Corporate tax in Thailand

Summary

Corporate Income Tax Rate (%) 20
Capital Gains Tax Rate (%) 20
Branch Tax Rate (%) 20
Withholding Tax (%)
Dividends 10
Interest 15*
Royalties from Patents, Know-how, etc. 15
Branch Remittance Tax 10
Net Operating Losses (Years)
Carryback 0
Carryforward 5

* Certain types of interest are exempt from tax [see footnote (a) to Section F].

Taxes on corporate income and gains

Corporate income tax. Thai resident companies are subject to cor­porate income tax on their worldwide income. Thai resident com­panies are those incorporated in Thailand. Branches of foreign corporations are subject to Thai tax on Thailand-source income only.

Rates of corporate tax. Thai resident companies and branches of foreign corporations are subject to corporate income tax at a flat rate of 20% on taxable profits.

Progressive corporate income tax rates of 0%, 15% and 20% apply to locally incorporated companies with paid-up capital of not more than THB5 million and revenue of not more than THB30 million per year.

Tax incentives. Tax incentives, which are described below, are available in Thailand for International Headquarters (IHQs), Trea­sury Centers (TCs) and International Trading Centers (ITCs), if relevant conditions are met.

IHQs. Income derived by IHQs from qualified support services and licensing fees from intellectual properties provided and/or granted to qualified overseas affiliate companies is exempt from Thai corporate income tax. Service fees and licensing fees gener­ated from qualified local affiliate companies are subject to a re­duced corporate income tax rate of 10%.

TCs. TCs licensed by the Bank of Thailand and operating as part of an IHQ may be eligible for corporate income tax exemption on interest income and income from qualified TC services generated from qualified overseas affiliate companies. Interest income and treasury service fees generated from qualified local affiliate com­panies are subject to a reduced corporate income tax rate of 10%.

ITCs. Income derived by ITCs from sales of goods bought from a supplier outside Thailand and sold to a customer outside Thai­land (out-out trading transactions) and service fees generated from other relevant services are exempt from Thai corporate in­come tax.

Capital gains. Capital gains are treated as ordinary business in – come subject to income tax.

Administration. Corporate income tax returns, together with the audited financial statements, must be filed with the Revenue Department within 150 days after the accounting year-end. Cor­porate income tax payments are due on the filing date.

Mid-year (interim) tax returns must be filed with interim tax pay­ments within two months after the end of the first half of the accounting year. Listed companies, financial institutions and com­panies approved by the Director-General of the Revenue Depart­ment compute their interim tax based on actual operating results for the first half-year. Other companies compute their interim tax based on one-half of the estimated annual profit. These companies do not have to submit audited or reviewed financial statements. The interim tax is creditable against the annual tax payable at the end of the year.

Dividends

Received from resident companies. In general, one-half of divi­dends received by resident companies from other resident com­panies may be excluded from taxable income. However, the full amount of the dividends may be excluded if either of the follow­ing applies:

  • The recipient is a company listed on the Stock Exchange of Thailand.
  • The recipient owns at least a 25% equity interest in the distrib­uting company, provided that the distributing company does not own a direct or indirect equity interest in the recipient company.

These rules apply if the related shares are acquired not less than three months before receiving the dividends and are not disposed of within three months after receiving the dividends.

Received from foreign companies. A Thai company that owns an equity interest of at least 25% in a foreign company can exclude dividends received from such foreign company from its taxable profit if, on the date of receipt of the dividend, it has held the investment for at least six months and if the profit out of which the dividends are distributed is subject to income tax in the hands of the foreign company at a rate of at least 15%.

Foreign tax relief. Thailand has entered into double tax treaties with 56 countries. In general, under the treaties, foreign tax relief is limited to the lower of the foreign tax and the amount of Thai tax calcu lated on such income.

Foreign tax payable in non-treaty countries may be credited against Thai tax, limited to the Thai tax computed on the foreign income, provided the foreign tax meets the conditions set forth in the rel­evant measure. If the foreign tax is not used as a credit, it may be claimed as a deduction for income tax purposes.

Determination of trading income

General. Corporate income tax is based on audited financial state­ments, subject to certain adjustments.

In general, expenses are tax-deductible if they are incurred wholly and exclusively for the purpose of generating income. However, expenses created by means of provisions or allowances, such as those for bad debts or stock obsolescence, are not tax-deductible until they are actually used.

Inventories. Inventories must be valued at the lower of cost or mar­ket value. Cost may be determined using any generally accepted accounting method. After a method is adopted, a change to another method may be made only with approval of the Director-General of the Revenue Department.

Depreciation and amortization allowance. A company may depre­ciate its fixed assets under any generally accepted accounting method, provided the number of years of depreciation under the selected method is not less than the minimum prescribed period. However, after a method is adopted, it may not be changed unless prior consent has been obtained from the Director-General of the Revenue Department. The following are the minimum prescribed periods applicable to some major fixed assets.

