Tax residents in Thailand are obligated by law to pay and file personal income tax returns each year. Therefore, it’s very important that you understand and accept your tax liabilities as a taxpayer. This article intends to guide you through the process of tax payment in Thailand this coming season.
Let’s find out more about Thailand’s taxation on income.
- Are you a Tax Resident of Thailand?
- What are the Types of Taxable Income in Thailand?
- Personal Income Tax Rates in Thailand 2022-23
- Tax Credits
- Deduction and Allowances on Personal Income Tax in Thailand
- Tax Administration for Personal Income Tax in Thailand
- Penalties and Surcharges for Late Filing of Personal Income Tax in Thailand
- Do You Need a Tax Clearance Certificate in Thailand?
Are you a Tax Resident of Thailand?
An individual’s income may be subject to personal income tax if it falls into the following categories:
- Benefits obtained in Thailand, whether monetary or non-monetary (paid in or outside Thailand)
- The income brought into Thailand within a year from a foreign source
Non-residents are only required to pay personal income tax on their income if they receive their benefits in Thailand.
Each year, both residents and non-residents must apply for a personal income tax ID and file a personal tax return in Thailand. If you are a foreigner staying for more than 180 days in Thailand in a single tax year and made income, you are a tax resident of Thailand.
What are the Types of Taxable Income in Thailand?
In Thailand, there are eight categories for assessing income:
- Earnings from employment, including wages, salaries, bonuses, gratuities, pensions, housing allowances, the monetary value of a home that an employer provides for free, the payment of an employee’s debt obligations by an employer, or any other money, asset, or benefit obtained from employment
- Income from jobs, employment offices, or services
- Goodwill, copyright, franchise, patent, and other rights income
- Income from interest, dividends, investor bonuses, gains from mergers, acquisitions, or dissolutions of businesses or partnerships, as well as gains from the sale of stock
- Property lease, violation of a hire-purchase contract, and installment sale deal
- Income from the liberal arts, engineering, architecture, accounting, and other professions
- income from a work agreement where the contractor is responsible for supplying all necessary materials other than tools
- Earnings from commerce, business, agriculture, transportation, or any other activity not already listed
Capital gains, as stated in the fourth point, are taxed as regular income. Moreover, capital losses cannot be used to offset capital gains, as is the situation in many other nations.
However, capital gains are not always taxable, and there are three exceptions:
- Income from earnings and salaries, including any perks offered by the company (such as stock option income, employer-paid personal income taxes, living expenses, the value of rent-free housing, etc.), but excludes costs for business travel and medical care.
- Gains on the selling of debt instruments or government bonds that don’t pay interest (although there are exceptions)
- Revenue from the sale of government bonds
Personal Income Tax Rates in Thailand 2022-23
Thailand uses a progressive tax system for personal income tax, with the following rates:
Tax Credits in Thailand
Taxpayers are eligible for credits for tax withholding at source against their annual tax liability. The income tax withheld at source from dividends received from Thai-incorporated companies may be applied as a credit against a person’s tax liability if they are domiciled and resident in Thailand.
Dividend income is combined with other types of income after the credit is added to account for the underlying corporate income tax paid on the profit being distributed. The value of the tax credit is subtracted from the tax that has been determined by applying the personal income tax rates to the entire taxable income. If a double taxation agreement does not allow it, taxpayers cannot use foreign taxes as a credit against Thai taxes.
Deduction and Allowances on Personal Income Tax in Thailand
According to the chart below, resident taxpayers may deduct personal and special allowances:
Apart from the above-mentioned allowances, the assessable income is also subject to some special allowances like the following:
Tax Administration for Personal Income Tax in Thailand
Thailand applies a self-assessment system in collecting taxes. Taxpayers must declare their tax liabilities in their tax returns and pay the tax due at the time of filing. The following individuals must file income tax returns for income earned in the preceding tax year:
- A person who has no spouse and earns an income of more than Baht 60,000
- A person who has no spouse and earns income under the category of salaries and wages of more than Baht 120,000
- An individual who has a spouse and earns an income of more than Baht 120,000
- A person who has a spouse and earns income under the category of salaries and wages of more than Baht 220,000.
- Each husband or wife earning income can choose to file his/her income tax return either separately or jointly with their spouse, whichever they prefer.
The tax year is the calendar year. All tax-liable persons must file a tax return no later than 31 March of the following year for hardcopy filing. However, 8 April is the date for online filing. Additionally, those taxpayers deriving income from the lease of property, liberal professions, contractual work, and other businesses, commerce, or industries must file a mid-year tax return by 30 September. Note that, this tax calculation is on the income during the first half of the tax year to 30 June. Tax paid at the time of the mid-year filing is creditable against the annual tax liability.
Penalties and Surcharges for Late Filing of Personal Income Tax in Thailand
A penalty rate of 100% will is payable for incorrect tax returns. Furthermore, a penalty rate of 200% will apply in cases of failure to file a tax return. The penalty decreases by 50% if the taxpayer submits a request in writing. On this, the assessment officer determines the intention of the taxpayer in regard to tax payment during the tax audit.
A surcharge of 1.5% per month, or a portion of the tax due or remittable, less the amount of the tax imposed, will be applied to anyone who doesn’t pay the tax within the allotted time.
The surcharge decreases to 0.75% per month or a fraction thereof if the Director-General extends the deadline for payment or remittance of tax and the payable tax or remittance within the time.
Anyone who knowingly or intentionally reports false information makes false statements, answers inquiries with false information, presents false proof to escape taxes, or attempts to evade taxes is subject to a fine of THB 200,000 and a sentence of three months to seven years in prison.
Do You Need a Tax Clearance Certificate in Thailand?
The following people must request a tax clearance certificate:
- Obligated to settle tax debts before leaving Thailand
- Owes a tax return and must pay taxes on behalf of a foreign-incorporated firm or legal partnership that conducts business in Thailand.
- Earn money in Thailand by performing in public
Before departing Thailand, a foreigner must submit an application for a tax clearance certificate within 15 days. On the day of departure, it is compulsory to show the tax clearance certificate to the immigration office.
A surcharge of 20% of the tax due will be due without the tax clearance certificate. The foreigner may also undergo imprisonment with a fine of no more than 1,000 THB, a month in jail, or both.
To avoid penalties or imprisonment, taxpayers in Thailand should continue to comply with their personal income tax requirements.
We advise getting in touch with Konrad Legal if you need expert tax assistance in Thailand. Simply email us your requirement at [email protected].
