Whether by promoting your activities through the Thai Board Of Investments or taking advantage of one of the country's strong international treaties, there are several ways to set up a prosperous company in Thailand.
However, it is essential that you understand the basics of fiscal compliance regulations in Thailand to ensure a successful expansion and avoid potential fines and penalties. This article will guide you through corporate tax in Thailand.
Key requirements for ensuring compliance with corporate tax regulations in Thailand
Securing a Taxpayer Identification Number for your company
In Thailand, any individual or corporate entity that earns income must register with the local Revenue Department to obtain a Taxpayer Identification Number (TIN). This allows you to submit annual tax returns for your company, as well as register for other tax services, depending on eligibility (Value Added Tax, Specific Business Tax).
Application for a corporate TIN must be submitted within 60 days of the incorporation date for registered Thai companies, or, in the case of foreign entities, from the date on which business activities in Thailand begin. For corporations, applications must be submitted by a company owner or an authorized legal representative.
What are the main corporate tax requirements in Thailand?
How to register and file your corporate Value Added Tax (VAT)
Value Added Tax (VAT) in Thailand applies to the sale or importing of goods and services by entities with sales exceeding THB 1.8 Million. Upon selling a good or service, you must generate a tax invoice, which can then be used to report Thailand VAT to the Revenue Department. Tax invoices must include the following details to ensure compliance:
- The words “Tax Invoice” must appear on the document
- Seller and buyer place of business must appear under the words “Head office” or “Branch No.”
- Seller and buyer TIN, Name, and address details
- Serial number
- Details on goods/services (value, type, category)
- Calculated VAT amount that is clearly separate from the value of goods
- Date of issue
You must register for VAT through the Revenue Department before starting operations, or within 30 days of reaching the minimum sales threshold. VAT returns are submitted by the 7th of the month following the sale for imported goods, and the 15th for local sales. If you register for E-filing with a local tax office, you will have an additional 8 days.
When do you have to pay Specific Business Tax (SBT)?
The Thai Specific Business Tax (SBT) only applies to certain types of companies that are exempt from reporting and paying VAT. The purpose for this is to levy the appropriate rate for operations that do not clearly differentiate between production versus value-added costs. SBT rates vary depending on the sector of activity:
- Financial institutions / Banks - 3%
- Life Insurance companies - 2.5%
- Real Estate: 0.1%
- Pawning/Brokerage - 2.5%
Companies that are required to pay SBT must register with the local revenue office within 30 days of starting operations. Returns must be submitted by the 15th to the Revenue Department. Keep in mind that if you run multiple branches, you must submit individual reports for each separate business location you own.
The importance of carefully managing Withholding Tax in Thailand
When earning or paying income in Thailand, you must ensure careful compliance with Withholding Tax regulations. This system is in place to ensure that the taxable portion of the income is remitted to the Revenue Department. Failure to properly report and pay withholding tax can result in severe fines and penalties.
Withholding tax rates can vary depending on each individual or entities specific residency or incorporation status, as well as on income classification type:
| Type of income | Withholding Tax rate (%) for individuals | Withholding Tax rate (%) for companies |
|---|---|---|
| Employment Income (salary) | 0 - 35 | - |
| Service provision income | 0 - 35 | 3 |
| Foreign/Non-resident service provision | 15 | - |
| Rental Income | 5 | 5 - 15* |
| Interest Income | 15 | 1 (Does not apply to interest accrued through banks) |
| Royalties | 0 - 35 | 3 |
| Foreign/Non-resident Royalties | 15 | - |
| Dividends | 10 | - |
| Government income | - | 1 |
| Contractor Income (essential materials) | - | 3 |
| Liberal profession income (Lawyers, architects, engineers) | - | 3 |
Navigating corporate income tax submissions throughout the fiscal year
Mid-year corporate income tax return for Thai companies
Managing corporate tax in Thailand requires thorough scheduling, as the taxable year for a company is determined by the company registration date. It is possible, however, to request a modification of your corporate tax year through the Revenue Department, with many companies opting to transition to the typical Thai fiscal year of January to December.
In Thailand, companies are required to submit mid-year income tax returns within 60 days of reaching the halfway point of their taxable year (which is June for most companies). Mid-year income tax payments are based on 50% of your estimated annual net income. Remember that the tax rate is set at 20%.
It is considered best practice to use audited financial statements to fill in the PND 51 mid-year tax form to ensure accurate payments. Failure to submit mid-year returns or underreporting by more than 25% can result in penalties and your company being flagged by tax authorities for further auditing.
Submitting and paying annual corporate income tax for your company
Annual income tax returns must be submitted within 120 days of your company’s fiscal year-end. When filing the PND 50 annual form, you must declare the total net income earned. The following companies are required to submit corporate income tax:
- Registered Thai Companies
- Foreign-owned companies that have a permanent office in Thailand
- Foreign-owned companies earning income from dividends, royalties, or interests in Thailand
It is during the year-end calculations that you will also need to pay adjustments on the mid-year estimations. If you have an overpayment, then you can either request a reimbursement from the Revenue Department, or you can also opt to carry the amount over to the next tax year to reduce your amount owing.
Why audited financial statements are essential for compliance with corporate tax regulations
To ensure financial transparency and accountability, regulations for corporate tax in Thailand require that you submit annual financial statements for your company to demonstrate the sources of income, any changes that may have occurred in equity, and which accounting policies you employ.
It is mandatory to have these reports audited by an authorized third-party Thai accountant who will verify compliance with local standards. This will also make it easier to prepare mid-year estimations, which can avoid potentially underreporting income and incurring penalties.
Emerhub’s team of advisors can help you with securing the necessary documents for preparing corporate income tax, as well as assist in locating a trustworthy auditor in Thailand for preparing your company’s annual financial statements. If you have any questions regarding tax compliance, contact us via the form below and one of our experts will be happy to assist you!