tax payment for conducting
business in Thailand

The corporate income tax rate in Thailand is 20% based on net profit. However, the government offers special tax rate for SME companies, which must be companies or partnerships with registered capital not exceeding 5 million baht and total annual revenue not exceeding 30 million baht.

NET PROFIT (TAX RATE)
Net Profit (baht) Rate 1 - 300,000 (0%)
300,001 -1,000,000 (15%)
over 1,000,000 (20%)

SMEs in Thailand, when registered as legal entities, may enjoy favorable deduction rates for specific expenses and assets, for example, when hiring elderly workers, SMEs can deduct expenses at twice the actual cost.

Other kinds of companies' tax rate

CATEGORIES (TAX RATE)
1.A foreign company that is not engaged in business activities within Thailand and receives dividends from Thai sources - (10% of Gross Receipt)

2.A foreign company not conducting business operations in Thailand and receives various forms of income, in addition to dividends, from sources within Thailand -(15% of Gross Receipts)

3.A foreign company repatriating profits from Thailand -(10% of amount repatriated)

When conducting business in Thailand, we typically advise clients to consider registering as SMEs to benefit from tax advantages. However, there are alternative avenues for registering a business on a larger scale with higher capital while still enjoying tax privileges. One such option is to register your business with the Board of Investment of Thailand (BOI).

VALUE ADDED TAX (VAT)
VAT Tax rate in Thailand is 7%. If a person or entity in Thailand consistently sells goods or offers services with an annual turnover above 1.8 million baht, they are required to pay VAT. For services, it doesn't matter where the service is used; if it's performed in Thailand, VAT applies, even if the usage is elsewhere. In VAT terms, taxable goods encompass all kinds of property, whether tangible or intangible, regardless of their purpose (sale, personal use, etc.). This definition extends to articles imported into Thailand. Services, on the other hand, involve activities performed for the benefit of an individual or entity and do not fall under the category of goods.

VAT exemptions
The Revenue Department of Thailand offers VAT exemptions including

1. Small entrepreneurs with an annual turnover below 1.8 million baht.
2. Sales and import of raw agricultural products and related items (fertilizers, animal feeds, pesticides).
3. Sales and import of newspapers, magazines, and textbooks.
4. Basic services like land transportation (domestic and international), healthcare, and education.
5. Professional services such as medical, auditing, and legal services.
6. Income from various activities like business, commerce, agriculture, industry, and transportation.
7. Cultural services, including amateur sports, libraries, museums, and zoos.
8. Services related to employment, research, technical services, and public entertainers.
9. Goods exempt from import duties under the Industrial Estate law in Export Processing Zones (EPZs) and Chapter 4 of the Customs Tariff Act.
10. Imported goods under Customs supervision for re-export, eligible for import duty refunds.
11. Other services like religious, charitable, and those provided by government agencies and local authorities.

VAT 0%
Activities subject to zero percent VAT include:

1. Export of goods.
2. Services provided in Thailand but used outside Thailand, following specified rules and procedures.
3. Aircraft or sea vessels involved in international transportation.
4. Supply of goods and services to government agencies or state-owned enterprises under foreign aid programs.
5. Supply of goods and services to the United Nations, its agencies, embassies, consulate-generals, and consulates.
6. Supply of goods and services between bonded warehouses or enterprises located in Export Processing Zones (EPZs).

VAT Calculation
In tax calculation for Value Added Tax (VAT):
VAT liability=Output Tax−Input Tax

• "Output Tax" refers to the tax collected or collectible by a VAT registered person from customers when goods or services are supplied.
• "Input Tax" is the tax charged by another registered person on the purchase of goods or provision of services. This term also includes any tax charged on imported goods.

DOES MY COMPANY NEED TO REGISTER FOR VAT?
To determine whether your company needs to register for VAT, consider the following:
Projected Cash Flow

• Assess your anticipated income and net profit.

If your company expects significant cash flow, with an annual turnover surpassing 1.8 million baht. This proactive step can help prevent potential hefty penalties in the future. However, please check if you business is exempted from VAT.
Work Permit and Business Visa:

• Evaluate whether registering work permits and business visas with the company is necessary.

Moreover, if registering your visa and work permit under the company is a requirement, it often implies the need to register for VAT. For more detailed guidance on this matter, please reach out to our team.

WITHHOLDING TAX
Withholding tax (WHT) is a deduction from payments to service providers. The applicable rate depends on the nature of the service.
To calculate withholding tax (WHT):

1. Deduct WHT for expenses exceeding 1,000 Baht.
2. Deduct WHT for expenses below 1,000 Baht if there's a long-term contract (e.g., telephone service).
3. No deduction for payments to non-taxpayers (e.g., Government, BOI promoted company).

Common WHT deduction rates apply.

Service and WHT rate (**)
Rent 5%
Rental service fee 3%
Parking 3%
Transportation (*) 1%
Telephone 3%
Advertising 2%
Non-life insurance premiums 1%
Professional fees 3%
Royalties 3%
Interest 1%
Dividends 10%
Prizes 5%
Water and electricity N/A
Public transportation/ air tickets N/A
Life insurance N/A

Additional notes:

• (*) Excludes public transportation fares.
• (**) Rates are for resident corporations and branches of foreign companies. Different rates may apply for payments to individuals, associations, foundations, or foreign companies without permanent residence in Thailand.

WITHHOLDING TAX AND VAT : How to calculate
When determining the amount for WHT deduction, calculate it net of VAT.
100,000 THB of office rent + 7% of VAT. = 107,000 THB
WHT tax rate of rent is 5%
5% of 100,000 = 5,000 THB
Amount of pay to the supplier 107,000 - 5,000 = 102,000 THB

When deducted WTH Tax, it's necessary to sent WHT certificate to your suppliers, unless your company's registered for e-witholding tax service.