The Thai Government has long maintained an open market-oriented economy and encouraged foreign direct investment. Following the 1997-98 Asian financial crisis, the Government embarked on an International Monetary Fund-sponsored economic reform programme, designed in part to promote a more competitive and transparent climate for foreign investors. Although protracted, the reform process continues to move ahead, and Thailand remains committed to economic reform and an open investment regime.
The Foreign Business Act of 1999 governs most investment activities by foreign nationals. It opened additional business sectors to foreign investment, and increased maximum ownership stakes permitted in some sectors above the standard 49% limitation. It continues to restrict foreign-majority participation in certain types of businesses, but this restriction excludes the majority of manufacturing ventures.
Thailand is one of the largest countries in Southeast Asia. It shares borders with Myanmar to the west, Lao PDR to the north and northeast, Cambodia to the east, and Malaysia to the south. The population of Thailand is estimated at 67 million. With a population of over 10 million, the capital city of Bangkok is the most important city, economically and politically.
Thailand is a constitutional monarchy, with the Prime Minister as the head of government, and a hereditary monarch as the head of state. The judiciary is independent of the executive and the legislative branches.
Thailand is divided into 77 provinces (changwat), which are gathered into five groups of provinces by location. There are also two specially governed districts – the capital Bangkok (Krung Thep Maha Nakhon) and Pattaya. For administrative purposes, each province is divided into districts and the districts are further divided into sub-districts (tambons).
Thailand’s legal system combines the principles of traditional Thai and Western laws. Its members are nominated by the Senate and appointed by the King. The Courts of Justice have jurisdiction over criminal and civil cases, and are organized in three tiers:
Administrative courts have jurisdiction over suits between private parties and the Government, and cases in which one government entity is suing another.
The Thai Baht (“B” or “THB”) is the currency of Thailand. One baht is divided into 100 satang.
Issuing currency is the responsibility of the Bank of Thailand.
The economy of Thailand is an emerging one which is heavily export-dependent, with exports accounting for more than two-thirds of GDP.
Thailand’s main exports are machinery (including computers), electronic equipment, vehicles, rubber, and gems.
Electrical machinery, mineral fuels, and other machinery (including computers) are the top three import products of Thailand.
To encourage export activities, a number of tax incentives are available. The exportation of goods is zero rated for purposes of value-added tax (VAT), whilst custom duties already paid will be refunded on materials imported for the production of goods which are then exported.
The Ministry of Commerce designates classes of goods that are subject to import controls, which usually take the form of permits and licenses. Applications for a licence must be accompanied by a supplier’s order, confirmation, invoice, and other pertinent documents. Goods subject to import controls include medicine, minerals, explosives, fireworks, antiques, and cosmetics. Customs duty is also levied on some type of goods imported into Thailand.
Thailand has a substantial number of financial institutions, both private and government owned. The financial institutions in Thailand offer a full range of financial services under the supervision of the Bank of Thailand. In general, Thai banks are reluctant to lend money to start-up companies and small international entities. Normally, collateral is needed to secure external funding. The collateral can be in the form of a title deed of land, a bank guarantee from a parent company, or a guarantee via the Thai Credit Guarantee Corporation. In addition, Thailand is a member of the World Bank and the Asian Development Bank.
All people, other than those in transit and Thai nationals, are required to obtain a visa in order to enter Thailand. Foreign nationals who intend to remain in Thailand to work or conduct business must comply with visa requirements, in addition to obtaining a work permit. Visa categories include:
The Foreign Employment Act (Foreigners’ working Management Emergency Decree No 2 BE 2561) lists numerous rules regarding work permits, which are summarized here:
Activities not requiring a work permit – a foreign national entering into Thailand irregularly for attendance a meeting, training, seminar, performance of arts, culture, sports competition or other activities as prescribed by the Council of Ministers will be given an exemption from having to obtain a work permit.
The smart visa project is intended to encourage foreigners to enter Thailand to exchange knowledge with the Thai public and private sectors to enhance business growth.
The holder of a smart visa will be able to stay in Thailand a maximum of 4 years. Dependants (such as a spouse and children) will also be entitled to the same right to live and work in Thailand as the smart visa holder. A person who receives a smart visa will not be required to apply for a work permit, and the period of time for giving notice of continued residence in Thailand will be extended from every 90 days to once a year.
The Thai Government offers a range of incentives to investors, administered by the Board of Investment (BOI) and the Industrial Estate Authority of Thailand (IEAT), and these incentives often come with permission for full foreign ownership. The BOI issued a new policy effective 1 January 2015. Under the new scheme, special consideration is given to enhancing Thailand’s competitiveness. The IEAT carries out the government’s industrial development policy, which includes allocating land for further expansion, improving land conditions, and providing accommodations and facilities to assist entrepreneurs.
The Foreign Business Act regulates the activities in which companies designated as ‘foreign’ may engage in. While some activities are completely prohibited, some may be engaged in with prior approval from a designated government agency, and some do not require any special approval.
Under Thai law, a company registered under the following laws must be deemed a foreign company:
The Foreign Business Act has identified three lists of activities in which foreign participation may be prohibited or restricted.
Companies promoted by the BOI are permitted to engage in certain business activities restricted under the Foreign Business Act by obtaining the foreign business certificate prior to conducting its business.
Foreign currencies can be transferred from or brought into Thailand without limit. With limited exceptions, any person receiving foreign currencies from abroad is required to convert such foreign currency into Thai baht or to deposit the same in a foreign currency account with an authorized financial institution within 360 days. A Foreign Exchange Transaction must be submitted to authorized commercial banks for each transaction involving the purchase, sale, deposit, or withdrawal of such foreign currency.
There is no restriction on the amount of Thai baht that may be brought into the country. A person travelling to Thailand’s bordering countries, as well as Vietnam, is allowed to take out up to THB 2,000,000, and up to THB 50,000 if travelling to other countries, without authorization. Any amount exceeding THB 450,000 or equivalent to USD 15,000 must be declared to Thai customs before arriving or departing Thailand.
All foreign exchange transactions must be conducted through commercial banks and through authorized non-banking institutions that are granted foreign exchange licences by the Minister of Finance, namely authorized money changers, authorized money transfer agents, and authorized companies. Any transactions not conducted through the above- mentioned licensees require approval from the Bank of Thailand, which will be assessed on a case-by-case basis.
The Thai Government has issued several incentives to promote business. In the second half of 2018, the investment promotion measures include incentives from the Eastern Economic Corridor (EEC). International Headquarters (‘‘IHQ”), and International Trade Centre (“ITC”); which were promoted by the Board of Investment and the Revenue Department, are soon replaced by International Business Center (“IBC”).
Thailand’s Board of Investment (BOI) changed the investment promotion scheme effective from 2015 to match the needs and level of development in Thailand. Under the current scheme, zones 1-2-3 were removed, and a number of eligible activities which do not involve high technology were deleted or entitled to fewer incentives. Under this scheme, the BOI pays more attention to the following issues:
Under the current scheme, the BOI offers activity-based incentives and merit-based incentives to encourage the entities receiving investment incentives to create more value in Thailand.
