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Note: This law is expected to pass the Thai Parliament in March, 2014.
Thailand’s tax structure is similar to that of many other countries in that tax rates are progressive for both business and individuals. In a move to boost the country’s economy by stimulating growth, the Thai Cabinet recently approved reductions in both sets of rates. The top corporate rate is being lowered to 20% from 23%, and the top individual rate will come down to 35%, from 37%. Most other brackets are being reduced as well.
Corporate income tax is levied on activities in Thailand or deriving certain types of income from Thailand from outside the country. Tax rates on businesses depend on ownership structure. As of the 2013 tax year, both partnerships and individual owners (non-juristic persons) will be taxed at a rate of 20% of net or estimated income. According to the Thailand Revenue Department, the following rates will apply:
| Tax Payer | Tax Base | Rate |
|---|---|---|
| Small Company | Net profit not exceeding 1 million Bht | 20% |
| Companies listed in Stock Exchange of Thailand (SET) | – Net profit for first 300 million Bht – Net profit for the amount exceeding 300 million baht | -25% -30% |
| Companies newly listed in Stock Exchange of Thailand (SET) | Net Profit | 25% |
| Company newly listed in Market for Alternative Investment (MAI) | – Net Profit for the amount not exceeding 50 millions baht | 25% |
| Bank deriving profits from International Banking Facilities (IBF) | Net profit | 10% |
| Foreign company engaging in international transportation | Gross receipts | 3% |
| Foreign company not carrying on business in Thailand receiving dividends from Thailand | Gross receipts | 10% |
| Foreign company not carrying on business in Thailand receiving other types of income apart from dividend from Thailand | Gross receipts | 15% |
| Foreign company disposing profit out of Thailand. | Amount disposed | 10% |
| Profitable association and foundation. | Gross receipts | 2% or 10% |
| Small Company | Net profit not exceeding 1 million Bht | 20% |
Despite the reduction, calculations of actual taxes due remain complex. For example, a business must pay taxes on either the previous year’s net income or the previous year’s tax liability. The difference between the two is that the latter is defined as the amount of tax liable before any withholding is considered. Penalties for underpayment can be as high as 20% of the additional amount due. Rates on most personal income tax brackets will be as follows:
| Income | Old Rate | New Rate |
|---|---|---|
| 0 – 300 | 10% | 5% |
| 300 – 500 | 10% | 10% |
| 500 – 750 | 20% | 15% |
| 750 – 1,000 | 20% | 20% |
| 1,000 – 2,000 | 30% | 20% |
| 2,000 – 4,000 | 30% | 30% |
| Above 4,000 | 37% | 35% |
Keeping up with legislation is difficult when you’ve got a business to run. You can put the time and investment into scouting and building a payroll team, or you can outsource to payroll professionals you can trust to get the job done right – every time – so that you and your business avoid hefty financial penalties. Contact CloudForce HR today to see how we can help you stay focused on the most important parts of your business.
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