In the Thai tax system, the Thai Revenue Code is fundamental. This code, as in any tax system, establishes the rules that govern taxation in Thailand. It is a mandatory legal framework for companies and professionals operating in the country. Amended just a couple of years ago, in order to subject the Convention on Mutual Administrative Assistance in Tax Matters, adopted by the OECD in 1988, to the necessary internal ratification process, it regulates taxes on the income of natural persons (articles 40-64 ), companies (articles 65-76), added value (articles 77-90), specific to businesses (article 91) and documented legal acts (“Stamp Duty”) (articles 103-129).
Below is a summary of these taxes, to which I have added, due to their undoubted importance, two others, such as withholding at source and those on real estate of a rural and urban nature, without this article being in any case considered as legal advice on the matter, but rather a simple introduction to it. On the other hand, I would also like to warn that, after the amounts in the Thai currency -Baht-, appears its conversion to the euro, a conversion that, given the fluctuations of both currencies, must be taken as an approximate reference only.
1. Personal Income Tax (PIT)
Regarding Personal Income Tax (IRPF) within the Thai tax system, different tax brackets are established depending on net income. For the purposes of this tax, a person, to be considered a taxpayer, must reside in Thailand for 180 days or more in a tax year. In this case, the net taxable income and the applicable rate are as follows:
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Net Income
Rate (%)
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0 – 150.000 Baht (€ 4.320)
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None
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150.001 – 300.000 Baht (€ 9.105)
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5
-
300.001 – 500.000 Baht (€ 15.155)
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10
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500.001 – 750.000 Baht (€ 22.735)
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15
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750.001 – 1.000.000 Baht (€ 30.315)
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20
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1.000.001 – 2.000.000 Baht (€ 60.630)
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25
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2.000.001 – 5.000.000 Baht (€ 151.635)
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30
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Above 5.000.000 Baht (€ 151.635)
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35
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2. Corporate Income Tax (CIT)
A company incorporated under Thai law will be considered resident and subject to a 20% corporate tax rate. However, in the case of small and medium-sized companies, the applicable IS rates will be the following:
|
Net Profit |
Rate (%) |
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|
|
|
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Above 3.000.000 Baht (€ 91.025) |
|
In any case, small and medium-sized companies can obtain a reduced rate if they meet the following criteria:
- Have income from sales of goods and services not exceeding 30 million Baht (€909,845) in any financial year; and
- Have a paid-up share capital of no more than 5 million Baht (€151,600).
3. Value Added Tax (VAT)
Value Added Tax (VAT) is another important pillar of the Thai tax system, applying to all persons carrying out business activities in the country. All persons doing business in Thailand are subject to VAT, including manufacturers, importers and retailers, among others. Companies that have a turnover of more than 1,800,000 Baht (€54,600) must register as VAT operators.
The VAT rate is currently, until September 30, 2023, 7%. Some of the activities that are exempt from it are the following:
. Taxpayers with annual sales less than 1,800,000 Baht (€54,600).
. Educational services.
. Research and technical services.
. Religious and charitable activities.
. Health services.
. Goods imported into a duty-free zone.
. Sale of goods related to agriculture.
. Rental of real estate.
4. Specific Business Tax
This tax is an alternative tax levy on services. Businesses that are exempt from VAT are instead subject to it.
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Business |
Rate (%) |
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5. Tax on Documented Legal Acts (“Stamp Duty”)
Within the Thai tax system there is also the Specific Business Tax, which taxes certain alternative services to those subject to VAT. In addition, the Stamp Duty affects various legal documents and transactions.
The tax on documented legal acts applies to various types of legal documents, such as, for example, those related to the transfer and lease of land, transfer of shares and obligations, letters of credit, promissory notes, insurance policies and powers of attorney, among others. . They are subject to a general rate of 0.01%, except in the cases of loans, which rises to 0.05%, with a limit of 10,000 Baht (€ 280), with the taxpayers being the owners or beneficiaries of said documents.
6. Withholding tax at source
Withholding at source is another important element in the Thai tax system, applying to dividends, interest and royalties. Finally, the Tax on rural and urban real estate establishes tax rates according to the use of the property.
The withholding tax on dividends paid to a Thai company is subject, except as provided in the Tax Code, to a rate of 10%; interest paid to non-resident companies at 15%, and to resident companies at 1%; and royalties paid to non-resident companies at 15%, and to residents at 3%.
7. Tax on real estate of rustic and urban nature
The maximum rates applicable to this tax, depending on the nature of the property, rural or urban, are the following:
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Use of the asset |
Rate (%) |
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|
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|
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In the event that the rural or urban property is empty or unoccupied for more than three consecutive years, an additional rate of 0.3% will be applied every three years, with a limit of 3%.
8. Spain-Thailand Double Taxation Treaty
Notwithstanding the above, it will be necessary to take into account, for the consequent effects, the Treaty to Avoid Double Taxation and Prevent Tax Evasion and Fraud, signed between the Governments of Spain and Thailand on October 14, 1997 (B.O.E. no. 242 , October 9, 1998).
In summary, knowing the Thai tax system is crucial for companies and professionals operating in Thailand, as complying with tax obligations is essential to avoid legal and financial problems.
Antonio Viñal
Lawyer
AVCO Legal
madrid@avco.legal
