Personal taxation in Phuket
Effective personal income tax rate
Teleport city rankings for personal income tax
Thailand residents and nonresidents are taxed on their Thailand-source income. Thai residents are taxed on foreign-source income only if the income is brought into Thailand in the year derived (repatriation in later years is exempt from personal income tax).
An individual is resident in Thailand for personal income tax purposes if he or she is present in Thailand for 180 days or more in a (calendar) tax year.
A married couple may opt for a joint or separate filing on all types of personal income. The spouses may agree to file tax returns separately with respect to employment income and file tax returns jointly on other types of personal income.
Assessable income is subject to reduced progressive rates, up to a maximum rate of 35%. Expatriate employees of a ROH, IHQ or ITC may be entitled to a flat income tax rate of 15% that will apply from four to 15 years, depending on the status of the ROH, IHQ or ITC as the case may be.
Deductions and allowances
Subject to certain restrictions, deductions are granted for first-time purchases of a personal residence, insurance, mortgage interest, retirement or long-term equity plans, charitable contributions, etc. Personal allowances are available to a taxpayer, his\her spouse, children and parents in certain cases.
Employment income, including most employment- related benefits, is subject to personal income tax. Profits derived by an individual from the carrying on of a trade or profession generally
Capital gains are considered taxable income.
Other taxes on individuals
Real property tax
A tax of 12.5% is levied on the appraised rental
Effective 1 February 2016, a 10% tax is levied on the beneficiary portion of an inheritance exceeding THB 100 million (a 0% or 5% rate may apply in certain circumstances).
An employee must contribute 5% of his or her monthly compensation to social security. The employer also is required to contribute.
Stamp duty generally applies at a rate of 0.1% to leases, hire of work agreements, the transfer of shares/debentures, loans, etc.
Compliance for individuals
A monthly surcharge of 1.5% applies to underpayments of tax, up to the additional tax amount that was due, and a penalty of up to 100% of the tax due will apply when the income tax liability is formally assessed by the tax authorities.
Filing and payment
Tax on employment income is withheld by the employer and remitted to the tax authorities, generally on a monthly basis. An individual must file an annual personal income tax return on or before 31 March of the following year and pay any additional income tax due at that time.
Corporate taxation in Phuket
Teleport city rankings for corporate income tax
Residents are taxed on worldwide income; nonresidents are taxed only on Thailand-source income. Foreign-source income derived by resident taxpayers is subject to corporate income tax in the same manner as Thailand-source income. A registered foreign branch or partnership is taxed the same as a limited company, but only on Thailand-source income.
Taxation of dividends
Dividends paid by a Thai limited company to another limited company in Thailand may be exempt from corporate income tax if certain conditions are satisfied; otherwise, 50% of the dividends is subject to corporate income tax at the normal rate. Tax withheld on the payment of dividends may be used to offset the final corporate income tax due for the company in the relevant tax year.
A limited company or partnership is considered resident if it is incorporated in Thailand and registered with the Ministry of Commerce.
Net operating losses may be carried forward for up to five accounting periods. If the net operating losses relate to a business promoted by the Board of Investment during a tax holiday period, the losses may be carried over to the first year after the tax holiday period and subsequently up to five years. The carryback of losses is not permitted.
Tax holidays from three to eight years are available for business activities promoted by the Board of Investment. A regional operating headquarters (ROH) and its foreign expatriate employees may benefit from a 0% to 10% rate on net taxable profits and a fixed personal income tax rate of 15%, respectively.
The corporate tax rate is 20%. Certain small and medium- sized limited companies are subject to lower progressive rates, up to a certain amount of net taxable profits. A bank deriving profits from an International Banking Facility pays a 10% rate for “out-out” deposits.
Foreign tax credit
Foreign income tax paid on profits that are subject to corporate income tax in Thailand normally may be credited up to the amount of income tax paid in Thailand on such foreign income.
Corporate income tax is imposed on an entity’s net taxable profits, which normally consist of business/trading income, passive income and capital gains/losses. Expenses that relate specifically to generating profits for the business or to the business itself may be deducted in determining net taxable profits.
Capital gains are subject to the normal corporate income tax rate, with no restrictions on the use of capital losses to offset net taxable profits.
Holding company regime
A tax exemption is available for dividend income received from foreign affiliates, provided the foreign profits were subject to a minimum headline income tax rate of 15%.
Other taxes on corporations
Real property tax
A tax of 12.5% is levied on the appraised rental value of real property. The tax is deductible in calculating the corporate income tax liability.