Asset Time period
Buildings 20 years
Furniture, fixtures, machinery,
equipment and motor vehicles
5 years
Trademarks, goodwill, licenses, patents and copyrights (including software) Over period of use (or 10 years if no period of use)
Computer hardware and operating software 3 years

Relief for losses. Operating losses may be carried forward for a period of five years. Loss carrybacks are not allowed.

Groups of companies. The Thai tax law does not include any pro­visions for consolidated treatment under which companies within a group may be treated as one tax entity. Each individual company must file its income tax return and pay its tax.

Other significant taxes

The following table summarizes other significant taxes.

Nature of tax Rate (%)
Value-added tax, on goods sold, services rendered and imports 7
Specific business tax, on financial service and real estate businesses Various

Miscellaneous matters

Foreign-exchange controls. On presentation of supporting docu­ments, virtually all foreign-exchange transactions may be pro­cessed by a commercial bank.

Transfer pricing. Under transfer-pricing guidelines issued by the Thai Revenue Department, all sales or service transactions must be executed at an arm’s-length price, and the taxpayer is required to prepare and maintain contemporaneous documentation to substan­tiate the price. Acceptable transfer-pricing methods include the comparable uncontrolled price method, the resale price method, the cost-plus method and other internationally accepted methods. If the taxpayer fails to prove that a transaction challenged by the tax authorities was executed on an arm’s-length basis, additional tax can be assessed. Transactions between related parties are sub­ject to particular scrutiny.

Treaty withholding tax rates

The rates in the table reflect the lower of the treaty rate and the rate under domestic tax law.

Dividends

%

Interest (a)(b)

%

Royalties

%

Armenia 10 15 (c) 15
Australia 10 15 (c) 15
Austria 10 15 (c) 15
Bahrain 10 15 (c) 15
Bangladesh 10 15 (c) 15
Belarus 10 15 (c)(q) 15
Belgium 10 15 (c) 15 (f)
Bulgaria 10 15 (c)(e) 15 (f)
Canada 10 15 (c) 15 (f)
Chile 10 15 15 (u)
China 10 15 (c) 15
Cyprus 10 15 (c)(e)(q) 15 (r)
Czech Republic 10 15 (c) 15 (f)(g)
Denmark 10 15 (o) 15 (f)
Estonia 10 10 (c) 10 (x)
Finland 10 15 (c) 15
France 10 15 (c)(d) 15 (f)(h)
Germany 10 15 (c)(e) 15 (f)
Hong Kong SAR 10 15 (c)(m) 15 (f)(g)
Hungary 10 15 (c) 15

 

India 10 15 (c) 15
Indonesia 10 15 (c) 15
Ireland 10 15 (c)(y) 15 (z)
Israel 10 15 (c) 15 (f)
Italy 10 15 (c)(e) 15 (f)
Japan 10 15 (c) 15
Korea (South) 10 15 (c) 15
Kuwait 10 15 (c)(e)(o) 15
Laos 10 15 (c)(e) 15
Luxembourg 10 15 (c) 15
Malaysia 10 15 (c) 15
Mauritius 10 15 (c) 15 (f)
Myanmar 10 10 (c) 15 (f)(v)
Nepal 10 15 (c) 15
Netherlands 10 15 15 (f)
New Zealand 10 15 (c)(m) 15 (n)
Norway 10 15 (c)(o) 15 (f)(s)
Oman 10 15 (c)(t) 15
Pakistan 10 15 (c) 15 (f)(h)
Philippines 10 15 (c) 15
Poland 10 15 (c) 15 (f)(h)
Romania 10 15 (c) 15
Russian
Federation 10 15 (c) 15
Seychelles 10 15 (c) 15
Singapore 10 15 (c) 15
Slovenia 10 15 (c)(o) 15 (k)
South Africa 10 15 (c) 15
Spain 10 15 (c) 15 (l)
Sri Lanka 10 15 (c) 15
Sweden 10 15 (c) 15
Switzerland 10 15 (i) 15 (f)(g)
Taiwan 10 (w) 15 (c) 10
Tajikistan 10 10 (c)(aa) 10 (f)
Turkey 10 15 (c) 15
Ukraine 10 15 (c)(o) 15
United Arab
Emirates 10 15 (c)(e)(o) 15
United Kingdom 10 15 (c) 15 (f)
United States 10 15 (c)(j) 15 (k)
Uzbekistan 10 15 (c)(p) 15
Vietnam 10 15 (c) 15
Non-treaty countries 10 15 15

 

(a)   The following types of interest are exempt from tax:

  • Interest paid to a financial institution wholly owned by another state
  • Interest on certain foreign-currency loans brought into Thailand between 1 May 1979 and 28 February 1990
  • Interest paid by the government or a financial institution established by a specific law of Thailand for the purpose of lending money to promote agriculture, commerce and industry
  • Interest paid by the central bank or state enterprises on loans approved by the Ministry of Finance

b) The rate is reduced to 10% if the interest is paid to banks, financial institu­tions or insurance companies of the treaty countries.

c) Interest paid to the government, subdivisions of contracting states or a central bank is exempt from tax.

d) The withholding rate is 3% for interest on loans or credits granted for at least four years with the participation of a public financing institution to a statutory body or enterprise of the other contracting state, in relation to sales of equip­ment, or in relation to the survey, installation or supply of industrial, com­mercial or scientific premises, or public works.