From ‘Seven-Year Investment Promotion Strategy (2015- 2021)’, the BOI continue offering 6 different packages of activity-based incentives, as follows:
| Package | Incentives |
| A1: For knowledge-based activities, focusing on R&D and design to enhance the country’s competitveness |
|
| A2: Activities in infrastructure for the country’s development, activities using advanced technology to create added value, where there are no or very few existing investments in Thailand |
|
| A3: High-technology activities which are important to the country’s development, where there are a few investments already existinig in Thailand |
|
| A4: Activities with lower technology than Group A1 through Group A3 above, but which add value to domestic resources and strengthen the supply chain |
|
| B1 – B2: Supporting industries that do not use high technology but still are important to the value chain |
|
Additional CIT incentives will be granted, depending on the ratio of investment to expenditure.
| Ratio of qualified investment/expenses to combined revenue of the first 3 years | Additional tax exemption period with an additional cap |
| 1% or more than THB 200 million | 1 year |
| 2% or more than THB 400 million | 2 years |
| 3% or more than THB 600 million | 3 years |
Qualified investment/expenses and the amount of the additional cap are as follows:
| Qualified investments/expenditures | Additional cap |
| 1. R&D: in-house, outsourced in Thailand, or joint R&D with institutes abroad | 200% |
| 2. Donations to technology and human resources development funds, educational institutes, specialized training centers, R&D institutes, or governmental agencies in scientific and technological fields in Thailand, as approved by the BOI | 100% |
| 3. IP acquisition/licensing fees for commercializing technology developed in Thailand | |
| 4. Advanced technology training | |
| 5. Development of local suppliers with at least a 51% Thai shareholding in advanced technology training, and technical assistance | |
| 6. Product & packaging design: in-house or outsourced in Thailand, as approved by the BOI |
2. Decentralization
Projects located in the 20 provinces with the lowest per capita income (Kalasin, Chaiya-phum, Nakhon Phanom, Nan, Bueng Kan, Buri Ram, Phrae, Maha Sarakham, Mukdahan, Mae Hong Son, Yasothon, Roi Et, Si Sa Ket, Sakhon Nakhon, Sa Kaew, Sukhothai, Surin, Nong Bua Lamphu, Ubon Ratchatani, and Amnatcharoen) could receive the following benefits:
3. Industrial area development
Projects located in industrial estates or promoted industrial zones could receive 1 additional year of exemptions from CIT.
By virtue of the Investment Promotion Act, the Board of Investment (“BOI”) issued BOI Announcement No. 6/2018 dated 3 August 2018 offering higher tax privileges to private investors who conduct the business in the EEC area, which covers three provinces: Chachoengsao, Chonburi, and Rayong.
The tax privileges to be offered to investors under this announcement will be determined based on the zone in which the investor’s project is located, and upon meeting the following three criteria:
A. Investment incentive zones for special activities (“Zone A”)
(1) Eastern Airport City (“EECa”)
(2) Eastern Economic Corridor of Innovation (“EECi”)
(3) Digital Park Thailand (“EECd”)
B. Investment incentive areas for targeted industries designated by the Eastern Economic Corridor Policy Committee currently consisting of the following 21 areas (“Zone B”):
(1) Hemaraj Chonburi Industrial Estate
(2)Hemaraj Chonburi Industrial Estate 2
(3) Hemaraj Eastern Seaboard Industrial Estate
(4) Hemaraj Eastern Seaboard Industrial Estate 2 (Chonburi)
(5) Hemaraj Eastern Seaboard Industrial Estate 3 (Chonburi)
(6) Eastern Seaboard Industrial Estate (Rayong)
(7) Hemaraj Eastern Industrial Estate (Map Ta Put)
(8) Hemaraj Rayong Industrial Estate 36 (Rayong)
(9) Amata City Industrial Estate
(10) Amata Nakorn Industrial Estate
(11) Amata Nakorn Industrial Estate (2nd Phase)
(12) Pin Thong Industrial Estate (Laem Chabang) Chonburi
(13) Pin Thong Industrial Estate (3rd Phase) Chonburi
(14) Pin Thong Industrial Estate (4th Phase) Chonburi
(15) Pin Thong Industrial Estate (5th Phase) Chonburi
(16) Pin Thong Industrial Estate
(17) Yamato Industries Industrial Estate Chonburi
(18) TFD Industrial Estate 2 Chachoengsao
(19) C.P. Industrial Estate Rayong
(20) Smart Park Industrial Estate
(21) Hemaraj Eastern Seaboard Industrial Estate 4
C. BOI-promoted industrial estates or zones consisting of the following 19 areas (“Zone C”):
(1) 304 Industrial Park (2nd Phase)
(2) Gateway Industrial Estate
(3) Wellgrow Industrial Estate
(4) Ban Bung Industrial Estate
(5) Laem Chabang Industrial Estate
(6) Sahaphat Industrial Estate (Sriracha)
(7) Asia Industrial Estate
(8) J.K. Land Industrial Park
(9) IRPC Eco Industrial Zone (4th Phase)
(10) Rubber City Industrial Estate
(11) Map Ta Put Industrial Estate
(12) Pha Daeng Industrial Estate
(13) Rayong Industrial Estate (Bangkai)
(14) R.I.L Industrial Estate
(15) Rojana Industrial Park (Bankai)
(16) Rojana Industrial Park (Pluagdang)
(17) Siam Eastern Industrial Park
(18) SSP Industrial Park (Rayong)
(19) WHA Rayong Industrial Land
The tax privileges offering to qualifying investors in the EEC area are summarized in the table below:
| Zones in the EEC | Incentives | For targeted industries in each EEC zone | For eligible activities in the EEC | ||||
| Section 8* | A1* | A2* | A3* | Section 8 | A1-A3 | ||
| A |
Exemption from CIT* 50% reduction in CIT |
10+3 Years (no cap) – |
8+4 Years (no cap) – |
8+4 Years – |
5+2 Years 5 Years |
10+1 Years (no cap) – |
5-8 Years (regular exemption) 3 Years |
| B |
Exemption from CIT* 50% reduction in CIT |
10+2 Years (no cap) – |
8 Years (no cap) 5 Years |
8 Years 5 Years |
5 Years 5 Years |
10+1 Years (no cap) – |
5-8 Years (regular exemption) 3 Years |
| C |
Exemption from CIT 50% reduction in CIT |
10+1 Years (no cap) – |
8 Years (no cap) 3 Years |
8 Years 3 years |
5 Years 3 years |
||
Notes:
*“CIT” refers to corporate income tax.
*“Section 8” refers to technology-based incentives for technology and innovation development, such as biotechnology, nanotechnology, advanced material technology, and digital technology.
*“A1” refers to knowledge-based activities focusing on R&D and design to enhance the country’s competitiveness.
*“A2” refers to infrastructure activities for the country’s development, activities usingadvanced technology to create added value, with no or very few existing investments in Thailand.
*“A3” refers to high-technology activities which are important to the development of the country, with a few investments already existing in Thailand.
Remarks:
Before the project is eligible for BOI incentives it will need to be approved by the BOI. In the approval process the following criteria are used:
Criteria for granting approval for imported used machinery
| Types of Machinery | Can be used | Counted as investment capital | Exemption from import duty |
| New machinery | ✓ | ✓ | ✓ |
| Imported used machinery | |||
|
Not over 5 years old* (from manufacturing year to importing year) |
✓ | ✓ | ✗ |
| Over 5 years old up to 10 years old (only metal stamping machinery)* | ✓ | ✓ | ✗ |
| Sea and air transport activities, and moulds and dies (approved as deemed appropriate) | ✓ | ✓ | ✓ |
*Must obtain a machinery performance certificate from trusted institutes identifying machinery efficiency, environmental impact, energy usage, and fair value.
2. Environmental protection
3. Minimum capital investment and project feasibility
In response to the Harmful Tax Practices 2017 Progress Report on Preferential Regimes (Inclusive Framework on Base Erosion and Profit Shifting (BEPS): Article 5), the Cabinet approved the repeal of existing ROH Scheme I, ROH Scheme II, as well as the IHQ and ITC regimes, replacing them with the International Business Centre (IBC) scheme.
