Thailand has a taxation system that is designed to raise revenue for public services and social programs. This article will provide an overview of how taxation works in Thailand, including double taxation agreements, the main taxes expats need to be aware of, tax breaks, how and when to file a tax return as an expat, and tax exit procedures.
The Taxation System in Thailand
The taxation system in Thailand is administered by the Revenue Department. The tax system is divided into two types of taxes: direct and indirect. Direct taxes are levied on individuals and businesses based on their income, while indirect taxes are imposed on goods and services.
Individuals are taxed based on their income, with a progressive tax system based on income bands. The tax rates range from 0% to 35%, with the highest tax rate applicable to those earning more than THB 5,000,000 per year.
Businesses are taxed based on their profits, with a corporate income tax rate of 20%. However, some industries are subject to higher or lower tax rates, depending on the sector.
Double Taxation Agreements
Thailand has entered into double taxation agreements (DTAs) with several countries, including major trading partners such as the United States, Canada, and the United Kingdom. DTAs are agreements between two countries that aim to eliminate double taxation of income earned in both countries. These agreements help to promote cross-border trade and investment and ensure that individuals and businesses are not taxed twice on the same income.
Under DTAs, residents of one country may be eligible for tax benefits, such as reduced withholding tax rates, when receiving income from the other country. Expatriates who are residents of a country that has a DTA with Thailand may be able to take advantage of these benefits.
Main Taxes for Expats in Thailand
As an expat working or doing business in Thailand, there are several taxes that you need to be aware of. These include personal income tax, corporate income tax, value-added tax (VAT), and specific business tax.
Personal Income Tax
Expats are subject to personal income tax on their income earned in Thailand if they are resident in Thailand for tax purposes. The tax rates range from 0% to 35%, with the highest tax rate applicable to those earning more than THB 5,000,000 per year.
Expats may be eligible for certain tax reliefs and allowances, such as the personal allowance, which can help reduce their tax liability.
Corporate Income Tax
Expats who are doing business in Thailand through a company are subject to corporate income tax. The corporate income tax rate is 20%, and the tax is levied on the company’s profits.
Value-Added Tax (VAT)
VAT is a tax on goods and services that is levied at a standard rate of 7%. Certain goods and services, such as food and healthcare, are exempt from VAT.
Expats who are providing services in Thailand may be subject to VAT if their annual revenue exceeds a certain threshold. The current threshold is THB 1.8 million per year.
Specific Business Tax
Specific business tax is a tax on certain types of businesses, such as hotels, restaurants, and entertainment venues. The tax rate is 3.3% of gross receipts.
Special Tax Breaks for Expats
Expats who are working or doing business in Thailand may be eligible for certain tax breaks. These include:
Double Taxation Relief
Expats who are resident in Thailand may be eligible for double taxation relief, which can help reduce their tax liability on income earned abroad.
Board of Investment (BOI) Promotion
The BOI promotes investment in Thailand by offering tax incentives, such as exemption from corporate income tax and import duty on machinery and raw materials. Expats who invest in certain industries or regions of Thailand may be eligible for BOI promotion.
Filing Tax Returns
Expats in Thailand are required to file a tax return annually, regardless of whether they are liable for tax. The deadline for filing the tax return is March 31st of the following year.
Expats can file their tax return online or by mail. They will need to provide their personal information, income earned in Thailand and abroad, and any applicable tax reliefs or allowances.
Employers are responsible for deducting personal income tax and social security contributions from their employees’ salaries and remitting them to the relevant authorities. Expats who are self-employed or running a business in Thailand are responsible for paying their own taxes.
Tax Exit Procedures
Expats who are leaving Thailand to move abroad are required to complete tax exit procedures. This involves notifying the Revenue Department of their departure and settling any outstanding tax liabilities.
Expats who are leaving Thailand may also be eligible for certain tax refunds, such as a refund of any overpaid tax or a refund of any tax paid on income earned after leaving Thailand.
Expats should consult with a tax professional to ensure that they are in compliance with all tax requirements before leaving Thailand.
In conclusion, the taxation system in Thailand is relatively straightforward, with direct and indirect taxes levied on individuals and businesses based on their income and profits. Expats who are working or doing business in Thailand should be aware of their tax obligations and take advantage of any tax breaks or incentives that they may be eligible for. Filing tax returns and completing tax exit procedures are important steps to ensure compliance with the law and avoid any potential legal issues. Expats should consult with a tax professional to ensure that they are meeting all tax requirements and taking advantage of any available tax benefits.