%) – 9,000
Adding together all the deductions and allowances, the total amount that can be deducted is 99,000 baht. Therefore, according to the income tax rates given, the tax for 6,000,000 baht is taxed for the income minus the deductions, i.e., 6,000,000 minus 99,000 is 5,901,000. Hence, tax payable for the income is 35% of 5,901,000 (which is 2,065,350 baht).
This is just a sample to demonstrate how taxes are calculated in Thailand and not to confuse with the original taxation as the original tax rates or calculation of taxes might differ from these tax rates and this tax calculation model. The main idea of providing this information is to provide a general idea about taxation in Thailand.
Taxation Basis – The tax is imposed on the assessable income in Thailand. Worldwide income of a Tax resident in Thailand is taxed if the income earned abroad is brought into Thailand in the year the income has been earned. Non-residents are subjected to taxation on the income earned from the sources in Thailand based on any tax treaties to avoid double taxation (if any exist).
The income taxes are levied on various types of income such as ‘Wages’, ‘Salary’, ‘Bonuses’, ‘Bounties’, ‘Gratuities’, ‘Pensions’, ‘Brokerage Fees’, ‘Discounts’, ‘Subsidies’, ‘House Rent Allowances’, ‘Rent free accommodation provided by the employer’, ‘benefits offered by the employer’, ‘Interests’, ‘Dividends’, ‘Capital Gains’, ‘Royalties’, etc.
If an expat qualifies as an employee for a regional operating headquarters, a flat income tax rate of 15% is applicable for an individual up to 4 years.
Capital Gains are exempt from the taxes in Thailand if they are earned from the shares of a public company that is listed on the Thailand Stock Exchange. Any other capital gains are subjected to taxation based on personal income tax rates.
Tax allowances and tax deductions are granted for insurance, mortgage interests, retirement or long-term equity plans, contributions made for charities, etc. to the individuals under certain restrictions. Personal allowances are also granted to the individuals (taxpayers) and their family members such as wife/husband, children, parents, etc.
Other taxes on Individuals – Let us have a look at the other forms of tax that is collected from the individuals in Thailand.
There are no Capital Duty, Capital Acquisitions Tax, Inheritance Tax, Estate Tax, or a Net Wealth Tax.
Stamp Duty is applicable and is applicable to the individuals at a rate of 0.1% on leases, hiring processes, transfer of shares or debentures, loans, etc.
12.5% of Real Property Tax is applicable to the individuals on the appraisal value of the real property.
5% tax should be contributed by both the employer and the employee as a contribution to the Social Security (for the employees having monthly income up to 15,000 baht).
Corporate Tax – The Corporate Tax Rate on taxable income/profits in Thailand is 20%. Any foreign company that does not carry out its business activities in Thailand is subjected to a final Withholding Tax (WHT) on some types of taxable income earned by the companies such as interests, dividends, rental fees, service charges, royalties, etc.
For these types of incomes, the tax rate applicable to the individuals is 15%, other than the dividends, for which the tax rate is 10%. However, there is an exception for certain cases where double tax is avoided with the help of tax treaties.
After January 1st of 2017, the tax rates for the individual companies or juristic partnerships (where the provided capital does not exceed 5 million baht and the services provided/sales of the goods does not exceed 30 million baht at the end of the accounting period) is as follows:
Corporate Tax Rates:
|Overall Profits||Tax Rate|
|Less than or equal to 300,000 baht||0%|
|300,001 to 3 million baht||15%|
|More than 3 million baht||20%|
Any company can be considered as a resident company if the company is incorporated in Thailand or is registered with Thailand’s Ministry of Commerce.
Similar to the income tax, the corporate tax is also taxed on the worldwide income for the residents, and non-residents are taxed only on the Thailand-based income sources. Non-registered companies are taxed in the same way as the non-residents only on their Thailand source income. Simultaneously, the income even earned through foreign sources when brought into Thailand would be liable for the taxes.
Generally, the corporate income tax is levied on certain types of income earned by companies such as normal business-based income, passive income, capital gains, etc. Expenses spent in order to make the business more profitable or the expenses related to the business itself are deductible from the taxes.
Under some conditions, dividends paid by one company to another company can be exempt from corporate taxation. If they do not comply with the conditions, 50% of the dividends are subjected to the corporate tax as per the normal tax rates. The taxes that have been withheld on the dividend payments can be used for the final due amount of the corporate tax in a respective tax year. Dividends earned with the help of foreign affiliate partners is also exempt from the corporate income tax.
Capital gains are taxed as per the general tax rates as the corporate income tax rates, however, the capital losses can be used to offset the net taxable profits without any sort of restrictions.
Companies can carry forward their overall operating losses up to 5 accounting periods. If the operating losses are related to a business that has been promoted by the Thailand Board of Investment at the time of a tax holiday period, the losses can be carried forward to the next year and 5 accounting periods from there onwards.