Based on the Cabinet’s resolution on 10 October 2018, qualified IBCs will receive the following tax incentives:
As a state enterprise under the Ministry of Industry, the Industrial Estate Authority of Thailand (IEAT) is responsible for the development and establishment of industrial estates, where factories for various industries are orderly and systematically clustered together. The IEAT also serves as a governmental mechanism to decentralize industrial development to provincial areas throughout the country. Industrial estates are divided into two zones: General Industrial Zones (GIZ) and IEAT Free Zones/Export Processing Zones (EPZ).
Investors in a GIZ are eligible for the following opportunities, options, and privileges:
1. Permission to conduct service businesses in the GIZ
The IEAT offers industrial operators in a GIZ comprehensive services essential for industrial operations – such as transportation, warehouses, training centres, and clinics.
2. Non-tax privileges for operators in a GIZ
Under the most recent Industrial Estate Authority of Thailand Act, investors in an EPZ are entitled to additional tax and other privileges, including the following:
To develop Thailand’s natural resources, the Petroleum Act and the Petroleum Income Tax Act of Thailand offer special incentives in relation to petroleum surveying, exploration, and production.
Petroleum-related investment incentives include:
Under the Research & Development (R&D) provisions of income tax legislation, companies or legal partnerships may take a double corporate tax deduction for payments made for eligible R&D costs to governmental or private agencies that are approved providers of R&D services. In addition, for machinery and equipment acquired for use in R&D activities, an initial depreciation allowance of 40% of the cost is granted on the date of its acquisition, and the residual value can be depreciated over its effective life (but not less than 5 years).
Under Royal Decree No. 437, companies or legal partnerships may take a double corporate tax deduction for costs incurred for training employees at certain educational or vocational training institutions, as well as for costs incurred for organizing approved in-house training for their employees.
Thailand recognizes several types of legal business entities:
There are three types of partnerships in Thailand, differing principally by the liability attached to each.
There are two types of limited companies – private limited companies and public limited companies. The first is governed by the Civil and Commercial Code, the second by the Public Limited Company Act.
A Thai private limited company has basic characteristics similar to Western corporations. A private limited company is formed through a process that leads to the registration of a Memorandum of Association (Articles of Incorporation) and Articles of Association (By-laws). These are the company’s registered constitutive documents.
The procedures for setting up a public limited company are similar to those for a private limited company. A Thai public limited company may, subject to compliance with the prospectus, Securities and Exchange Commission (SEC) approval and other requirements, offer shares, debentures, and warrants to the public, and may apply to have its securities listed on the Stock Exchange of Thailand (SET).
The table below illustrates the different procedures involved in establishing a private limited company and a public limited company:
| Private limited company | Public limited company | |
| Minimum number of natural persons as promoters | 3 | 15 |
| Minimum number of shareholders required at all times | 3 | 15 |
| Minimum number of directors | 1 | 5 |
| Public subscription of shares by prospectus | Not Allowed | Allowed * |
| Public subscription of debentures by prospectus | Allowed * | Allowed * |
| Registration fee | THB 5,500 | THB 2,000-300,000 |
* Subject to SEC approval.
Every company must appoint at least one director to act as an agent of the company. The number of directors of a private company is not fixed under Thai law, but set by the shareholders’ general meeting. A director is appointed or removed only by a general meeting of shareholders. For public companies, there must be at least five directors, of which three must be Thai nationals.
The directors are jointly responsible for ensuring that payment for shares by the shareholders is actually made, as well as for the proper distribution of any dividend or interest, as prescribed by Thai law. In addition, the directors have a statutory obligation to keep the books and documents prescribed by Thai law, and to enforce the resolutions of general meetings.
An unincorporated joint venture may be described, in accordance with general practice, as a group of persons (resident and/or non-resident) entering into an agreement in order to conduct a business activity together. It is not yet recognized as a legal entity under the Thai Civil and Commercial Code. However, income from an unincorporated joint venture is subject to corporate taxation under the Thai Revenue Code, which classifies it as a single entity.
Foreign companies may carry out certain business activities in Thailand through a branch office. Branch offices are required to maintain accounts only relating to the branch that is established in Thailand.
It is important to clarify before establishing a branch what constitutes income subject to Thai tax. This is because the Revenue Department may consider revenues directly earned by the foreign head office from sources within Thailand as being subject to Thai tax.
One of a key condition for approval of a foreign business licence for a branch of a foreign corporation is that minimum capital of at least THB 3 million or average of 25% of 3 years estimated expenses whichever is higher must be brought into Thailand. This amount may be subject to change in subsequent Ministerial Regulations.
Foreign corporations may establish representative offices in Thailand to engage in limited activities that do not generate revenue. These activities are restricted to:
The minimum capital contribution of THB 3 million for branches also applies to representative offices for immigration purposes.
Before forming a limited company, the chosen corporate name must first be registered and approved by the Thai Commercial Registrar.
A Memorandum of Association must be filed, which contains the approved name of the company, its business address, its objectives, the personal details about the promoters and the shares subscribed for by each, and data on the authorized capital of the company.
The next step is to hold a statutory meeting of shareholders, during which:
The directors may then register the company with the Commercial Registrar.
A limited company that has registered capital of more than THB 5 million must file evidence issued by a commercial bank to prove that share payments have been made to the company’s bank account no later than 15 days after incorporation.
Prior to the new Ministerial Regulations of the Department of Business Development becoming effective in May 2017, foreign corporations wishing to do business in Thailand through a branch, representative office, or regional office had to submit certain required documents, including the application for a foreign business licence.
Currently, in order to set up a representative office or regional office, it is only necessary to apply for a company registration number and corporate taxpayer number from the governmental authorities. However, in order to set up a branch office, it is still necessary to apply for a foreign business licence (except for a branch office which has contracts with the governmental authorities or a state enterprise to render service activities).
In order to offer newly issued securities for sale to the public, companies must apply for approval from the Securities and Exchange Commission (SEC), complying with the rules and regulations issued by the SEC Board according to the Securities and Exchange Act, 2535 B.E. However, existing securities can be offered for sale without the SEC’s approval, on the condition that the company discloses information to the SEC prior to offering those securities for sale. Before offering securities to the public, the company or existing shareholders will generally need to file a registration statement and a draft prospectus with the SEC. This is in order to provide information to potential investors.
An individual person who is subject to Thai personal income tax and has no Thai identification number (such as an expatriate employee) must obtain a tax identification number from the Thai Revenue Department within 60 days of the date of deriving taxable income.
A legal entity which is subject to corporate income tax, except for Thai incorporated companies which have a 13-digit registration number issued by the Ministry of Commerce, must obtain a tax identification number from the Thai Revenue Department within 60 days of the date of commencing business in Thailand.
All entities that have annual turnover exceeding THB 1.8 million must register for VAT within 30 days of the annual turnover exceeding the threshold, unless specifically exempt.
It is possible to apply for VAT registration before the date of commencing business under conditions specified by the Director-General of the Thai Revenue Department.
The Factory Act, 2535 B.E. (1992), divides factories into three groups:
Before the establishment of a factory under Group 3, the operator must obtain a factory license from the Department of Industrial Works and Ministry of Industry. The operator of a Group 3 factory must notify the authorities at least 15 days before a factory test-run commences, and again 15 days before actual manufacturing operations start.