e) Interest paid to a financial institution wholly owned by the other contracting state is exempt.

f) The withholding rate is 5% (10% for Pakistan) for royalties for copyrights of literary, artistic or scientific works.

g) The withholding rate is 10% for royalties paid for patents, trademarks, designs, models, plans, or secret formulas or processes.

h) Royalties and similar payments paid to the other contracting state or a state-owned company for films or tapes are exempt.

i) Interest paid to residents of Switzerland with respect to loans guaranteed or insured under the Swiss provisions regulating the Export or Investment Risk Guarantee is exempt.

j) The rate is reduced to 10% for interest paid on indebtedness resulting from sales on credit of equipment, merchandise or services. Interest on debt obli­gations guaranteed or insured by the government is exempt.

k) The withholding rate is 5% (10% for Slovenia) for royalties for the use of, or the right to use, copyrights of literary, artistic or scientific works, including software and motion pictures and works on films, tape or other means of reproduction for use in connection with radio or television broadcasting. The withholding rate is 8% (10% for Slovenia) for royalties for the use of, or the right to use, industrial, commercial or scientific equipment.

l) The withholding rate is 5% for royalties paid for the use of, or the right to use, copyrights of literary, dramatic or scientific works, excluding cinemato­graphic films or films or tapes used for radio or television broadcasting. The withholding rate is 8% for amounts paid under financial leases for the use of, or the right to use, industrial, commercial or scientific equipment.

m) The rate is reduced to 10% for interest paid on indebtedness resulting from sales on credit of equipment, merchandise or services, except for sales between persons not dealing with each other at arm’s length. Under the New Zealand treaty, interest derived by the government of New Zealand or its central bank from the investment of official reserves is exempt from tax.

n) The withholding tax rate is 10% for royalties paid for the following:

  • The use of or right to use, copyrights, industrial, scientific or commercial equipment, motion picture films, films or videotapes or other recordings for use in connection with television, and tapes or other recordings used in connection with radio broadcasting
  • For the reception of, or the right to receive, visual images or sounds trans­mitted to the public by satellite, cable, optic fiber or similar technology
  • For the use of, or right to use, in connection with television or radio broad­casting, visual images or sounds transmitted by cable, optic fiber or similar technology

o) Interest on loans made, guaranteed or insured by the government, central bank, agency or body wholly owned or controlled by the government is exempt from tax.

p) Interest is exempt from tax if it is paid on loans made, guaranteed or insured by the contracting state or by an authorized body of the state on behalf of the state or if it is paid on other debt claims or credits guaranteed or insured on behalf of the contracting state by an authorized body of the state.

q) The rate is reduced to 10% for interest paid on indebtedness resulting from sales on credit of industrial, commercial, or scientific equipment or from sales on credit of merchandise between enterprises.

r) A withholding tax rate of 5% applies to royalties for the use of, or the right to use, copyrights of literary, dramatic, musical, artistic or scientific works, includ­ing software, cinematographic films and films or tapes used for radio or television broadcasting. A withholding tax rate of 10% applies to royalties for the use of, or the right to use, industrial, commercial or scientific equipment or for information concerning industrial, commercial or scientific experi­ence.

s) The withholding tax rate is 10% for royalties paid for the use of, or the right to use, industrial, commercial or scientific equipment.

t) The rate is reduced to 10% if the loan or debt claim generating the interest is guaranteed by the government, central bank, state general reserve fund, local authorities, or a body wholly owned by the government.

u) The withholding tax rate is 10% for royalties paid for copyrights of literary, artistic or scientific works and the right to use industrial, commercial and scientific equipment.

v) The withholding tax rate is 10% for royalties paid for managerial or consul­tancy services or for information concerning commercial, industrial, or sci­entific experience.

w) The withholding tax rate is reduced to 5% if the beneficial owner holds direct­ly at least 25% of the dividend-paying company.

x) The withholding tax rate is 8% for royalties paid for the use of, or the right to use, industrial, commercial or scientific equipment. The rate is 10% for royal­ties in other cases.

y) The rate is 10% for interest paid on indebtedness resulting from sales on credit of equipment, merchandise or services, except for sales between per­sons not dealing with each other at arm’s length.

z) The withholding tax rate is 5% for royalties for the use of, or the right to use, copyrights of literary, artistic or scientific works, including software and motion pictures and works on films or other means of reproduction for use in connection with radio or television broadcasting. The rate is 10% for royalties for the use of, or the right to use, industrial, commercial or scientific equip­ment or patents.

(aa) Interest is exempt from tax if any of the following circumstances exists:

  • The interest is paid in connection with the sale on credit of merchandise or equipment.
  • This interest is paid on a loan or credit granted by a bank.
  • The interest is paid to the government including a political subdivision or local authority thereof, the central bank or a financial institution controlled by the government.
  • The interest is paid to a resident of the other contracting state in connection with a loan or credit guaranteed by the government including a political subdivision or local authority thereof, the central bank or a financial institu­tion controlled by the government.