Detailed Tax Analysis

The main body of tax law in Thailand is the Revenue Code. Taxes under the Revenue Code are primarily collected under a self assessment system of taxation, whereby taxpayers take responsibility for correctly filing their tax returns and paying taxes.

The Revenue Department administers the Revenue Code and enforces compliance with the law through regular tax audits. Taxpayers can ask the Revenue Department for a ruling to clarify the Department’s viewpoint in advance of a tax audit.

In recent years, the Revenue Department has invested heavily in IT and now provides a number of e-services through its website, including e-tax filings. IT systems have played a critical part in the Revenue Department's ability to improve its collection of tax revenues over the past few years.  

Corporate Income Tax (“CIT”)

Companies or juristic partnerships established under Thai law are subject to CIT on their worldwide income whilst those established under a foreign law carrying on business in Thailand are subject to CIT only on the net profits arising from their business activities in Thailand. The term “company or juristic partnership” is defined to include entities such as limited partnerships, registered partnerships as well as unincorporated joint ventures. 

Net profit for tax purposes is calculated by taking into account all revenue arising from or in consequence of the business carried on in a tax year, and deducting therefrom all allowable expenses. Revenue and expenses are computed on an accruals basis.

Dividends received by Thai companies, either from another Thai company or from a foreign company, may qualify for exemption from CIT if certain prescribed conditions are met.

In general, expenses incurred for the purpose of acquiring profits or for conducting business in Thailand are deductible. Accordingly, usual business expenses, qualifying bad debts and depreciation are deductible for tax purposes. Deductible expenses must be claimed in the tax year in which they are incurred.

A number of incentives are contained in the tax law that allow for accelerated depreciation and capital write offs in respect of certain types of assets. If an asset is acquired during a tax year, the depreciation allowance must be pro-rated.

Tax losses may be carried forward for a maximum of five years and set off against net profits of any nature. Companies promoted by the BOI that receive exemption from corporate income taxes can carry forward tax losses and deduct them as expenses for up to five years after the end of the income tax holiday period.

Transfer Pricing

The Revenue Department has the power to deem a taxpayer to have received market value consideration for the sale of goods, provision of services, or the lending of money, where it considers that the actual consideration received was less than market value without justifiable grounds. The Revenue Department also has the power to deny a deduction for any expenditure that is not exclusively expended for the purpose of acquiring profits or for the purpose of the business.

Transfer pricing guidelines have been introduced for determining the market price of cross-border and Thai domestic transactions between related parties. The guideline’s definition of market price is consistent with the “arm’s length” principle used in the OECD’s transfer pricing guidelines. In addition, the Instruction sets out a list of documents that Revenue Department officers may request from taxpayers when conducting a transfer pricing audit.

The Revenue Department is increasingly focusing on transfer pricing issues when reviewing the tax affairs of companies.

Filing of Returns and Payment of Tax

A company may choose any twelve-month period as its accounting period. Subsequent changes in accounting period must be approved by the Director-General of Revenue.

An annual corporate income tax return accompanied by audited accounts must be filed within 150 days of the end of the accounting year. A mid-year tax return must also be filed and tax paid on half of either the actual or estimated profit for the year, depending on the business of the taxpayer.

The tax paid on the mid-year return, as well as domestic withholding tax deducted from income during the year, is allowed as a tax credit against the tax payable on the annual tax return. Thai companies are also entitled to claim a foreign tax credit for tax paid in a foreign country on income which is also subject to CIT. The foreign tax credit cannot exceed the amount of CIT payable on the income.
          
Taxes due should accompany the submission of the return. A refund of tax overpaid may be requested within 3 years and a request will generally be subject to tax audit before the refund is made.

Branches of foreign incorporated companies are subject to the same filing requirements as Thai incorporated companies.

The Revenue Department has the power to issue a summons to conduct a tax audit within two years from the date the return is filed. The two year prescription period can be extended to five years where there is documentary evidence or reason to suspect the taxpayer had an intention to evade tax. If tax deficiencies are found, the Revenue Department can assess additional taxes provided the assessment is made within 10 years of the date the tax was required to be paid.

Corporate Tax Rates

The general CIT rate in Thailand is 30% but a number of concessional rates apply. Companies listed on the Stock Exchange of Thailand or the Market for Alternative Investment are eligible for lower rates of 25% and 20% respectively.

For a company or juristic partnership with paid up share capital not exceeding Baht 5,000,000 at the end of its tax year, the following tax rates apply:

A tax rate of 10% applies to qualifying net profits derived by Regional Operating Headquarters and companies approved by the Ministry of Energy to conduct oil trading activities.

Foreign companies engaged in international transportation are subject to 3% tax on gross receipts.

A foreign company carrying on business in Thailand is also subject to 10% tax on the disposal of profits out of Thailand. This tax may be exempted under an applicable double tax agreement, such as the recent one made with Hong Kong.

Petroleum income tax rather than CIT is levied on the net profits and the disposal of profits out of Thailand of businesses engaged in petroleum exploration and production.