A factory license is valid up to the last day of the fifth calendar year from the year of issue, and is renewable. An application for the renewal of a factory license must be filed with the authorities prior to the expiration of the current license. While the factory license is valid, the licensee must pay an annual fee for the license, as determined by the authorities.
Prior permission from the Ministry of Industry must be obtained for any factory expansion, transfer of machinery to other sites, or transfer of a factory site, as well as to transfer, lease, assign, or sell a factory operation.
The financial statements of a legal entity, including a limited company, registered partnership, branch office, representative office, and unincorporated joint venture, must be audited by a Thai certified public accountant and submitted to the Revenue Department and the Department of Business Development for each accounting year. The audited financial statements must be prepared in compliance with Thai Accounting Standards, and approved by the shareholders in a general meeting within four months of the end of the accounting period.
Companies listed on the Stock Exchange of Thailand or the Market for Alternative Investment in Thailand must also prepare financial statements which must be reviewed by Thai auditors on a quarterly basis.
Shareholders in a Thai company can be residents of any country. However, some specific business activities limit the percentage of foreign ownership, as detailed in the Foreign Business Act 1991.
Thailand’s employment laws, administered by the Department of Labour, Protection, and Welfare, set out working conditions, such as maximum work hours, holidays, sick leave, the minimum wage, and severance pay. The laws, which may significantly affect a firm’s decision to do business in Thailand, also give employers some flexibility with regard to managing labour, such as staff recruitment processes, retrenchment policies, and employee transfers.
The maximum number of work hours is eight a day, or 48 a week. The exception is when work is deemed by law to be hazardous, in which case working hours are limited to seven hours a day, or 42 a week. Overtime compensation must be paid at a rate of between
1.5 to 3 times the normal hourly rates to qualified employees. Employees are entitled to a minimum of 13 national holidays a year, plus a minimum of six vacation days after one year of consecutive work.
Thirty annual paid sick days is standard. An employer may require a doctor’s certificate for sick leave that is three consecutive days or more.
Female employees are entitled to 90 days of maternity leave, including 45 days of paid leave.
The government has set, with effective from 1 April 2018, the minimum wage of THB 325 a day for Bangkok and the surrounding area, THB 330 a day for Phuket, Chonburi, and Rayong, and THB 308 a day for Narathiwat, Pattani, and Yala. In total, there are seven separate minimum wage bands for various provinces.
As a result of the minimum wage increase, the minimum monthly salary of Thai staff listed in the monthly tax return (Form PND.1) submitted to the Revenue Department, and in Forms SPS.1-10 submitted to the Social Security Office, must be changed based on a company’s registered address (for example, the minimum wage for office staff is Bangkok should be raised from THB 9,300 to THB 9,750 a month).
A draft amendment of the Labour Protection Act, 2541 B.E. (1998 A.D.) (“the Draft”), was approved by the National Legislative Assembly on 13 December 2018. After the Draft is approved by His Majesty the King, it will be published in the Royal Gazette and become effective 30 days later.
The key differences between the current and new Labour Protection Act are summarized below:
Subject | Current | New | ||
| Length of service | Payment | Length of service | Payment |
120 days, but less than 1 year | For not less than 30 days at the individual employee’s latest wage | 120 days, but less than 1 year | For not less than 30 days at the individual employee’s latest wage | |
1 year, but less than 3 years | For not less than 90 days at the individual employee’s latest wage | 1 year, but less than 3 years | For not less than 90 days at the individual employee’s latest wage | |
3 years, but less than 6 years | For not less than 180 days at the individual employee’s latest wage | 3 years, but less than 6 years | For not less than 180 days at the individual employee’s latest wage | |
6 years, but less than 10 years | For not less than 240 days at the individual employee’s latest wage | 6 years, but less than 10 years | For not less than 240 days at the individual employee’s latest wage | |
More than 10 years | For not less than 300 days at the individual employee’s latest wage | 10 years, but less than 20 years | For not less than 300 days at the individual employee’s latest wage | |
More than 20 years | For not less than 400 days at the individual employee’s latest wage | |||
Subject | Current | New |
| Prior consent of the employee not required. | Prior consent of the employee required. |
| Not required, but can be granted in the work rules. | A minimum of 3 days’ business leave a year with full pay for a maximum of 3 working days a year while on leave Note: The Department of Labour Protection and Welfare may issue a ruling to determine what sort of leave is considered ‘business leave’. |
| A minimum of 90 days per pregnancy with full pay for a maximum of 45 working days | A minimum of 98 days per pregnancy with full pay for a maximum of 45 working days Note: Leave taken for prenatal care is considered part of maternity leave. |
| Method of notifying employees of relocation: Giving notice at least 30 days before relocation. | Method of notifying employees of relocation: Posting an announcement at a prominent place on the current business premises at least 30 days before relocation. |
Employee’s right to refuse to work at the new location: An employee whose normal living conditions will be affected by the relocation is entitled to refuse to work at the new location by giving notice of termination of employment to the employer within 30 days of the relocation being announced. | Employee’s right to refuse to work at the new location: An employee whose normal living conditions will be affected by the relocation is entitled to refuse to work at the new location by giving written notice to the employer within 30 days of the relocation being announced. |
Subject | Current | New |
| Consequences of such a refusal: Entitled to special severance pay equal to the normal amount of severance pay for termination, and employment will be considered terminated as of the relocation date. | Consequences of such a refusal: Entitled to special severance pay equal to the normal amount of severance pay for termination, and employment will be considered terminated as of the relocation date. |
| When payment in lieu of notice should be made is not set out clearly. | Payment in lieu of notice must be made on the date that the employee is dismissed. |
| An interest rate of 7.5% will be imposed for failing to make payment in lieu of advance notice and when temporarily ceasing business. | An interest rate of 15% will be imposed for failing to make payment in lieu of advance notice and when temporarily ceasing business. |
Employers often recruit staff through advertisements in either Thai or English-language newspapers, and there are several domestic and international personnel recruitment services. Employers may specify criteria, such as preferences for an applicant’s age and gender. Employers have the right to transfer staff to other locations, providing the transfer is not ordered with the intent to create personal hardship. An employee’s refusal to transfer is legal cause for dismissal.
The Social Security Act requires all employers to withhold social security contributions of 5% from the monthly salary of all employees, up to a maximum of THB 750 (approximately USD 25) per person a month. Employees registered for social security may file compensation claims for injury, illness, disability, or death if it is not a consequence of work performance, as well as for childbirth, child welfare, retirement, and unemployment.
The Workmen’s Compensation Act requires an employer to provide benefits at rates prescribed by law for employees who suffer injury, illness, or death while performing their work. In general, the compensation amount is paid monthly at a rate of 60% of monthly wages, between a minimum of THB 2,000 (approximately USD 67) and a maximum of THB 9,000 (approximately USD 300) a month. Actual and necessary medical expenses must be paid up to THB 35,000 (approximately USD 1,167) for normal cases and THB 50,000 (approximately USD 1,667) for a serious injury.
Employers who have 10 or more employees must draw up work regulations and announce them with the employees. The work regulations must contain provisions on working conditions, leave, discipline, submission of grievances, and termination of employment.
The Copyright Act protects works in the categories of literary work, including computer programs; dramatic, artistic, and musical work; audio-visual material, cinematic films or recorded material; disseminated pictures or disseminated audio; or any other works in the fields of literature, science, or the fine arts.
Copyright belongs to the creator of a work, subject to the following conditions:
Copyright is valid for the period of the creator’s life, plus an additional 50 years thereafter. Where the creator is a legal entity, the protection period is 50 years from the date of creation, or 25 years if the copyright application is for art. The following are not deemed eligible for copyright protection under the Act:
Thailand is a member of the Berne Convention for the Protection of Literary and Artistic Works. This allows certain copyrights registered in other Berne Convention countries to be enforced in Thailand.
