It is always tough for any person to settle and start a business at any place to which he or she is not accustomed or is not native. Even if any applicant proceeds in the process, he or she has to come across various hold points before attaining the eligibility to practice business in foreign lands. But the process is somewhat easy and smooth if you are thinking to start your business in Thailand. Starting from BOI Registration to Corporate Income Tax filing, Thailand offers a wide range of flexibility throughout the course of the actions.
The major reasons behind the flexibility in the registration, starting and maintaining a business in Thailand is the welcoming attitude of the Royal Thai Government for new business proposals. This makes Thailand a gateway for foreign nations to get associated with free and fair trade with ASEAN Nations which is now the most skyrocketing and thriving economy zone of the world. It is very important to know about the Thailand Accounting and Taxation policies for foreigners before you start implementing your business plan in the regions.
Following are few points or rather an informational checklist which you must know about Thailand Accounting and Taxation policies –
Corporate Income Tax Rates in Thailand
The corporate tax rate in Thailand is 20% in general. The percentage varies depending upon the scale of business and the type of its registration. Various small and medium-sized companies with limited-liability registration type pay taxes with lower progressive rates. Similarly, branch tax rate and capital gain tax rate is also 20% individually. Foreign companies involved in businesses related to international transportation needs to pay 3% of the gross proceeds and are exempt from the tax on profit remittance.
Taxable Income Calculation in Thailand
Business or trading income, passive income and capital gains or losses are all taxable in Thailand. There is a deduction in taxable profit based on direct or indirect expenses for the business generation process. There is no surtax or tax surcharge and hence business owners are to needed to pay taxes over any particular tax.
However, there isn’t any Alternative Minimum Tax as well. Due to this reason, the Royal Thai Government never places a floor on the percentage of taxes that a filer is bound to pay for any minimum amount of business.
Thai Corporate Income Tax Year, Filing and Payment
A Thai tax year is generally 12 months. In case of incorporation of a company in a fiscal or the verge of dissolution, the year gets shorter. There is no provision of consolidated returns and every company must file its own tax return.
An individual or a company must file a half-year tax return. They should do so within two months from the completion of six months in the current fiscal. Whereas, they must file annual income tax within 150 days from the last day of the fiscal.
Extensions are not available in the payment process or dates. However, cases of electronic filing provide an additional eight days to complete the process.
Capital Gains, Losses and Foreigner Corporate Income Tax Relief in Thailand
Normal corporate income tax is based on capital gains, whereby, capital losses can offset net taxable profits. BOI promoted businesses can receive a tax holiday of up to five years on grounds of losses.
In case non-BOI promoted business, it can use the losses to offset its net taxable profits for a period of five years. After the tax holiday period, if the similar condition persists, the remaining tax losses are payable after a further five years.
Foreign Income tax payable in Thailand is calculated over the foreign income. They are subject to corporate income tax and credits to the amount of income tax payable.
Taxation Incentives in Thailand
BOI promoted businesses can have a tax holiday for the period of three to eight months. Grant of additional tax exemption is there for businesses of specific investment areas. Primarily, they can be investments in fields like management, technical support and financial management services. However, the exemptions are more assured if any of such business involves themselves in innovation, research and development.
For businesses in Thailand with annual operating expenditure of minimum THB 60 million, the tax rate is 8%. However, it is 3% if the same expenditure volume reaches THB 600 million.
IBC companies also benefit from an exemption from corporate income tax. They get the exemption on dividend income from the associated enterprises or their treasury services.
Corporate Income Tax Penalties in Thailand
Any business entity suppressing profit volumes on the first half-yearly tax instalment can attract a 20% surcharge. It is a fine of 1.5% on the monthly tax amount for all other cases. It is if any company or business entity fails to pay the tax on time.
The penalty rate is up to 100% of calculated tax volume in cases of misappropriation of income volume. Moreover, tax authorities can summon owner or representatives from any company on the grounds of doubt.
These were the basic laws for persons or business units willing to start a business in Thailand must know. You must know that it is preferable for foreign investors to enlist their business in IBC or BOI. Such companies can receive better incentives and loss-handling accounting benefits. These benefits can provide them with some monetary relief in terms of taxable income calculations and tax payment.
If the Corporate Income Tax rules of Thailand bothers you or you fail to understand the same, we can help you. Write your query to [email protected] for a brief consultation session. We won’t charge you anything for that.
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