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Corporate Income Tax (CIT) is a direct tax levied on a juristic company or partnership which is established under Thai or foreign law and carries on business in Thailand or derive certain types of income from Thailand.
The term "juristic company or partnership" (hereinafter called "company") means a limited company, a limited partnership or a registered ordinary partnership incorporated under Thai or foreign law as well as an association and a foundation engaged in business producing revenue. The term also includes any joint venture and any trading or profit-seeking activity carried on by a foreign government or its agency or by any other juristic body incorporated under a foreign law.
1. Taxable Person
Corporate income tax is levied on both Thai and foreign companies. A Thai company means a company incorporated under the law of Thailand. 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 carrying on business in Thailand if it has an office, a branch or any other place of business in Thailand or has an employee, agent, representative or go-between for carrying on business in Thailand. A foreign company carrying on business in Thailand is subject to CIT only for net profit arising from or in consequence of business carried on in Thailand, at the end of each accounting period. However, a foreign company engaged in international transport is subject to tax on its gross receipts. When a foreign company disposes its profit out of Thailand, such profit will be subject to tax on the sum disposed. Profit also means any sum set aside out of profits as well as any sum which may be regarded as profit.
A foreign company, not carrying on business in Thailand but deriving certain types of income from Thailand, such as service fees, interests, dividends, rents, professional fees, is subject to corporate income tax on the gross amount received. It is collected in the form of withholding tax by which the payer of income shall deduct the tax from the income at the rate shown in 3 (Tax Rates).
2. Tax Calculation
In the calculation of CIT of a company carrying on business in Thailand, it is calculated from the company's net profit on the accrual basis. A company shall take into account all revenue arising from or in consequence of the business carried on in an accounting period and deducting therefrom all expenses in accordance with the condition prescribed by the Revenue Code. As for dividend income, one-half of the dividends received by Thai companies from any other Thai companies may be excluded from the taxable income. However, the full amount may be excluded from taxable income if the recipient is a company listed in the Stock Exchange of Thailand or the recipient owns at least 25% of the distributing company's capital interest, provided that the distributing company does not own a direct or indirect capital interest in the recipient company. The exclusion of dividends is applied only if the shares are acquired not less than 3 months before receiving the dividends and are not disposed of within 3 months after receiving the dividends
In calculating CIT, deductible expenses are as follows.
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1. |
Ordinary and necessary expenses. However, the deductible amount of the following expenses is allowed at a special rate:
- 200% deduction of Research and Development expense,
- 150% deduction of job training expense,
- 200% deduction of expenditure on the provision of equipment for the disabled; |
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2. |
Interest, except interest on capital reserves or funds of the company; |
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3. |
Taxes, except for Corporate Income Tax and Value Added Tax paid to the Thai government; |
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4. |
Net losses carried forward from the last five accounting periods; |
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5. |
Bad debts; |
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6. |
Wear and tear; |
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7. |
Donations of up to 2% of net profits; |
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8. |
Provident fund contributions; |
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9. |
Entertainment expenses up to 0.3% of gross receipt but not exceeding 10 million Baht; |
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10. |
Depreciation : Provided that in no case shall the deduction exceed the following percentage of cost as shown below. However, if a company adopts an accounting method, which the depreciation rates vary from year to year, the company is allowed to do so provided that the number of years over which an asset depreciated shall not be less than 100 divided by the percentage prescribed below. |
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| Types of Assets |
Depreciation |
1. Building
1.1 Durable building
- durable building acquired within
5 September 2001 - 4 September 2002
- plant of SMEs*
1.2 temporary building |
5 %
initial allowance of 20% on the date of acquisition and the residual shall be depreciated at the rate in 1.1
initial allowance of 25% on the date of acquisition and the residual shall be depreciated at the rate in 1.1
100 % |
| 2. Cost of acquisition of depleted natural resources |
5 % |
3. Cost of acquisition of lease rights
3.1 no written lease agreement
3.2 written lease agreement containing no renewal clause or containing renewal clause but with a definite duration of renewable periods |
10 %
100 % divided by the original and renewable lease periods |
4. Cost of acquisition of the right in a process, formula, goodwill, trademark, business license, patent, copyright or any other rights:
4.1 unlimited period of use
4.2 limited period of use |
10 %
100 % divided by number of years used |
5. Other depreciable assets not mentioned above excluding land and stock-in-trade
5.1 machinery used in R&D
5.2 machinery used in SMEs*
5.3 cash registering machine
5.4 passenger car or bus with no more than 10 passengers capacity |
20 %
initial allowance of 40 % on the date of acquisition and the residual can be depreciated at the rate in 5
initial allowance of 40 % on the date of acquisition and the residual can be depreciated at the rate in 5
100 % or
initial allowance of 40 % on the date of acquisition and the residual can be depreciated at the rate in 5
depreciated at the rate in 5 but the depreciable value is limited to one million Baht |
6. Computer and accessories
6.1 SMEs*
6.2 other business |
initial allowance of 40 % on the date of acquisition and the residual can be depreciated over 3 years
depreciated over 3 years |
| * SMEs refer to any Thai companies with fixed assets less than 200 million Baht and number of employee not exceeding 200 people. |
3. Tax Rates
The corporate income tax rate in Thailand is 30% on net profit. However, the rates vary depending on types of taxpayers.