The Trademark Act of Thailand governs the registration and protection of trademarks. The Act defines a trademark as a symbol used in connection with goods, for the purpose of indicating that they belong to the owner of the trademark. The trademark must be distinctive, and not identical or similar to those registered by others.
Registration of a trademark may be completed by the trademark proprietor, or through an agent. Application for registration must be made on official forms duly signed either by the proprietor or the agent and filed with the Trademark Office. If an application is approved, the registration will be published in the Official Journal. Once published, if not opposed, the proprietor has the exclusive right to use the registered mark on all of the products for which registration has been granted. Trademark registration is valid for 10 years from the date of application. It is renewable for an unlimited number of periods of 10 years each. Renewal of the registered trademark must be made 90 days before the date of expiration.
The Trademark Act allows the protection of service marks, service names, collective marks, certification marks, and trade names.
The Patent Act protects both inventions and product designs and pharmaceuticals. Thailand has numerous bilateral agreements enabling citizens of other countries to file patent applications in Thailand. However, Thailand is neither a signatory to the Paris Convention for the Protection of Industrial Property nor a signatory of any other international convention for the reciprocal protection of patents.
Under the Patent Act, patents for inventions are valid for 20 years, and patents for designs are valid for 10 years.
The invention must be patentable by meeting the following requirements:
Any patent that is widely published and/or patented or registered in a different place prior to the filing date of the Thai application is not patentable in Thailand. In addition, the following are not patentable in Thailand:
The principal taxation law of Thailand is the Revenue Code of 1938. In Thailand, taxes are collected in two ways. There are direct taxes (personal and corporate income taxes, and petroleum income tax) and indirect taxes (value-added tax, excise tax, customs duties, stamp duties, and specific business tax).
Generally, income tax in Thailand is by self-assessment, where tax declarations and payments are assumed to be correct. However, the Revenue Department has the power to audit taxes and taxpayers’ financial records. Value-added tax (VAT) is collected upon the consumption of goods and services, and is also levied on imports.
Corporate income tax (CIT) is a direct tax levied on legal entities (companies) established under Thai law, as well as legal entities established under foreign law that conduct business in Thailand, or which derive certain types of income from Thailand.
The term ‘legal entity’ means a legal company or partnership operating in Thailand. Companies incorporated in Thailand are subject to corporate income tax on all profits derived from both domestic and foreign sources. The term also includes any unincorporated joint venture, and any trading or profit-seeking activity conducted by a foreign government or its agency, or by any other legal body incorporated under foreign law.
Corporate income tax is levied on both Thai and foreign companies. A Thai company means a company incorporated in Thailand. A Thai company is subject to tax in Thailand on its worldwide net profit at the end of each accounting period (12 months).
A foreign company means a company incorporated under foreign law. Generally, a foreign company is treated as conducting business in Thailand if it has an office, a branch, or any other place of business in Thailand, or if it has an employee, agent, or representative that is conducting business in Thailand. A foreign company conducting business in Thailand is subject to CIT only on net profit arising from, or as a consequence of, business conducted in Thailand at the end of each accounting period.
A separate profit remittance tax of 10% of the amount remitted is imposed on foreign companies that remit their Thailand-based profits offshore. Profits include any sum set aside out of profits, as well as any sum which may be regarded as profits.
A foreign company not conducting business in Thailand, but deriving certain types of income from Thailand, such as service fees, interest, dividends, rent, or professional fees, may be subject to CIT on the gross amount received. It is collected in the form of withholding tax, which the payer of income must deduct from the income at the rate shown in the section on withholding tax (payments to non-resident individuals and companies). A foreign company engaged in international transport is also subject to tax only on its gross receipts.
The usual fiscal year for tax submission is for the 12-month period ending 31 December. However, with the consent of the Director-General of the Revenue Department, corporate taxpayers may choose an alternative accounting period for the purpose of determining taxable income.
The CIT of a company conducting business in Thailand is calculated from the company’s net profit on an accrual basis. A company must take into account all revenue arising from, or as a consequence of, the business conducted in an accounting period, and may deduct all expenses in accordance with the conditions set out in the Revenue Code.
| Net profit (Thai baht) | CIT rates |
| 0 – 300,000 | Nil |
| 300,001 – 3,000,000 | 15% |
| Over 3,000,000 | 20% |
(*An ‘SME’ means a company which has paid-up capital at the end of any accounting period not exceeding THB 5 million, and which has revenue from the sale of goods or the provision of services in any accounting period not exceeding THB 30 million.)
For income derived from countries that do not have a Double Taxation Agreement (DTA) with Thailand, foreign tax credits are allowed. These foreign tax credits are subject to certain criteria and conditions, and can be taken up to the amount of Thai tax that would have been payable had the income been derived in Thailand. The same rules apply in regard to foreign tax relief for DTA countries.
Each company is taxed as a separate legal entity. Losses incurred by one affiliate may not be offset against profits made by another affiliate. Losses can only be carried forward for a maximum of five years.
Dividends received by a company listed on the Stock Exchange of Thailand are exempt from tax. Exemptions also apply to dividends received by any other company incorporated in Thailand that holds at least 25% of the voting shares in another Thai company, without any cross shareholding, either directly or indirectly, provided that the related investments have been held for a period of at least three months before and three months after the receipt of the dividends. Where a Thai company does not qualify for the shareholding period specified, it will nevertheless only need to include in its assessable income an amount of 50% of a dividend received from another company incorporated in Thailand.
Dividends paid by a foreign company to a Thai company are exempt from Thai CIT if:
In addition to paying dividends, profits may be repatriated through various other means, including the payment of royalties and/or service fees. Although there is no separate transfer- pricing legislation in Thailand, guidelines have been issued to counteract aggressive inter-company pricing practices, and to ensure that any such payments reflect the true market value. These guidelines are intended to prevent the manipulation of profits and losses within a group of related companies, and to ensure that goods and services traded between the related companies are priced at arm’s length. The Revenue Department also has the power to assess income resulting from transfers which it deems are made at below market value.
On 27 September 2018, a draft transfer-pricing law was approved by the National Legislative Assembly. This law will be effective for accounting periods commencing on or after 1 January 2019.
Personal income tax (PIT) is a direct tax levied on the taxable income of a person. A person is defined as an individual, an ordinary partnership, a body of persons that is not a legal entity, a deceased person, and an undivided estate.
In general, a person liable to PIT must calculate his tax liability, file tax returns, and pay tax, if any, on a calendar-year basis. Taxpayers are classified as either ’residents’ or ’non-residents’.
A resident is any person residing in Thailand for a period, or periods, for a total of 180 days or more in any tax (calendar) year. A resident of Thailand is liable to pay tax on income from sources in Thailand on a cash basis, regardless of where the money is paid, and on the portion of income from foreign sources that is brought into Thailand in the same year that the foreign income is derived.
A non-resident is only subject to tax on income from sources in Thailand.
Income on which PIT is due is called ’assessable income’. The term covers income both in cash and in kind. This means that any benefits provided by an employer or other persons, such as rent-free housing, or the amount of tax paid by the employer on behalf of the employee, will also be treated as assessable income of the employee for PIT purposes.
