If you are planning to establish a business in Thailand, it is extremely important to know about corporate income tax Thai laws. CIT is paid by those companies and partnerships in Thailand who are subjected to income tax on the income earned from the sources both within and outside Thailand. However, the juristic companies for income tax purposes include, but they are not limited to;
- Registered ordinary and limited liability partnerships
- Foundations and associations
- Limited companies
- Foreign corporation branch earning from sources within Thailand
- Joint ventures
Corporate Income Tax is typically imposed on the net profits as per the recognized accounting principles and based on the conditions stated in the Revenue Code of Thailand. It must be kept in mind that;
- Return must be attached with the audited financial statement.
- An amount of 20% of the deficit will be fined if the taxpayer fails to pay the tax on time.
- By the end of the 8thmonth, 50% of the annual income tax must be paid.
However, the corporate receives some exemption on dividends.
- Dividends received by the Thai companies and foreign companies, conducting business in Thailand are taxable as any ordinary income. Also, it is entitled to include one-half of the dividends in the taxable income received from a Thai company, provided the shares have been there for a period of at least 3 months before and 3 months after receiving the receipt of the dividends.
- A company in Thailand will be exempted from taxation on all the dividends received from another Thai company, provided the recipient holds 25% of the total shares with the voting rights in the paying company. And has also held shares in accordance with the holding period.
- Additionally, Thai companies that are listed on the Thai Stock Exchange are exempted from the taxation on all the dividends received from any other companies in Thailand, if they comply with the determined holding period.
In case you fail to file a tax return, late filing or even filing a return containing false or inadequate details may be subjected to the taxpayer to different penalties. On failing to file a return or subsequent non-compliance to pay the tax assessed might result in the penalty that equals to twice the amount of the tax due. Typically, penalties are due within 30 days of the assessment. Similarly, an annual income tax return must be filed within 150 days after each accounting period and must be accompanied by the audited financial statements.
Income Tax
This includes the following;
- Gross income arising from carrying out petroleum business
- Other income arising from transferring of any property
- Petroleum value delivered as the royalty program to the government
Value Added Tax in Thailand
Generally, the Value Added Tax is imposed to products and services supplied in and/or imported into Thailand. Well, VAT includes the municipal tax that is charged at the rate of one-ninth of the VAT rate. Under the tax regime, value added at each stage of the production process is subject to tax. As you may know that such tax affects the providers of services, importers, exporters, wholesalers, and retailers. 0% rate is applicable to some businesses, such as international transportation by sea or air, the sale of goods and services to the US-related organizations and the export of goods and services.
The trader will usually charge Value Added Tax on selling of goods. Businesses that are excluded from VAT are subjected to some specific business tax; businesses that are necessary to maintain social welfare, charitable services and cultural and religious services. The traders who are involved in zero-rate supply business will not require collecting VAT on their supplies, are liable to refund the VAT paid for buying of goods and services from others. On the other hand, services provided by the trader staying abroad and used in Thailand are considered as being rendered in Thailand and therefore they are subject to VAT. Please see that you file a VAT return and pay the tax monthly, on or before 15th of the following month.
Specific Business Tax in Thailand
Such tax is levied on a few types of businesses whose value added can give you a tough time to define like life insurance, pawnshops, real estate, banking and finance. These businesses do not fall inside the VAT system and thus are not subjected to value-added taxation. Well then specific business tax is calculated on monthly gross receipts that do not include municipal tax.
Stamp Duty Tax
It is paid on the instruments, such as letters of credit, powers of attorney, bills of exchange and promissory notes, etc., listed in the Stamp Duty Schedule of the Revenue Code at various specified rates. In case the instrument is executed in Thailand, the stamp duty is due in fifteen days after the execution date; whereas if the instruments are executed outside Thailand, then the stamp duty is due in thirty days after they arrive in Thailand.
Excise Tax
Such tax is imposed mainly on the luxury items like petroleum products, soft drinks, crystal glasses, liquor and tobacco, etc. It is actually calculated on the basis of the Excise Tax Tariff at a specific rate that is higher. Please note that the goods that are subjected to excise tax are also subjected to VAT. The tax is further collected by the Excise Department and then imposed at the delivery time of the goods from factories.
Municipal Tax
Usually, municipal tax is paid on the basis of the rate specified by the Government. When you pay VAT, you also pay one-ninth of its rate to municipal tax.
Customs Duty Tax
This is primarily imposed on the import and a few export goods like, rice, teak, rubber, and leather that are mentioned in the Customs Tariff statue. Generally, it is the invoice price that forms the basis for computation of the duty and the normally applied Cost, Insurance and Freight value for import; whereas Free on Board for export.
Double Tax Treaty
The Thai government enters into tax treaties in order to avoid double taxation so that a person will not be taxed in another country where he lives, provided he has already paid tax in the country from where he earns. Similarly, the treaty aims at improving cooperation within the government of different countries to prevent tax evading. The scope of tax treaties in Thailand covers income taxes and on the capital of individual and juristic entities. Also, these treaties exempt and minimize certain types of income from taxation.
