Corporate Income Tax

Incorporated firms operating in Thailand generally pay income tax at a rate of 30 percent of net profits, although reduced tax rates apply to companies listed on the Stock Exchange of Thailand (SET) and the Market for Alternative Investment (MAI). Small companies pay taxes at reduced rates on a progressive scale on profits below 3 million Baht. Temporary exemptions from corporate income can be applied for in certain circumstances. Foundations and Associations pay income taxes at rates of 2 to 10 percent of gross business income, depending upon the activity. International transport companies face a rate of three percent of gross ticket receipts and three percent of gross freight charges.

All companies registered under Thai law are subject to taxation as stipulated in the Revenue Code and are subject to income tax on income earned from sources within and outside of Thailand. Foreign companies not registered or not residing in Thailand are subject to tax only on income derived from sources within Thailand.

Normal business expenses and depreciation allowances, under accrual accounting are allowed as deductions from gross income. Double-deductions are available for qualifying R&D and training expenditure. Inventory must be valued at cost or at market price, whichever is lower. Fixed Assets and buildings are depreciated over the useful life of the asset at rates of between 5 and 100%. Accelerated depreciation methods may be applied to certain asset classes. Tax deductions may be claimed for donations of up to 2% of net profits to approved public charities or for public benefit, 10% of net profits for approved educational causes and 20% of net profits to approved sporting bodies. Entertainment expenses are tax deductible to a limit of the lesser of 0.3% of gross sales income or 10 million baht.

Thai companies are required to file corporate tax returns and make payments of corporate income tax twice annually, and employers are required to withhold personal income tax from their employees. Except for newly incorporated companies, an accounting period is defined as a period of 12 months. Annual tax returns must be accompanied by audited financial statements. Tax losses can be carried forward for up to five consecutive years.

A corporate taxpayer must file a half-year return and pay a tax installment based on 50% of the estimated annual profit by the end of the eighth month of the accounting period. Failure to pay the estimated tax or underpayment by more than 25 percent may subject the taxpayer to a fine amounting to 20 percent of the amount in deficit.

Failure to file a tax return, late filing or filing a return containing false or inadequate information may subject the taxpayer to various penalties. Failure to file a return, and subsequent non-compliance with an order to pay the tax assessed, may result in a penalty equal to twice the amount of tax due. Filing a return with a tax deficiency may result in a penalty equal to the amount of tax. All penalties must be paid within 30 days of being assessed.

Inter-corporate dividends are generally exempt from tax on 50 % of the dividend payment received, provided the shareholding is in place for longer than 3 months prior to, and for at least 3 months after, the payment date. Dividends are exempt from income taxes where there recipient holds 25% of more of the shares of the payer company. The exemptions do not apply where respective cross-holdings exist between the payer and the recipient company.