Assessable income is divided into eight categories. Certain deductions and allowances can be offset against assessable income to calculate taxable income. Taxpayers must make deductions from assessable income before the allowances are granted.
| Types of income | Deductions |
| 1. Income from employment | 50%, but not exceeding THB 100,000 |
| 2. Income from independent personal services | 50%, but not exceeding THB 100,000 |
| 3. Income from goodwill, copyright, and other | 50%, but not exceeding THB 100,000 rights |
| 4. Interest income, dividends, and capital gains | N/A |
5. Income from letting out property
| Actual expenses or 30% Actual expenses or 20% Actual expenses or 15% Actual expenses or 30% Actual expenses or 10% |
| 6. Income from professional services (law, medical practice, engineering, architecture, accountancy, and fine arts) | Actual expenses or 30%, except for the medical profession, where 60% is allowed |
| 7. Income from the hire of work where the Actual expenses is obliged to provide essential materials besides tools | Actual expenses or 70% |
| 8. Income from business, commerce, agriculture, industry, transport, or any other activities not specified | Actual expenses or between 40% and 60%, depending on the types of income |
| Taxable Income (Thai baht) | Tax Rate | Tax Amount (Thai baht) | Accumulated Tax (Thai baht) |
| 0 – 150,000 | 0% | – | – |
| 150,001 – 300,000 | 5% | 7,500 | 7,500 |
| 300,001 – 500,000 | 10% | 20,000 | 27,500 |
| 500,001 – 750,000 | 15% | 37,500 | 65,000 |
| 750,001 – 1,000,000 | 20% | 50,000 | 115,000 |
| 1,000,001 – 2,000,000 | 25% | 250,000 | 365,000 |
| 2,000,001 – 5,000,000 | 30% | 900,000 | 1,265,000 |
| 5,000,001 and over | 35% |
Persons over the age of 65 are granted an exemption on the first THB 190,000 of taxable income instead of the normal THB 150,000 threshold.
There are several types of income that a taxpayer may elect to have assessed separately.
Special rules apply to calculating gains on the sale of immovable property. This may allow a taxpayer to pay a final withholding tax to the Land Department in lieu of including the gain made on the sale as normal assessable income.
Interest income may, at the taxpayer’s choice, be excluded from the PIT calculation, if that tax at 15 per cent is withheld at source. However, the following forms of an individual’s interest income are exempt from any tax:
A resident individual taxpayer that derives dividends has a choice of including the dividend in PIT-assessable income or paying a final withholding tax at 10% and excluding that dividend from their income. Taxpayers who choose the first option must gross up the dividend to include the 10% withholding tax deducted, as well as the company tax paid on that dividend. However, a tax credit is granted for both the withholding tax and company tax deducted.
A taxpayer is liable to file a PIT return (Form PND 90 or 91) and make a payment to a district Revenue Department office by the last day of March following the taxable year. A taxpayer who derives income in categories 5 to 8 (listed earlier in this section) during the first six months of the taxable year is also required to file a half-year return (Form PND 94), and to make a payment to a district Revenue Department Office by the last day of September of that taxable year. Any withholding or half-year tax that has been pre-paid can be used as a credit against the year-end tax liability.
For certain categories of income, the payer of income must withhold tax at source, file the necessary return (Form PND 1, 2, or 3) and submit the amount of tax withheld to the district Revenue Department office. The tax withheld is then credited against the tax liability of the taxpayer when the tax return is filed. The table below shows the withholding tax rates for some categories of income:
| Types of income | Withholding tax rate |
| 1. Employment income/independent personal services | 0% to 35% |
| 2. Interest(*1) | 15% |
| 3. Dividends | 10% |
| 4. Royalties | 0% to 35% |
| 5. Rent(*1) | 5% |
| 6. Prizes | 5% |
| 7. Hire of work and professional services(*1) | 3% |
| 8. Public entertainer remuneration | 5% |
| 9. Advertising fees(*1) | 2% |
| 10. Capital gain(*2) | 0% to 35% |
Certain types of income paid to companies are subject to withholding tax at source. The withholding tax rates depend on the types of income and the tax status of the recipient. The payer of income is required to file a tax return (Form PND 53) and submit the amount of tax withheld to the district Revenue Department office within the first seven days of the month following that in which the payment was made. The tax withheld is credited against the final tax liability of the taxpayer. Governmental agencies are required to withhold tax at the rate of 1% on all types of income paid to Thai companies. The table below sets out the withholding tax rates on some important types of income:
| Types of income | Withholding tax rate |
| 1. Interest | 10% if paid to associations or foundations, or 1% in other cases |
| 2. Dividend | 10% |
| 3. Royalty | 10% if paid to associations or foundations, or 3% in other cases |
| 4. Rent | 10% if paid to associations or foundations, or 5% in other cases |
| 5. Prize | 5% |
| 6. Service and liberal profession | 3% |
| 7. Hire of work | 3% if paid to a Thai company or a foreign company that has a permanent branch in Thailand; 5% if paid to a foreign company without a permanent branch in Thailand.
|
| 8. Advertising fee | 2% |
Apart from dividends, for which a 10% withholding tax must be paid, a 15% withholding tax must be paid for most other payments applicable to a non-resident that resides in a non-DTA country (including interest, royalties, rent, management fees, consultancy payments, and capital gains). However, Thailand has concluded DTAs with many countries. The withholding tax rates may therefore be reduced, depending on the applicable DTA (see the following section on Double Taxation Agreements).
Thailand concluded its first double tax agreement (DTA) with Sweden in 1963. The Thai DTA network continues to be expanded and updated.
DTAs apply to persons (including individuals and corporate entities) which are residents of either one or both of the respective Contracting States. In order to be classified as a Thai resident and to be entitled to DTA benefits, a person must be one of the following:
DTAs apply only to income taxes – namely, personal income tax, corporate income tax, and petroleum income tax. Other indirect taxes, such as VAT and specific business tax (SBT), are not covered by DTAs.
In general, a DTA does not stipulate an exact tax rate that applies to a specific item of income. Instead, it states whether the source country or resident country is entitled to tax certain income. If the source country has taxing rights, the income will be subject to tax under the domestic laws of that country.
The DTA also prescribes a maximum tax rate applicable to investment income – namely, dividends, interest, and royalties. This means that the source country can tax investment income at a rate not exceeding that set out in the DTA. In many cases, tax rates in a DTA are lower than domestic tax rates, in order to reduce tax impediments for cross-border trade and investments.
Some Articles of DTAs clearly do not allow the source country to exercise taxing rights on certain income, such as income from international air transport, and income from general management and administrative services (business profits), provided such a business is not conducted through a permanent establishment (PE) in the source country.