The employer and the employee are required to contribute 5% of an employee’s monthly compensation up to a specified monthly cap.
A specific business tax applies to the gross proceeds from the transfer of immovable property at a rate of 3.3% (including a municipal tax of 10%), a withholding tax of 1% of the gross proceeds
Stamp duty generally applies at a rate of 0.1% to leases, hire of work agreements, transfers of shares/debentures, loans, etc.
Compliance for corporations
Consolidated returns are not permitted for corporate income tax purposes; each company must file its own tax return.
If an entity underestimates its profits for an entire year by more than 25%, a maximum 20% fine is charged on the first half-year installment. In other circumstances, a surcharge of 1.5% per month on outstanding tax applies. A penalty of up to 100% of the tax due will apply when the income tax liability is formally assessed by the tax authorities.
A taxpayer may request a nonbinding private letter ruling and APAs are available under the transfer pricing regime.
The tax year is 12 months (a shorter year is allowed only in the year of incorporation, when there is a change of accounting period or in the year of dissolution).
A taxpayer must self-assess and make an advance corporate income tax payment for the first six months of the tax year. The half-year return must be filed within two months after the first six months of the tax year. The annual income tax return must be filed within 150 days from the company’s year end. Extensions are not available.
Other taxation in Phuket
Value added tax
Filing and payment
VAT is payable by the 15th day of the month following the month in which it is collected. In cases in which a self- assessment of VAT output is required on the payment of certain income to nonresidents (primarily services or royalties on rights used in Thailand), the VAT is payable on the seventh day of the month following the month when the actual payment took place.
The standard VAT rate is 10%, athough the rate is reduced to 7% until 30 September 2016. A 0% rate applies to exported goods and services.
VAT is levied on the sale of goods and the provision of services.
The registration revenue threshold for VAT is turnover exceeding THB 1.8 million for any given tax period. Nonresident suppliers that are carrying on business on more than a temporary basis must register.
Under the transfer pricing rules, a taxpayer must declare in its annual corporate tax return whether revenue and expense transactions are based on market prices, and if this is not the case, the tax authorities may adjust income to reflect a market price. Advance pricing agreements (APAs) may be obtained and, while transfer pricing documentation is not formally required to be maintained, there is an assumption (based on filing requirements and directives to revenue officers) that documentation should be available by the corporate income tax return filing date. A taxpayer may initiate an adjustment (up or down) if there is adequate documentation to substantiate the adjustment.
Foreign exchange control
Repatriation payments may not be made in THB, but may be made in any other currency. However, an exception applies for the transfer of funds made for the purpose of investing in or lending to business entities in Vietnam or in Thailand’s neighboring countries; such transfers may be made in THB and/or in another currency.
Accounting principles/financial statements
Thai Accounting Standards apply. For areas not addressed by Thai Accounting Standards, IAS, IFRS and US GAAP may be consulted. Financial statements that have been audited and signed off by a certified accountant must accompany an entity’s annual income tax return.
Principal business entities
These are the public and private limited company, partnership, sole proprietorship, joint venture and branch of a foreign corporation.
Dividends paid to another Thai company are subject to a 10% withholding tax, or are exempt if certain conditions are satisfied. Dividends paid to a nonresident company are subject to a 10% withholding tax. Dividends paid to an individual (resident or nonresident) are subject to a 10% withholding tax that is considered a final tax. The withholding tax rate on dividends paid to a nonresident may be reduced under a tax treaty.
Branch remittance tax
A 10% branch remittance tax is imposed on after-tax profits paid or deemed paid to a head office.
Technical service fees
Technical service fees paid to another Thai company are subject to a 3% advance withholding tax, which is used as a credit against the final corporate income tax due for the accounting period. Technical service fees treated as royalties and paid to a nonresident are subject to a 15% final withholding tax, unless the rate is reduced under a tax treaty.
Interest paid to a nonresident company is subject to a 15% withholding tax unless the rate is reduced under a tax treaty. Interest paid on loans from a bank, financial institution or an insurance agency is subject to a 10% withholding tax rate if the lender is resident in a country that has concluded a tax treaty with Thailand, but an exemption applies if the interest is paid by the government or a Thai financial institution on loans granted under a law intended to promote agriculture, industry or commerce.
Royalties paid to another Thai company are subject to a 3% advance withholding tax, which may be credited against the final corporate income tax due for the accounting period. Royalties paid to a nonresident are subject to a 15% final withholding tax, unless the rate is reduced under a tax treaty.
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