Thailand Income Tax

Thailand income tax system is a core component of its fiscal structure, designed to tax both individuals and legal entities on income derived from sources within the Kingdom, and in some cases, from abroad. The rules governing Thailand’s income tax are primarily set out in the Revenue Code B.E. 2481 (1938) and its amendments, and administered by the Revenue Department under the Ministry of Finance. Understanding how income tax operates in Thailand is essential for residents, expatriates, business owners, and professionals engaged in cross-border activities.

This article provides an in-depth exploration of Thailand’s income tax system, focusing on individuals, with insights on tax residency, types of income, tax rates, deductions, compliance obligations, and practical challenges.

Legal Basis

Thailand’s income tax is governed by:

• The Revenue Code and subordinate ministerial regulations.

• Double Taxation Agreements (DTAs) Thailand has concluded with over 60 countries.

• Administrative rulings and Revenue Department practice notes.

The tax year is the calendar year: 1 January to 31 December.

Tax Residency and Its Impact

Tax Resident

An individual is considered a tax resident if:

• They stay in Thailand for 180 days or more in a calendar year.

Tax scope: Residents are liable for:

• All income sourced in Thailand.

• Foreign-sourced income remitted into Thailand within the same calendar year it is earned.

Non-resident

An individual staying in Thailand for fewer than 180 days.

Tax scope: Non-residents are taxed only on income sourced in Thailand.

👉 Key point: Residency is determined solely by physical presence, not by visa type, work permit, or intention.

Types of Taxable Income

Section 40 of the Revenue Code classifies taxable income into eight categories:

1️⃣ Employment income: Salaries, wages, bonuses, benefits-in-kind, allowances.
2️⃣ Professional fees: Remuneration for services rendered other than employment, including consultancy or advisory fees.
3️⃣ Contract work income: Earnings from contract work or hire of labor, including construction and fabrication.
4️⃣ Royalties: Payments for intellectual property rights, licenses.
5️⃣ Rental income: Rent from land, buildings, vehicles, machinery.
6️⃣ Liberal professions: Income from professions such as law, medicine, engineering, architecture, accountancy.
7️⃣ Business income: Gains from business operations or trading.
8️⃣ Other income: Annuities, pensions, prizes, or any other income not falling into the above categories.

Personal Income Tax Rates

Thailand employs a progressive tax rate system for individuals:

👉 The net taxable income is after deduction of allowable expenses and personal allowances.

Allowable Deductions and Allowances

Standard expense deductions

• Employment income: 50% of gross income capped at THB 100,000.

• Professional fees: Actual expenses or standard rates (e.g., 30% for royalties).

• Rental income: Standard deductions vary (e.g., 30% for buildings).

Personal allowances (examples)

• Personal: THB 60,000.

• Spouse (if no separate income): THB 60,000.

• Child: THB 30,000 per child (THB 60,000 for the third child born after 2018).

• Parental support: THB 30,000 per parent (subject to conditions).

Additional deductions

• Provident fund contributions: up to 15% of salary, capped at THB 500,000 combined with other retirement contributions.

• Life insurance premiums: up to THB 100,000.

• Mortgage interest: up to THB 100,000.

• Donations: deductible up to 10% of net income after other deductions.

Withholding Tax Obligations

• Employers must withhold tax on salary and remit monthly.

• Businesses paying fees, rent, interest, or royalties must withhold at source (rates generally 3%–15% depending on type of payment and recipient status).

• Withholding tax is creditable against the annual tax liability.

Tax Filing and Payment

• Individuals must file their annual return (Form PND 90 or 91) by 31 March of the following year (extended deadlines apply for e-filing).

• Self-employed individuals or those with certain income types (e.g., rental) may need to file a mid-year return (PND 94) by 30 September.

Late filing penalties:

• 1.5% surcharge per month on unpaid tax (capped at the tax due).

• Additional fine up to twice the tax due for failure to file.

Tax Treatment of Capital Gains

• No separate capital gains tax: gains are taxed as ordinary income.

• Exemptions:

  • Gains from sale of shares on the Stock Exchange of Thailand.

  • Certain government bonds.

• Gains from immovable property: withholding tax is collected at the Land Office upon registration of transfer; this may represent the final tax or serve as a credit against final tax depending on the case.

Foreign-source Income

For residents:

• Foreign-source income is only taxable if remitted into Thailand in the same year it is earned.

• Careful remittance planning can defer taxation.

For non-residents:

• Foreign-source income is not taxable in Thailand.

Double Taxation Agreements (DTA)

Thailand has DTAs with over 60 countries to:

• Prevent double taxation.

• Allocate taxing rights between Thailand and the treaty partner.

• Set reduced withholding tax rates (e.g., on dividends, royalties, interest).

Taxpayers must provide a certificate of residence from the treaty partner country to claim treaty benefits.

Penalties for Non-compliance

• Failure to file return: Fine up to THB 2,000 + surcharge.

• Underreporting tax: Surcharge of 1.5% per month on underpaid tax.

• Fraudulent filing: Fine up to twice the tax shortfall + imprisonment in serious cases.

Taxation of Expatriates

• Expatriates are subject to the same tax rules as Thai nationals.

• Income earned from work performed in Thailand is Thai-source income, regardless of payment location.

• Certain Board of Investment (BOI) promoted projects and Smart Visa holders may access preferential tax rates (e.g., 15% or 17%) in specific industries or roles.

Challenges and Practical Considerations

⚠ Tax residency misconceptions

• Some expatriates incorrectly assume visa type determines tax status; only physical presence counts.

⚠ Remittance of foreign income

• Careless remittance of foreign earnings into Thailand in the year earned can trigger Thai tax unexpectedly.

⚠ Complex deductions

• Evidence of entitlement is required for all deductions and allowances; failure to maintain documentation risks denial.

⚠ Withholding tax as final tax

• Some types of income (e.g., certain interest, dividends) may have withholding tax treated as final; others are creditable against the annual liability.

Conclusion

Thailand’s income tax system is detailed and nuanced, particularly for those with mixed income sources or cross-border dealings. Both residents and non-residents must understand the scope of their tax liability, available deductions, compliance obligations, and planning opportunities. Proper record-keeping, timely filings, and careful management of foreign remittances are essential to ensure compliance and minimize tax risks.