Withholding tax is generally applied at a rate of 10% for dividends, and 15% for interest and royalties. However, for some DTA countries, the lower withholding tax rate is provided, on the condition that the recipient of dividends, interest, and royalties does not have a PE or fixed base in Thailand. The following table sets out the general tax applicable to dividends, interest, and royalty payments under Thailand’s DTAs:
| Dividends (1) | Interest (2) | Royalties (3) | |
| Armenia | 10% | 10%, 15% | 15% |
| Australia | 10% | 10%, 15% | 15% |
| Austria | 10% | 10%, 15% | 15% |
| Bahrain | 10% | 10%, 15% | 15% |
| Bangladesh | 10% | 10%, 15% | 15% |
| Belarus | 10% | 10%, 15% | 15% |
| Belgium | 10% | 10%, 15% | 5%, 15% |
| Bulgaria | 10% | 10%, 15% | 5%, 15% |
| Cambodia | 10% | 10%, 15% | 10% |
| Canada | 10% | 10%, 15% | 5%, 15% |
| Chile | 10% | 10%, 15% | 5%, 15% |
| China | 10% | 10%, 15% | 15% |
| Cyprus | 10% | 10%, 15% | 5%, 10%, 15% |
| Czech Republic | 10% | 10%, 15% | 5%, 10%, 15% |
| Denmark | 10% | 10%, 15% | 5%, 15% |
| Estonia | 10% | 0%, 10% | 8%, 10% |
| Finland | 10% | 10%, 15% | 15% |
| France | 10% | 3%, 10%, 15% | 5%, 15% |
| Germany | 10% | 10%, 15% | 5%, 15% |
| Hong Kong | 10% | 10%, 15% | 5%, 10%, 15% |
| Hungary | 10% | 10%, 15% | 15% |
| India | 10% | 10% | 10% |
| Indonesia | 10% | 10%, 15% | 15% |
| Ireland | 10% | 10%, 15% | 5%, 10%, 15% |
| Israel | 10% | 10%, 15% | 5%, 15% |
| Italy | 10% | 10%, 15% | 5%, 15% |
| Japan | 10% | 10%, 15% | 15% |
| Korea | 10% | 10%, 15% | 15% |
| Kuwait | 10% | 10%, 15% | 15% |
| Laos | 10% | 10%, 15% | 15% |
| Luxembourg | 10% | 10%, 15% | 15% |
| Malaysia | 10% | 10%, 15% | 15% |
| Mauritius | 10% | 10%, 15% | 5%, 15% |
| Myanmar | 10% | 10%, 15% | 5%, 10%, 15% |
| Nepal | 10% | 10%, 15% | 15% |
| The Netherlands | 10% | 10%, 15% | 5%, 15% |
| New Zealand | 10% | 10%, 15% | 10%, 15% |
| Norway | 10% | 10%, 15% | 5%, 10%, 15% |
| Oman | 10% | 10%, 15% | 15% |
| Pakistan | 10% | 10%, 15% | 10%, 15% |
| Philippines | 10% | 10%, 15% | 15% |
| Poland | 10% | 10%, 15% | 5%, 15% |
| Romania | 10% | 10%, 15% | 15% |
| Russia | 10% | 10%, 15% | 15% |
| The Seychelles | 10% | 10%, 15% | 15% |
| Singapore | 10% | 10%, 15% | 5%, 8%, 10% |
| Slovenia | 10% | 10%, 15% | 10%, 15% |
| South Africa | 10% | 10%, 15% | 15% |
| Spain | 10% | 10%, 15% | 5%, 8%, 15% |
| Sri Lanka | 10% | 10%, 15% | 15% |
| Sweden | 10% | 10%, 15% | 15% |
| Switzerland | 10% | 10%, 15% | 5%, 10%, 15% |
| Taiwan | 5%, 10% | 10%, 15% | 10% |
| Tajikistan | 10% | 10% | 5%, 10% |
| Turkey | 10% | 10%, 15% | 15% |
| The Ukraine | 10% | 10%, 15% | 15% |
| The United Arab Emirates | 10% | 10%, 15% | 15% |
| The United Kingdom | 10% | 10%, 15% | 5%, 15% |
| The United States of America | 10% | 10%, 15% | 5%, 8%, 15% |
| Uzbekistan | 10% | 10%, 15% | 15% |
| Vietnam | 10% | 10%, 15% | 15% |
VAT replaced sales tax on 1 January 1992. VAT is an indirect tax imposed on the value added at each stage of production and distribution.
Any person or entity that regularly supplies goods or provides services in Thailand, and has an annual turnover exceeding THB 1.8 million, is subject to VAT in Thailand. A supplier of services to an offshore entity will also have to pay VAT if the services are used in Thailand. VAT also applies to any import of goods or services. Suppliers of goods and services collect output VAT. Purchasers of goods and services pay input VAT. Input VAT is deducted from output VAT to determine VAT liability.
VAT is currently levied at a rate of 7% on gross receipts, although a zero rate applies to exported goods and services that are used abroad. Certain businesses are exempt from VAT.
Some businesses that are not subject to VAT are instead subject to SBT, although certain entities and activities may be exempt from SBT. The tax is imposed on gross revenue, and the tax rate differs based on the nature of the business conducted:
| Business | Tax Base | Tax Rate |
| 1. Banking, Finance and similar businesses | Interest, discounts, service fees, other fees, profits from the exchange of foreign currencies | 3% |
| 2. Life Insurance | Interest, service fees and other fees | 2.5% |
| 3. Pawn Brokerage | Interest, fees, remuneration from selling property which has not been bought back | 2.5% |
| 4. Real estate | Gross receipts | 3% |
| 5. Factoring | Interest, discounts, service fees and other fees | 3% |
Note: Local tax at the rate of 10% is imposed on top of SBT.
Income derived from petroleum operations is subject to the Petroleum Income Tax Act. Petroleum companies are taxed at the rate of 50% on the annual net profit from operations, including other activities incidental to petroleum operations.
Stamp duty is payable on most documents filed by companies with government agencies or entities, and on official company documents. This includes transfers of land, leases, stock transfers, debentures, mortgages, life assurance policies, annuities, powers of attorney, promissory notes, letters of credit, and cheques.
Instruments, not transactions or persons, are subject to stamp duty. For stamp duty purposes, an instrument is defined as any document chargeable with duty under the Revenue Code. The stamp duty rules are contained in Chapter VI of Title II of the Revenue Code.
Only instruments listed in the stamp duty schedule are subject to stamp duty, and the persons liable to pay stamp duty are those associated with the instrument. For example, the persons executing the instrument, the holders of the instrument, or the beneficiary. General exemptions are available under the Revenue Code. Rates vary according to the class of the instrument. Failure to pay stamp duty can result in a penalty or tax surcharge.
Excise tax is levied on certain types of products, such as alcoholic beverages, tobacco, and fruit juice.
Tariff duties on goods are levied on an ad valorem (according to value) or a specific rate basis. The majority of goods imported by businesses are subject to rates ranging from 5% to 60%. The majority of imported articles are subject to two different taxes:
Goods imported for re-export are generally exempt from import duty and VAT. Export duties are imposed on only a few items, including rice, hides, skins and leather, scrap iron or steel, rubber, teak and other kinds of wood.
Two exceptions to mandatory customs duties apply to the importation of machinery, equipment, and materials for use by:
There is no capital gains tax in Thailand. Capital gains are treated as ordinary income for the purpose of calculating income tax.
There is no branch profits tax in Thailand. Thai branches of foreign companies will generally only be taxed in Thailand on the net profit arising from business conducted in Thailand. Thai branches are subject to the same tax rate as resident companies. However, a separate profit remittance tax is imposed on profits that are remitted outside of Thailand.
This tax may be imposed at various rates per square metre (depending on the language) on any signs or billboards that display a name, trademark, or product for the purpose of advertising or providing information about a business.
Owners of land and buildings in designated areas may be subject to either local development tax (based on the unimproved capital value of land), or house and land tax (calculated as a percentage of actual or imputed annual rental value). Local development tax is based on the appraised value of land, as determined by the local authorities. Land that is subject to house and land tax is not subject to local development tax. House and land tax covers all properties, with the exception of owner-occupied residences. The annual value is the official assessment of rental income that could be derived from such premises.