There is no Surtax applicable to businesses in Thailand. There is no sort of Alternative minimum tax as well. Under certain conditions, the participation exemption is allowed.
Based on the Tax Treaties, the foreign income tax paid on the income that is liable for the corporate income tax in Thailand may usually be credited up to the income tax paid in Thailand on this type of income.
Tax is exempted for the dividend related income that has been obtained with the help of foreign affiliates (only if the foreign profits are subjected to tax at a minimum of 15%). Capital Gains, however, are subjected to the normal tax rate of 30%.
Tax holidays are made available for the businesses in Thailand for a period of up to 3 to 8 years (only for the business activities that have been promoted by the Thailand Board of Investment). Companies that are listed on the Stock Exchange of Thailand and investing in the new projects involving equipment, heavy machinery, vehicles, and software can also have an additional deduction of 25% on the overall cost that qualifies for income tax purposes.
Regional operating headquarters and the employees that are working within have a benefit of a flat 10% tax rate on the overall profits and a flat 15% tax rate on the personal income.
Withholding Tax – Withholding Tax is the type of tax that is generally deducted at the source. Withholding tax can be observed being imposed on Interests, Dividends, Royalties, etc.
Dividends -Dividends paid by one company to another company based in Thailand are liable for a 10% withholding tax or can be exempt from the tax under certain conditions. Dividends paid to companies that are not based in Thailand or residential/non-residential individuals are subjected to a withholding tax of 10%.
However, there is an option for the resident individuals to obtain a dividend tax credit, with the help of which they can include the dividends in their taxable income or not.
Interests – Interest paid to a Thailand-based entity that is not considered as a financial institution is subjected to a 1% advance withholding tax, which can be used as a credit for the final corporate income tax. Interests paid to the non-residential company is subjected to a 15% final withholding tax, except if there is a tax treaty applicable, in which case, the tax rate can be reduced.
Interests paid from a company to a resident or a non-resident individual is subjected to a 15% withholding tax.
Royalties – Royalties paid to a Thailand company are subject to a 3% advance withholding tax and the royalties paid to a non-resident are subjected to a 15% withholding tax (unless a tax treaty is involved).
Branch remittance tax – the tax rate for the branch remittance tax is 10% on the after-tax profits that are paid or the profits that are deemed as paid in the head office.
Other taxes imposed on Corporations – There is no Capital duty applicable to the individuals in Thailand. There is a payroll tax applicable which is usually withheld by the employer and is remitted to the tax authorities each month.
12.5% of real property tax is applicable on the appraised rental value of any real property. This is deductible while calculating the corporate income tax.
5% tax should be contributed by both the employer and the employee as a contribution to the Social Security (for the employees having monthly income up to 15,000 baht).
Stamp duty is applicable at a rate of 0.1% in case of leases, hiring processes, transfer of shares or debentures, loans, etc.
Another specific business tax is also applicable on the transfer of immovable property known as Transfer tax and the tax rate for the transfer tax is 3.3% (along with the municipal tax of 10%), 1% withholding tax, and a transfer fee of up to 2% of the appraisal value.
VAT – The standard rate for Value-Added Taxes in Thailand is 10%. This has been deducted to 7% until the 30th of September 2020 (this can be either continued or changed depending on the economic conditions). For the goods and services that have been exported the rate is 0%.
VAT is imposed on the sales of goods and the provision of services. The revenue threshold for VAT should be more than 1.8 million baht in order to register. Non-resident supplier carrying out their business activities in Thailand on a permanent basis should also register for the VAT.
VAT should be paid every month before the 15th of the month for the previous month of which the VAT has been collected.
Penalties – A monthly surcharge of 1.5% is applicable on the underpayments of tax for the remaining due tax amount. Upon the assessment by the tax authorities, if they find out that a person is liable for the income tax penalty, the person will be charged 100% of the tax amount as a penalty.
If a corporation declares the profits to be less by 25% for a complete year on average, then the company will be charged with a penalty of 20% in the first half of the year. For other situations, the surcharge of 1.5% is applicable to the outstanding due tax amount. Similar to the individuals, companies might also be imposed with a 100% penalty amount if found out during the assessment of tax authorities.
There are 55 countries as of now (including the United States) that have a tax treaty with Thailand in order to avoid double taxation on the individuals. By taking certain measures and qualifying for some conditions, individuals (expats) can be able to lower their taxes while living in Thailand.
There are some methods like Long-term equity funds, holiday travel expenses, donations to religious, educational, or charitable institutions, etc. By doing so, people might legally reduce their taxes while working in Thailand as expats.
Taxation is a very complicated procedure and if not done in the right way can cost you a lot of money. If you are a person who is busy and do not have `enough time to take care of this process or if you are a person who has very less knowledge and experience dealing with such type of matters, you can avail the professional services offered by us and get things done in the correct way.
That being said, we wish for you to have a bright future with profitable growth in your career.