Companies or businesses operating in Thailand have an obligation to pay corporate tax according to the regulations in order to stay compliant with the law and continue to operate legally. Whether you are a local business owner, an international entrepreneur considering setting up a company in Thailand, or simply curious about how business tax in Thailand works, you are in the right place. Today, we will explore the intricacy of corporate tax in Thailand, presenting an easy-to-understand overview of tax rates, requirements, and tax law in Thailand.

Understanding Corporate Tax in Thailand

Corporate income tax Thailand (CIT) represents a direct tax obligation for juristic entities such as companies, enterprises, and partnerships engaged in business activities within the country. Corporate tax in Thailand also extends to any company incorporated abroad or involved in business outside Thailand but earning specific types of income from within the nation. This tax framework underscores the Thai government’s approach to regulating corporate earnings and ensuring equitable contribution to the national economy.

Entities Considered as a Taxable Person in Thailand

The following entities are obligated to pay corporate income tax:

1. A Company or Juristic Partnership Incorporated under Thai Law 
   • A company or juristic partnership
   • Limited company
   • Public company limited
2. Entities Incorporated under Foreign Laws that:
   • Conduct business in Thailand
   • Conduct business in Thailand and in other locations
   • Engage in the carriage of goods or passengers in places including Thailand
   • Have an employee, an agent, or an intermediary conducting business in Thailand, resulting in income or profits within Thailand
   • Receive assessable income under Section 40 (2)(3)(4)(5) or (6) from or in Thailand, without conducting business in Thailand

    

3. A business conducting operation in a commercial or profitable manner by a foreign government, an organization of a foreign government, or any other juristic entity established under foreign laws.
4. Incorporated and unincorporated joint ventures.
5. A foundation or association engaged in business activities that generate revenue, excluding those specified in Section 47 (7)(b).
6. A juristic person recognized as a company or juristic partnership by the Minister and approved by the Royal Thai Government Gazette

What is the Corporate Tax Rate in Thailand?

The tax law in Thailand regulates a standard rate for corporate tax at 20% on net profit. However, this rate varies based on the type of taxpayer.

• Small Company – A small company refers to any company whose paid-up capital is below 5 THB at the conclusion of each accounting period. For such companies, the tax rate applied depends on their net profit:
• A 15% tax rate applies to net profits ranging from 300,000 THB up to 3 million THB.
• Net profits exceeding 3 million THB are taxed at a standard rate of 20%.
• Companies listed in the Stock Exchange of Thailand (SET) – Subject to a 20% corporate income tax rate, based on net profit.
• Companies newly listed in the Market for Alternative Investment (MAI) – Subject to a 20% corporate income tax rate, based on net profit.
• Banks deriving profits from International Banking Facilities (IBF) –  Subject to a 10% corporate income tax rate, based on net profit.
• Foreign companies engaging in international transportation – Subject to a 10% corporate income tax rate, based on gross receipts.
• Foreign companies not carrying on business in Thailand but receiving dividends from Thailand – Subject to a 10% corporate income tax rate, based on gross receipts.
• Foreign companies not carrying on business in Thailand receiving other types of income apart from dividends from Thailand – Subject to a 15% corporate income tax rate, based on gross receipts.
• Foreign companies disposing profit out of Thailand – Subject to a 15% corporate income tax rate, based on the amount disposed of.
• Profitable associations and foundations – Subject to a 15% corporate income tax rate, based on gross receipts.

Withholding Tax in Thailand

In Thailand, withholding tax is applied to specific types of income paid to the companies, with rates varying based on the income type and recipient’s tax status. The entity disbursing the income must file a return (Form CIT 53) and remit the withheld tax to the District Revenue Offices within 7 days after the month of payment. This withheld amount is credited against the taxpayer’s final tax liability. Below are the withholding tax rates for key income categories:

• Dividends – 10%
• Interest – 1%
• Royalties – 3%
• Advertising Fees – 2%
• Service and professional fees – 3% if paid to a Thai company or a foreign company having a permanent branch in Thailand, and 5% if paid to a foreign company not having a permanent branch in Thailand.
• Prizes – 5%

File a Tax Return and Payment in Thailand

 

Thai and foreign companies engaged in business activities within Thailand must adhere to the following tax filing and payment procedures:

 

• Annual Tax Return Filing

Companies are mandated to file their tax returns (Form CIT 50) within 150 days following the end of their accounting periods. The tax payment should be made concurrently with the submission of tax returns.

• Tax on Profit Disposal

Companies that transfer funds representing profits outside of Thailand must pay tax on the disposed amount. This tax must be paid within seven days from the disposal date, using Form CIT 54.

• Tax Prepayment

Companies subject to corporate income tax in Thailand (CIT) on net profits are required to estimate their annual net profit and corresponding tax liability. They must prepay half of the estimated tax amount within 2 months following the first six months of their accounting period, using Form CIT 51. This prepaid tax will be credited against the company’s annual tax liability.

• Taxation of Foreign Companies Not Operating in Thailand

Foreign companies that do not conduct business in Thailand but receive income from the country are taxed at a flat rate. The income payer is responsible for withholding tax at the time of payment and must file a tax return (Form CIT 54) and remit the payment to the Revenue Department within 7 days of the month following the payment.

Navigating Corporate Tax in Thailand

Filing corporate taxes in Thailand is an essential annual task that requires precision and punctuality. Thanks to the advent of electronic filing, compliance has become more manageable than ever. However, the journey to tax compliance is not without its challenges, including the risks of missing deadlines or submitting inaccurate filings. Awareness of these common errors is crucial to avoiding potential penalties.

In certain cases, the complexity of the business tax in Thailand necessitates expert guidance. Seeking consultation from a distinguished law firm in Bangkok can offer customized advice, ensuring that your business not only adheres to Thai tax regulations but also optimizes financial efficiency. This strategic approach can help navigate the intricacies of tax laws, providing peace of mind and contributing to the overall success of your business.

Contact H&P for Support and Advise on Tax Law in Thailand

At H&P, our expert lawyers provide an extensive array of legal services, ranging from setting up a representative office in Thailand to intellectual property trademarking and more, tailored to meet the needs of both individual and corporate clients.

Our team of lawyers at H&P possess the expertise and experience necessary to assist businesses in Thailand with the development of innovative tax planning strategies, ensuring compliance and optimization.

For professional consultation with a Thai Tax Lawyer, contact us at:

Email: info@herrera-partners.com

Telephone: +66 22545600

Office in Bangkok: Herrera and Partners Co., Ltd. 142 Two Pacific Place, 17th Floor, Sukhumvit Road, Klongtoey, Klongtoey, Bangkok 10110

Frequently Asked Questions (FAQs) – Corporate Tax in Thailand

1. What is corporate income tax (CIT) in Thailand?

Corporate income tax (CIT) is a direct tax imposed on the net profits of juristic entities such as companies and partnerships that conduct business in Thailand or earn certain types of Thai-source income.

2. Who must pay corporate income tax in Thailand?

Corporate tax applies to Thai-incorporated companies, juristic partnerships, foreign companies doing business in Thailand, and certain foreign entities earning income from Thailand, even if they do not operate in the country.

3. What is the standard corporate tax rate in Thailand?

The standard corporate income tax rate in Thailand is 20% of net profit, although reduced or special rates may apply depending on the type of taxpayer.

4. Are small companies taxed differently in Thailand?

Yes. Small companies with paid-up capital below the legal threshold may qualify for reduced tax rates on certain profit brackets, while profits above the threshold are taxed at the standard 20% rate.

5. Do foreign companies have to pay corporate tax in Thailand?

Yes. Foreign companies may be taxed in Thailand if they conduct business in Thailand or receive Thai-source income, such as dividends, interest, royalties, or service fees.

6. How are foreign companies taxed if they do not operate in Thailand?

Foreign companies that do not operate in Thailand but earn Thai-source income are typically taxed at a flat rate based on gross receipts, and the Thai payer is usually required to withhold tax at the time of payment.

7. What is withholding tax in Thailand?

Withholding tax is a tax deducted at source on certain payments such as dividends, interest, royalties, service fees, and advertising fees. The payer must remit the withheld tax to the Thai Revenue Department within the required deadline.

8. What are common withholding tax rates in Thailand?

Common withholding tax rates include:

• Dividends: 10%

• Interest: 1%

• Royalties: 3%

• Advertising fees: 2%

• Service and professional fees: 3% or 5% depending on the recipient’s status

Actual rates may vary depending on the payer, recipient, and applicable tax treaty.

9. What forms are used for corporate tax filing in Thailand?

Key corporate tax forms include:

• CIT 50 (annual corporate income tax return)

• CIT 51 (mid-year tax prepayment return)

• CIT 53 (withholding tax return for certain payments)

• CIT 54 (tax on foreign companies and profit remittance, depending on the case)

10. When is the annual corporate tax return due in Thailand?

Companies must file the annual corporate income tax return (Form CIT 50) within 150 days after the end of the accounting period.

11. What is the mid-year corporate tax filing (CIT 51)?

Form CIT 51 is a mid-year tax prepayment return. Companies must estimate annual net profit and prepay 50% of the estimated tax, typically within two months after the first six months of the accounting period.

12. What happens if a company misses corporate tax deadlines in Thailand?

Late filing or late payment may result in penalties, surcharges, and potential tax audits. Businesses should ensure timely filing and accurate reporting to avoid legal and financial risks.

13. What is tax on profit disposal (profit remittance) out of Thailand?

Foreign companies transferring profits out of Thailand may be subject to tax on the amount disposed of or remitted. This tax must generally be paid within a short timeframe after the disposal.

14. Are foundations and associations taxed in Thailand?

Yes. Foundations and associations that engage in revenue-generating business activities may be subject to corporate tax, except for certain exempt entities under Thai law.

15. Do tax treaties affect corporate tax and withholding tax in Thailand?

Yes. Thailand has tax treaties with many countries, which may reduce withholding tax rates and prevent double taxation. Eligibility depends on the recipient’s residency and proper documentation.

16. Should a business hire a lawyer or tax advisor for corporate tax in Thailand?

In many cases, yes. Corporate tax compliance in Thailand can be complex, especially for foreign-owned companies, cross-border payments, withholding tax, and profit remittance. Professional advice can help ensure compliance and reduce risk.