On 16 November 2018, the National Legislative Assembly (NLA) passed a long-delayed bill on new land and building tax, which will replace the house and land tax and the local development tax, and which will come into effect on 1 January 2020, The new property tax rates are based the appraisal value of the property and the category of the property, as follows.
| Category of property | Statutory ceiling rate (As a Percentage) | Appraisal value (Unit: millions of Thai baht) | Applicable rate (As a percentage) |
| 1. Agricultural use | 0.15 | 0 – 75 | 0.01 |
| > 75 – 100 | 0.03 | ||
| > 100 – 500 | 0.05 | ||
| > 500 – 1,000 | 0.07 | ||
| > 1000 | 0.1 | ||
| Note: There is a tax exemption for agricultural land worth up to THB 50 million belonging to individuals, and the new law will not be applicable to individual owners for the first three years. | |||
| 2. Residence | 0.3 | 0 – 50 | 0.02 |
| > 50 – 75 | 0.03 | ||
| > 75 – 100 | 0.05 | ||
| > 100 | 0.1 | ||
Note: For first homes, there is a tax exemption of up to THB 50 million for owners of both the land and home, and whose names are on household registration documents, and up to THB 10 million for those who own homes only and whose names are on household registration documents.
| 3. Commercial use | 1.2 | 0 – 50 | 0.3 |
| > 50 – 200 | 0.4 | ||
| > 200 – 1,000 | 0.5 | ||
| > 1,000 – 5,000 | 0.6 | ||
| > 5000 | 0.7 | ||
| 4. Undeveloped land | 3 | 0 – 50 | 0.3 |
| > 50 – 200 | 0.4 | ||
| > 200 – 1,000 | 0.5 | ||
| > 1,000 – 5,000 | 0.6 | ||
| > 5000 | 0.7 |
Note: Rates will be raised by 0.3% every three years, but will not exceed 3%.
On 1 February 2016, the Inheritance Tax Act came into effect in Thailand. The act does not apply to an inheritance where the owner dies before the date that the act is effective, or to an inheritance received by the spouse of the owner.
The following recipients of an inheritance will be liable to pay the tax:
The following persons are exempt from the tax:
The following assets, received as an inheritance, are subject to the tax:
If the inheritance received has a value exceeding THB 100 million, no matter where received, or if received all at once or over a period of time, only that portion which exceeds the value of THB 100 million shall be taxed. For the purposes of this inheritance tax, the value of the inheritance subject to tax means the value of the asset received as an inheritance offset by the liabilities inherited.
The tax rate is 10% of the value of the inheritance subject to tax. However, if the recipient is a descendant or ancestor of the owner of the inheritance, the rate is reduced to 5%.
A new regulation on gift tax, as part of personal income tax, was announced on 5 August 2015, and became effective from 1 February 2016 onwards.
The following items will be assessable for personal income tax purposes:
A taxpayer can choose to pay tax of 5% of the taxable portion without having to include the amount in the calculation of net taxable income for the year-end.
A foreign individual that invests in securities listed on the Stock Exchange of Thailand (SET) is exempt from any tax on the capital gain made from the sale of shares. A foreign corporation will be subject to a 15% withholding tax on the capital gain under Thai law. However, this tax rate may be reduced or the gain may be exempt from tax under a DTA. Dividends received on shares are subject to a domestic withholding tax rate of 10%.
Foreign investment in Thai real estate is restricted under the Alien Business Act 1999. However, the Land Code 1954 allows foreigners, under certain rules and conditions set out under the Department of Land’s regulations, to have a proprietary right in immovable property.
Thus, a foreigner, with limited exceptions, cannot own land but can own a building on the land. Many foreigners, therefore, choose to obtain long-term leases. Depending on a quota based on total area size, a foreigner can own a condominium outright (for example, through freehold purchase) because the underlying land is owned by a Thai legal entity.
The concept of trusts and taxing trust income, which is prevalent in many western countries, does not exist in Thailand. There is no separate tax return that needs to be filed for trusts, and thus there is no separate taxation for trust income, either for the trustee or the beneficiary. Recently, however, trusts have been recognized purely for conducting transactions on the Stock Exchange of Thailand. In order to ensure that the trustee is not taxed on income derived, an exemption has been specifically granted to that type of investment income.
Bus transport dominates for long distances and in Bangkok, with motorbikes and bicycles dominating in rural areas. Road transportation is the primary form of freight transport. Standard rail travel has been used for many decades for rural long-distance transportation, though plans are underway to expand services with high-speed rail lines extending to several major regions of Thailand. There has also been a significant rise in domestic air transport.
Thai is the national language. English is the next most commonly spoken language, and is especially prevalent among the business community in Bangkok. Many Thai-Chinese also speak Standard Chinese or a form of Mandarin Chinese.
Thailand is seven hours ahead of GMT year round, as it does not observe Daylight Savings Time.
Businesses in Thailand generally observe an eight-hour day – from 8 a.m. to 5 p.m. A one-hour lunch period is usually taken between noon and 1 p.m. Most business offices are closed on Saturdays and Sundays.
The holidays observed by most businesses and government offices are:
* Dates are dependent on the Thai lunar calendar.
ABOUT MAZARS IN THAILAND
Mazars in Thailand is a leading audit, accounting, tax, legal and advisory practice, combining the benefits of an integrated global partnership with the entrepreneurial drive of its senior advisors. Mazars currently employs over 240 professionals in Bangkok, divided between two operating entities, Mazars (Thailand) Ltd. and Mazars Ltd. and provides accounting, audit, tax, legal and business advisory services to international clients and locally registered businesses. A key feature of the practice is the multinational composition of its advisors, with British, Korean, German, Thai, Dutch, Japanese, and Australian nationals among its senior advisors.
MAZARS IS AN INTERNATIONAL, INTEGRATED AND INDEPENDENT FIRM, SPECIALISING IN AUDIT, ACCOUNTANCY, ADVISORY, TAX AND LEGAL SERVICES. OPERATING IN 89 COUNTRIES AND TERRITORIES, AS OF 1ST JANUARY 2019, THE FIRM DRAWS ON THE EXPERTISE OF 23,000 PROFESSIONALS TO ASSIST MAJOR INTERNATIONAL GROUPS, SMES, PRIVATE INVESTORS AND PUBLIC BODIES AT EVERY STAGE IN THEIR DEVELOPMENT.
THIS GUIDE HAS BEEN PREPARED FOR THE ASSISTANCE OF THOSE INTERESTED IN DOING BUSINESS IN THAILAND. IT DOES NOT COVER EXHAUSTIVELY THE SUBJECTS IT TREATS, BUT IS INTENDED TO ANSWER SOME OF THE IMPORTANT BROAD QUESTIONS THAT MAY ARISE. WHEN SPECIFIC ISSUES ARISE IN PRACTICE, IT WILL OFTEN BE NECESSARY TO CONSIDER THE RELEVANT LAWS AND REGULATIONS, AND TO OBTAIN APPROPRIATE PROFESSIONAL ADVICE. FOR THIS REASON, THE PUBLISHERS AND AUTHORS ARE NOT RESPONSIBLE FOR THE RESULT OF ANY ACTIONS WHICH ARE UNDERTAKEN BASED ON INFORMATION CONTAINED WITHIN THIS PUBLICATION, NOR FOR ANY ERRORS IN, OR OMISSIONS FROM, THIS PUBLICATION.
CONTACTS
Mazars in Thailand
12th Floor, Empire Tower 1 South Sathorn Road Yannawa, Sathorn Bangkok 10120
Tel: (662) 670 1100
Fax: (662) 670 1101
Email address: [email protected]
Rob Hurenkamp
Managing Partner
Blake Dimsdale
Partner – Audit Practice
Chatchawat Kriengsuntikul
Partner – Legal Practice
Damian Norris
Partner – International Taxation
Jonathan Fryer
Partner – Accounting and Payroll Outsourcing
Layout: Mazars, Communication information available
2019-Photo c Thinkstock
Request your information here: