Thailand legal and accounting and tax considerations in 2023
- The standard corporate income tax rate in Thailand is 20%;
- Companies benefit from a reduced corporate tax rate of 15% if their income is below THB 3 million.
- Taxable income includes business profits and passive income (i.e. dividends, interest, royalties, capital gains, etc.) derived from domestic and foreign sources;
- A Thai company must register for VAT if annual turnover exceeds THB 1.8 million. However, Healy Consultants always advise our Clients to register as they will not be able to claim input VAT if unregistered. The VAT rate is a flat 7%. Monthly VAT returns must be filed with the Revenue Department within the 15th day of the following month;
- A newly formed Thai LLC must apply for a tax identification number from the Revenue Department within 60 days of incorporation or the start of operations;
- Even though representative offices are not subject to corporate taxes, they must i) obtain a Tax Identification Number ii) register for VAT iii) have their books audited annually by a Thai auditor iv) submit financial statements to the Revenue Department within five months from the day the accounts are closed;
- A Thai LLC enjoys zero rate VAT on i) exports ii) services provided in Thailand for overseas customers iii) sale of goods or services to the Thai Government iv) sale of goods or services between bonded warehouses and between export processing zones and v) auditing, legal and health services;
- In 2022, business losses can be carried forward for up to 5 years.
Corporate tax rates
Net Profit Tax rate (%) THB 0 – 300,000 0% THB 300,000 – 3,000,000 15% THB 3 million and above 20%
Thailand tax exemptions, rebates and tax planning structures
- Thailand offers Board of Investment (BOI) tax incentives for specific business activities in the following categories: i) agriculture and agricultural products ii) mining, ceramics and basic metals iii) metal products, machinery and transportation equipment iv) electronic industry and electrical appliances v) technology development and innovation vi) chemicals, paper and plastics vii) services and public utilities and viii) light industry;
- In March 2022, the Thai cabinet approved income tax exemptions for investment in Thai start-ups directly or indirectly through individuals, companies, or through corporate venture capital (CVC). However, the start-up must operate under one of the 12 government-promoted industries, which are divided into three groups:
New S-curve industries:
i. Aviation Logistics
ii. Biofuels and biochemicals
iv. Digital economy
v. Medical hub
vi. Smart electronic
vii. Medical and wellness tourism
viii. Affluent tourism
ix. Agriculture and biotechnology
x. Food for the future
xi. Defense and education
xii. Human resources
- Thailand has a broad network of Double Tax Treaties (DTTs) with 61 countries, including Canada, China, India, Korea, Norway, Singapore, South Africa, UAE, the United Kingdom and United States. These treaties help reduce withholding tax in Thailand on overseas income;
- To avoid double taxation by doing business in Thailand, Healy Consultants will assist secure the necessary documentation for our Client’s Thailand company.
Tax reporting, accounting and audit considerations
- Every 12 months, the board of directors of both LLC and PLCs is required to submit an audited balance sheet to the Ministry of Commerce within one month after approval from the general shareholders’ meeting. All financial statements submitted to the Revenue Department must be audited and translated into Thai;
- Companies pay corporate income tax biannually. The mid-year return must be filed between the 6th and 8th month and the annual tax must be filed within 150 days of the end of the tax year;
- Withholding tax rates depend on the types of income and the tax status of the recipient. Withholding tax rates on payments to non-resident companies are i) 10% on dividends ii) 3% on royalties iii) 1% on interests;
- Monthly tax reports must be submitted to the Thai Government including i) personal income tax withholding ii) social fund withholding iii) VAT collected and iv) corporate income tax withheld from vendors. To minimise external consultants’ fees, Healy Consultants recommends our Client hire an in-house accountant to complete these monthly tasks;
- In accordance with Thailand regulations, each entity must register for corporate tax with the Thai Revenue Department. VAT registration is also mandatory if the annual sales in Thailand of our Client’s business exceeds THB 1.8 million or if our Client intends to hire foreign employees;
- If a firm underestimates its annual profits by i) more than 25%, a maximum 20% fine is charged on the first half-year instalment ii) less than 25%, a surcharge of 1.5% per month is applied on outstanding taxes;
- To pursue Thailand business setup, Healy Consultants assists our Clients with i) documenting and implementing accounting procedures ii) implementing financial accounting software iii) preparation of financial accounting records iv) preparing forecasts, budgets and sensitivity analysis.
