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Business Taxation for Expats in Thailand

Submitted: August 2014

The authority responsible for Thai tax is the Thai Revenue Department; their website is https://www.rd.go.th/publish/index_eng.html.

 

Registration

For expats, a common form of business structure in Thailand is the private limited company, which is essentially the same as a private limited liability company. They offer the advantages of:

  • liability limited to the unpaid amount of the par value of the shares, and
  • business income is taxed at the corporate tax rate.

The minimum capital requirement depends on the nature of the business. Foreign-owned Thai companies are governed by the Foreign Business Act (FBA) which has lists of businesses that are controlled for such companies. There are also types of businesses that foreign-owned companies are prohibited from engaging in. These prohibited businesses are mainly involved in activities which would compete directly with native workers. Generally the minimum capital requirement is in the region of THB2m – THB3m for a single activity business, but each additional business type undertaken will require a similar amount of additional capital. In addition, a stipulation of the FBA is that the minimum capital must be enough to be used at the commencement of the business, ie there must be sufficient working capital in place.

A Thai private limited company requires at least seven shareholders and at least 51% must be owned by Thai residents. Thai companies are not governed by the FBA so a freer in terms of which activities they may choose as a business. The initial minimum capital is THB30,000, but there is an additional THB2,000,000 required for each foreign work permit required for expat staff.

There is also the sole proprietorship which is unincorporated, so it is not separated from its owner. The owner is fully liable for all business liabilities, and is subject to individual income tax on the income from the business activities. However sole proprietorship is not an option for the majority of expats. The only expats who are allowed to operate a sole proprietorship are those covered by the Treaty of Amity and Economic Relations Between the Kingdom of Thailand and the United States of America. There are details regarding this treaty here.

Thailand has a somewhat glacial and bureaucratic registration and licencing process. All forms must be completed in Thai, so most expats will employ a lawyer to help them through it.

 

Corporate Income Tax

The Thai tax year for companies runs from 1 January to 31 December. Thai resident companies are liable for corporate income tax on their worldwide income.

The corporate income tax rate is 20%. For SMEs there is a reduced progressive tax rate of 15% on income between THB300,000 and THB1,000,000 with an exemption for income up to THB300,000.

Companies must also pay payroll tax (social security) on wages and salaries.

Capital gains and interest are generally treated as ordinary income and taxed as such. Capital and income losses can be carried forward for five years; they cannot be carried back.

Companies must file their Thai corporate income tax returns twice a year. The first return must be filed within 60 days of the end of the first six months of the tax year. For companies that are not listed on the Thai Stock Exchange, a tax payment based on half of the estimated income for the year must be sent together with the return. The final return, together with the balancing payment, must be filed within 150 days of the end of the tax year.

 

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