Tax guidelines for foreign companies in Thailand

Even after laying restrictions on certain economical and business areas, numerous foreigners are intent to set up a business in the Kingdom of Thailand. This is on the grounds that Thailand offers great infrastructure, labour and investment incentives to expats as we have already mentioned in one of our past web blogs. Consequently, it is our obligation to pay legitimate and timely income tax to the government to carry out further development projects in Thailand.

This blog plans to give a review of corporate income tax framework for foreign organizations operating in Thailand.

What is Corporate Income Tax (CIT)?

It is a direct tax levied on a juristic company or association doing business in Thailand or not carrying on business in Thailand but rather inferring certain sorts of wage from Thailand. The kind of business you pick will influence your assessment rates and tax cuts.

Tax rules for foreign companies:

The taxes for foreigners are the same as for Thai citizens. Therefore, a foreign company doing business in Thailand, whether it has a branch, an office, a representative or an operator in Thailand shall pay 30% tax on profit getting from their business in Thailand.

How to do tax registration:

• Any foreign company operating a business in Thailand should apply for and obtain a tax identification number from the Revenue Department.
• Submit the application form along with the relevant documents to the Area Revenue Office within 60 days after the date of registration or operation of your business.

How is tax calculated?

The calculation of CIT of a company doing business in Thailand is done on the basis of the company’s net profit – A company first calculates all its revenue generated within the accounting period and then deducts all its expenses.

Accounting period and Tax payments:

An accounting period generally covers a span of one year and the company needs to pay the tax at the end of accounting year, but in Thailand, both local and foreign companies doing business in Thailand must submit their tax returns and payments twice a year.

• 50% of the estimated annual income tax must be submitted by the end of the eighth month.
• The annual tax returns must be submitted within 150 days after the closing date of its accounting period.

PS: Every return must be accompanied by the audited financial statement and failure to pay the estimated amount will result in a fine of up to 20% of the deficit.

Tax Benefits:

Thailand provides all its registered organizations with investment promotion, some tax benefit schemes, such as,

• Income tax holiday from 3 to 8 years.
• Reduction or exemption of import duties on raw material and imported machinery
• Double deduction for the cost of transportation, power and water supply
• 200% deduction for the cost of procuring qualified scientists doing innovative work extends.
• 150% deduction for the cost of worker’s preparation with a specific end goal to enhance human capital.
•  SMEs can choose to deduct special initial allowance on the date of acquisition for plant (25%) and machinery (40%)