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| Taxpayer |
Tax Base |
Rate |
| 1. Small company1 |
- Net profit not exceeding 1 million Baht
- Net profit over 1 million Baht but not exceeding 3 million Baht
- Net profit exceeding 3 million Baht |
15%2
25%
30% |
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2. Companies listed in Stock Exchange of Thailand (SET) |
- Net profit for first 300 million Baht
- Net profit for the amount exceeding 300 million Baht |
25%3
30% |
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3. Companies newly listed in Stock Exchange of Thailand (SET) |
Net Profit |
25%4 |
| 4. Company newly listed in Market for Alternative Investment (MAI) |
- Net Profit for first 5 accounting periods after listing
- Net Profit after first 5 accounting periods |
20 %4
30 % |
| 5. Bank deriving profits from International Banking Facilities (IBF) |
Net Profit |
10 % |
| 6. Foreign company engaging in international transportation |
Gross receipts |
3% |
| 7. Foreign company not carrying on business in Thailand receiving dividends from Thailand |
Gross receipts |
10% |
| 8. Foreign company not carrying on business in Thailand receiving other types of income apart from dividend from Thailand |
Gross receipts |
15% |
| 9. Foreign company disposing profit out of Thailand |
Amount disposed |
10% |
| 10. Profitable association and foundation |
Gross receipts |
2% or 10% |
| 11. Regional Operating Headquaters (ROH) |
Net Profit |
10% |
| 1 |
Small company refers to companies with paid-up capital less than 5 million Baht at the end of each accounting period. |
| 2 |
The 15% rate applies for accounting periods beginning on or after 1 January 2004. |
| 3 |
The reduced rate applies for currently listed companies for 5 accounting periods beginning on or after 6 September 2001. |
| 4 |
The reduced rate applies for newly listed companies (registered within 6 September 2001- 5 September 2005) for 5 accounting periods beginning on or after 6 September 2001. | |
4. Withholding Tax
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 the return (Form CIT 53) and submit the amount of tax withheld to the District Revenue Offices within seven days of the following month in which the payment is made. The tax withheld will be credited against final tax liability of the taxpayer. The following are the withholding tax rates on some important types of income.
| Types of income |
Withholding tax rate |
| 1. Dividends |
10 % |
| 2. Interest |
10 % if paid to associations or foundations
1 % in other case |
| 3. Royalties |
10 % if paid to associations or foundations
3 % in other case |
| 4. Advertising Fees |
2 % |
| 5. Service and professional fees |
3 % if paid to Thai company or foreigncompany having permanent branch in Thailand
5% if paid to foreign company not having permanent branch in Thailand |
| 6. Prizes |
5 % |
Government agencies are required to withhold tax at the rate of 1% on all types of income paid to companies.
5. Tax Return and Payment
Thai and foreign companies carrying on business in Thailand are required to file their tax returns (Form CIT 50) within 150 days from the closing date of their accounting periods. Tax payment must be submitted together with the tax returns. Any company disposing funds representing profits out of Thailand is also required to pay tax on the sum so disposed within seven days from the disposal date (Form CIT 54).
In addition to the annual tax payment, any company subject to CIT on net profit is also required to make tax prepayment (Form CIT 51). A company is obliged to estimate its annual net profit as well as its tax liability and pay half of the estimated tax amount within two months after the end of the first six months of its accounting period. The prepaid tax is creditable against its annual tax liability.
As regards to income paid to foreign company not carrying on business in Thailand, the foreign company is subject to tax at a flat rate in which the payer shall withhold tax at source at the time of payment. The payer must file the return (Form CIT 54) and make the payment to the Area Revenue Branch Office within seven days of the following month in which the payment is made. | | |