Legal and compliance
- A general shareholders meeting must be held i) within six months of the initial company registration and ii) annually thereafter, within four months of the end of the company’s fiscal year. A Thai company is not required to have a company secretary, but we recommend our Clients to appoint Healy Consultants Group PLC as the company secretary to liaise with the Thai government and maintain company records;
- The FBA is the main law defining foreign ownership. The law restricts access to certain service industries (such as transport, retail and wholesale and services) for reasons of security, cultural heritage or perceived competitive disadvantage. Some of Thailand’s free trade agreements and certain laws (e.g. the Investment Promotion Act and Industrial Estate Authority of Thailand Act) relax the ownership restrictions under the Foreign Business Law;
- Approximately 45 days following incorporation, a Thai Revenue Department team will do a one-time inspection/verification visit off each new company office;
- Healy Consultants Group PLC recommends every Thai entity maintain a Thai resident director to liaise with the Thai government. Unfortunately, administrative interactions with the Thai government still require a Thai resident director to visit and sign documentation in person. For example, when our Client sets up a telephone line or activates water and electricity for office premises. For simplicity purposes, Healy Consultants Group PLC will provide a professional passive nominee resident director until our Client appoints its own local director.
- The Thai government regulates the activities in which foreign companies can engage in. Regulated industries are included in the table below. In summary, multinationals are i) not allowed to engage in activities stated in List 1 ii) but allowed to invest in List 2 and List 3, subject to prior government authorization. Prior authorization must be obtained through i) US-Thailand Amity treaty (U.S. Clients only) ii) Thai BOI and iii) Foreign Business License from the Ministry of Commerce. Foreign companies who violate the Foreign Business Act will be subject to i) a fine of up to THB 1 million and/or ii) up to three years of imprisonment.
List 1 List 2 List 3 Newspaper, Radio, TV Weapons, firearms Accountancy Farming, cultivation or horticulture Land, waterway and airline transport Legal services Land Trading Thai arts and handicrafts Architecture Forestry Thai silk production Engineering Trade of Thai antiques Manufacturing goldware, silverware etc. Construction Fisheries Sugar and Salt production Tourism Extracting Thai herbs Mining Sale of food and beverages
Recruitment in Thailand
- Both employees and employers must contribute 5% each of the employee’s monthly compensation to their social security fund by the 15th of the following month. The maximum contribution is capped at THB 750 per month;
- In order to hire a foreign employee, the company must provide evidence that no qualified local is available for the position and have i) at least four Thai employees and ii) THB 2 million registered capital for each visa application;
- The maximum number of working hours is i) eight per day and ii) 48 per week. The maximum number of overtime working hours is 36 hours per week and hourly overtime pay must be at least 1.5 times the normal hourly rate;
- The minimum wage in Thailand is THB 353 per day. Failure to comply subjects the employer to a THB 100,000 fine and/or six months in prison.
- An employer with 10 or more regular employees must i) display written company rules in Thai at the workplace and ii) disclose them to the Department of Labour. The list must include rules regarding iii) working days and hours iv) overtime work v) holidays vi) date and placement of pay vii) taking leave viii) submission of complaints and ix) termination of employment.
Licensing in Thailand
- When a foreign invested company is majority owned by non-Thai nationals, the company will require ministerial approval from the Thai BOI before it can legally commence business. The approval is granted in the form of a Foreign Business License issued by the Ministry of Commerce;
- Import/export companies must be in possession of a Thai VAT number and local corporate bank account before registering for a commercial import/export license with the Thai Customs;
- When exporting goods, our Clients must follow export declaration guidelines through the customs website. Similar guidelines are available for importation of goods into the country.
ConclusionIt is important that our Clients are aware of their personal and corporate tax obligations in their country of residence and domicile, and that they fulfil those obligations annually. Healy Consultants can help clarify your annual reporting obligations.