Incorporated firms who operate in Thailand generally pay income tax at a rate of 20% of net although reduced tax rates do apply to companies that are listed on the Stock Exchange of Thailand (SET) and the Market for Alternative Investment (MAI). Small companies will pay taxes at reduced rates on a progressive scale of profits below 3 million THB.
Foundations and associations now pay income taxes at rates of 2-10% of gross business income, that is, depending on the activity. Temporary exemptions from corporate income can and will be applied in certain circumstances.
International transport companies face a rate of 3% of gross ticket receipts and 3% of gross freight charges.
All companies that are registered under Thai law are subject to taxation as articulated in the Revenue Code and are subject to income tax on income earned from sources within and outside of Thailand. Foreign companies which are not registered or not residing in Thailand are subject to tax only on income derived from sources in Thailand.
Business Expenses In Thailand
Normal business expenses and depreciation allowances, under accrual accounting are allowed as deductions from gross income. Double-deductions are available for qualifying and training expenditure. Inventory must be valued at cost or at market price, whichever is lowest. Fixed assets and buildings are depreciated over the useful life of the asset at rates of between 5 and 100%. Accelerated depreciation methods can be applied to certain asset classes.
Tax deductions can be claimed for donations of up to 2% of net profits to approved public charities or for public benefit, 10% of net profits for approved educational causes and 20% of net profits to approved sporting bodies. Entertainment expenses are tax deductible to a limit of the lesser of 0.3% of gross sales income but not exceeding 10 million THB.
Thai companies are required to file corporate tax returns and make payments of corporate income tax 2 times a year while employers are required to withhold personal income tax from their employees. Except for newly incorporated companies, an accounting period is defined as a period of 12 months. Annual tax returns must be accompanied by audited financial statements. Tax losses can be carried forward for up to 5 consecutive years.
A corporate taxpayer must file a half-year return and pay a tax installment based on 50% of the estimated annual profit by the end of the 8 month of the accounting period. Failure to pay this estimated tax or underpayment by more than 25% may be subject to a taxpayer fine amounting to 20% of the amount in deficit.
Failure to file a tax return, late filing or filing a return containing false or inadequate information may subject the taxpayer to various penalties. Failure to file a return, a subsequent non-compliance with an order to pay the tax assessed, may result in a penalty equal to twice the amount of tax due. Filing a return with a tax deficiency may result in a penalty equal to the amount of tax all penalties must be paid within 30 days of being assessed.
Dividends In Thailand
Inter-corporate dividends in Thailand are generally exempt from tax on 50% of the dividend payment received provided the shareholding is in place for longer than 3 months prior to and for at least 3 months after the payment is due. Dividends are exempt from income taxes where the recipient holds 25% or over of the share of the payer company. The exemptions do not apply where respective cross-holdings exist between the payer and recipient company.