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What is the Corporate Tax Rate in Thailand?

If you’re planning to establish your business in Thailand, one of the things you’ll need to know is the corporate tax rate. The corporate tax rate in Thailand is an essential factor to consider when starting a company as it can impact your profitability and potential growth.

In this article, we will explain the current corporate tax rate in Thailand and provide you with all the essential information you need to know.

Corporate Tax Rates in Thailand

The corporate tax rate in Thailand is a flat rate of 20% for both Thai and foreign companies. This rate applies to net profits earned in Thailand, including income from selling goods and services, interests, and rents.

However, small and medium-sized companies in Thailand are eligible for tax deductions and benefits.

Tax Deductions and Benefits for Small and Medium-sized Companies

The government of Thailand offers tax incentives to small and medium-sized companies in the country. Companies that meet the criteria can enjoy a lower corporate tax rate of 15%.

To qualify as a small and medium-sized enterprise in Thailand, the company must meet the following criteria:

  • The company’s paid-up capital must not exceed THB 5 million
  • The total revenue of the company must not surpass THB 500 million
  • The company must not be a branch or a subsidiary of another company

Tax Exemptions for Newly-Set Up Thai Companies

Newly established Thai companies can also benefit from tax exemptions for the first three accounting periods, provided that the company’s paid-up capital does not exceed THB 5 million, and the company’s income is derived entirely from Thailand.

During the first accounting period, a company is eligible for a full tax exemption. The second and third accounting periods, the company will receive a 50% tax reduction on the corporate tax rate.

Capital Gains Tax and Withholding Tax

Capital gains tax in Thailand is taxed at a flat rate of 20% on capital gains realized from selling shares, securities, or assets. For non-residents, the rate can go as high as 30% depending on the nature of the asset.

Foreign companies that operate in Thailand are subject to a withholding tax rate of 15% on their net profits. However, several tax treaties with other countries provide relief or reduce the withholding tax.

What is the Corporate Tax Rate in Thailand?

Frequently Asked Questions about the Corporate Tax Rate in Thailand

Thailand has a favorable tax structure for businesses and investors, with competitive corporate tax rates and a wide range of tax incentives. Here are some of the most common questions about the corporate tax rate in Thailand:

1. What is the current corporate tax rate in Thailand?

The current corporate tax rate in Thailand is 20%. This rate applies to both Thai-resident and foreign companies that operate in Thailand. However, small and medium-sized companies with a paid-up capital of less than 5 million baht may be eligible for a reduced tax rate of 15%. Additionally, companies that operate in specific industries, such as software development or R&D, may also qualify for tax incentives that can lower their tax liability.

2. Are there any tax incentives available for businesses in Thailand?

Yes, there are several tax incentives available for businesses in Thailand that can help to reduce their tax burden. These incentives vary depending on the industry and the type of business, and may include tax exemptions or reductions for specific types of income or activities. For example, businesses involved in the production of certain goods or services may be eligible for tax holidays, which can exempt them from tax payments for up to 8 years. Additionally, companies that invest in certain industries or regions may be eligible for investment promotion privileges, which offer a range of benefits including tax exemptions, reduced import duties, and other incentives.

3. How is corporate tax calculated in Thailand?

The corporate tax in Thailand is calculated on the basis of the company’s net profit. This is determined by subtracting the company’s allowable expenses from its total revenue. Allowable expenses include all expenses that are necessary for the business operation, such as the cost of goods sold, salaries, office rent, and utilities. Once the net profit is determined, the tax is assessed at a rate of 20% (or 15% for qualifying small and medium-sized companies) based on the net profit.

4. Are there any other taxes that businesses in Thailand need to consider?

Yes, there are several other taxes that businesses in Thailand may be required to pay. These taxes include VAT (Value Added Tax), which is levied at a rate of 7%, and withholding tax, which is applied to certain types of payments including rent, interest earned, and professional fees. Additionally, businesses may be required to pay property tax on any buildings or land that they own, and they may also be subject to specific excise taxes on certain types of goods such as alcohol, tobacco, and petroleum products.

5. How can businesses in Thailand minimize their tax liability?

There are several strategies that businesses in Thailand can use to minimize their tax liability. These include taking advantage of tax incentives and exemptions, carefully planning their expenses to ensure that they are eligible for tax deductions, and seeking professional advice from tax experts who can help them to identify opportunities for tax savings. Additionally, businesses that engage in tax planning and maintain accurate records and documentation can help to minimize the risk of audits or penalties from tax authorities.

How to Calculate the Corporate Tax Rate in Thailand

If you are planning to start a business in Thailand or are already running a company there, you need to know about the corporate tax rates. In this guide, we will provide you with a step-by-step process on how to calculate the corporate tax rate in Thailand.

Step 1: Determine the Accounting Period

The first step in calculating the corporate tax rate in Thailand is determining your accounting period. The accounting period refers to the time period that you will be calculating your taxes for. The accounting period for companies in Thailand is typically the fiscal year, which is the same as the calendar year. However, you can choose to have a different accounting period if you so desire.

Step 2: Calculate the Gross Income

The second step is to calculate your gross income. This refers to the total amount of income that your company has earned during the accounting period. Gross income includes all sources of income, such as sales revenue, interest income, and rental income.

Step 3: Deduct the Allowable Deductions

After calculating the gross income, the next step is to deduct the allowable deductions. Allowable deductions refer to the expenses that you can deduct from your gross income to arrive at your taxable income. These deductions include expenses related to the cost of goods sold, salaries and wages, rent, utilities, and other relevant expenses.

Step 4: Calculate the Taxable Income

After deducting the allowable deductions, you will arrive at your taxable income. This is the amount of income that is subject to taxation. The current corporate tax rate in Thailand is 20% of the taxable income.

Step 5: Calculate the Corporate Tax

To calculate the corporate tax for your company, you need to multiply your taxable income by the corporate tax rate of 20%. For example, if your taxable income is 1,000,000 THB, your corporate tax would be 200,000 THB.

Step 6: Pay the Corporate Tax

After calculating the corporate tax for your company, the final step is to pay the tax to the Revenue Department of Thailand. You can pay your taxes online or through designated bank branches.

Conclusion

Calculating the corporate tax rate in Thailand can be a complicated process, but by following the steps outlined in this guide, you can determine the tax rate for your company. It is important to get this calculation right to avoid any legal issues and penalties from the Revenue Department of Thailand. By optimizing your tax calculation, you can reduce your tax liability and keep more of your hard-earned money.

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