Taxation of international executives
All income tax information is summarized by KPMG Phoomchai Tax Ltd., a Thai limited company and a member firm of KPMG International Cooperative (“KPMG International”), a Swiss entity, based on the Thai Revenue Code, Revenue Department of Thailand.
When are tax returns due? That is, what is the tax return due date?
Individual tax returns are due by 31 March following the end of the tax year for paper-based return (8 April for electronically return).
What is the tax year-end?
What are the compliance requirements for tax returns in Thailand?
For employment income, a withholding system is in operation, whereby the employer deducts income tax from the employee’s salary or wage before paying it. Employers are responsible for submitting a monthly withholding tax return to the Revenue Department within the first seven days following the month in which the payment was made. The tax due must be paid at the time of filing the return.
Tax is calculated under the assumption that the payments of employment income are made throughout the entire length of the year. The annual amount of tax is calculated at the progressive tax rates prevailing. This tax is then divided by the number of payments; the result shall be the tax to be deducted.
Same as resident for employment income.
What are the current income tax rates for residents and non-residents in Thailand?
Income tax is calculated by applying a progressive tax rate schedule to taxable income as follows.
Income tax table for 2017 & 2018
|Taxable income bracket||Total tax on income below bracket||Tax rate on income in bracket|
|From THB||To THB||THB||Percent|
Employment income shall be taxed at the progressive tax rate, the same tax rate as residents of Thailand.
A non-resident taxpayer is also entitled to claim for personal allowance. Allowances for spouse and child are only available to non-resident if the spouse and child are residents in Thailand in the concerned tax year.
Non-resident may be taxed at 15 percent on gross income for certain income other than employment income.
For the purposes of taxation, how is an individual defined as a resident of Thailand?
A resident is defined as a person present in Thailand for an aggregate of 180 days or more in any given tax year.
Is there, a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country for more than 10 days after their assignment is over and they repatriate.
What if the assignee enters the country before their assignment begins?
Provided assignees have not commenced work in Thailand, there should be no tax and immigration issues.
Are there any tax compliance requirements when leaving Thailand?
Tax returns must be filed. The only special formalities relating to the termination of residence relate to the individual having to obtain a tax clearance certificate in the following circumstances:
What if the assignee comes back for a trip after residency has terminated?
Provided assignees no longer work for Thailand, there should be no tax and immigration issues.
Do the immigration authorities in Thailand provide information to the local taxation authorities regarding when a person enters or leaves Thailand?
No (immigration authorities will provide information to local taxation authorities upon request only).
Will an assignee have a filing requirement in the host country after they leave the country and repatriate?
Departure tax return prior to leaving the country is not required in Thailand. However, a tax return for the year of departure under the normal process is still required should there is incometaxable in Thailand. The tax return shall be filed after December but by the end of March of the following year.
Do the taxation authorities in Thailand adopt the economic employer approach1 to interpreting Article 15 of the OECD treaty? If no, are the taxation authorities in Thailand considering the adoption of this interpretation of economic employer in the future?
Yes. KPMG in Thailand notes that the Thai tax authority does not refer to economic employer but instead adopts the general rule that is, during the assignment period the assignee works for Thai entity and if the Thai entity absorbs the assignee’s remuneration or the Thai entity sponsor the work permit and visa, the Thai entity is a payer of income and is deemed employer, DTA does not protect.
Are there a de minimus number of days2 before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?
What categories are subject to income tax in general situations?
As a general rule, all types of remuneration and benefits received by an employee for services rendered constitute taxable income, regardless of where paid, including the following:
Are there any areas of income that are exempt from taxation in Thailand? If so, please provide a general definition of these areas
Medical expenses of an employee and dependent for treatment that takes place in Thailand and medical expenses of employees only for treatment that takes place outside Thailand while temporarily working outside Thailand.
Substantiated actual moving expenses (moving expenses for the first time to commence the Thai employment and for returning upon termination of Thai employment).
Are there any concessions made for expatriates in Thailand?
Expatriates working and receiving employment income from a Thai entity with a status of Regional Operating Headquarter (ROH) or International Headquarter (IHQ) are taxable in Thailand at a flat tax rate of 15%. Expatriates working for the IHQ must be in Thailand for at least 180 days and receiving a minimal monthly income of THB200,000 to qualify for the tax incentive.
Is salary earned from working abroad taxed in Thailand? If so, how?
Salaries receive from employment exercises outside of Thailand are exempt from Thai tax, if not paid in or remitted into Thailand within the same calendar year it is received and provided the cost is not recharged into Thailand.
Are investment income and capital gains taxed in Thailand? If so, how?
Most types of capital gains are taxable as ordinary income. Capital gains from the sale of shares in a company listed on the Stock Exchange of Thailand (if the sale is made through a licensed broker) or from the sale of investment units in a mutual fund are exempt from tax. Any capital gain or investment income from sources outside Thailand is not subject to taxation unless a resident taxpayer remitted the process into Thailand within the same calendar year it is received.
In general, dividend, interest, and rental income from local sources by residents and non-residents are taxable income in Thailand.
Interest earned on savings deposits with a bank in Thailand (which are repayable on demand) is tax-exempt if the interest is below a maximum limit of THB20,000 per year.
A resident of Thailand may elect not to include dividend income in his/her annual tax return provided that a tax credit /refund on dividend are not requested.
Interest, dividend, and rental income derived from sources outside Thailand by resident of Thailand are taxable in Thailand to the extent such income is paid or remitted into Thailand within the same calendar year it is received. Non-resident is not subject to Thai tax on such income from foreign-sourced, in any case.
If income is paid or determined in a foreign currency, the conversion rate as specified by the Revenue Department’s guideline should be used in computing and paying Thai tax. Gain derived from actual exchange is not taxable and loss is not deductible.
Gain from principal residence in Thailand is general taxable income to the individual whereas loss is not deductible.
Capital loss is not deductible.
Gain on sale of personal use items is not taxable income to the individual provided it is not for commercial purpose.
Starting on 1 February 2016, gifts from the following are exempt to the recipients from personal income tax:
Gifts with net value exceeding the above exemption threshold is tax at a flat tax rate of 5 percent.
Are there additional capital gains tax (CGT) issues in Thailand? If so, please discuss?
Are there capital gains tax exceptions in Thailand? If so, please discuss?
What are the general deductions from income allowed in Thailand?
A number of deductions are available to a resident depending upon the type of income and family status.
A taxpayer may deduct from his/her income either a standard amount or actual expenditures depending on the type of income involved. Standard deductible expense rates are as follows.
|Income Type||Standard deductible expense rates for 2017
||Standard deductible expense rates for 2017|
|Employment income - s.40(1)
||50 percent of assessable income capped at THB100,000
||50 percent of assessable income capped at THB100,000|
|Income from hiring of services - s.40(2)||50 percent of assessable income capped at THB100,000
||50 percent of assessable income capped at THB100,000|
|Goodwill, copyright and other rights income – s.40(3)
||Actual expense or 50% of income
||Actual expense or 50% of income
|Construction income – s.40(7)||Actual expense or 60% of income
||Actual expense or 60% of income|
|Income from business, commerce, agriculture, transportation or not specified||60 percent of income
||60 percent of income|
The deduction of expenses in relation to rental income and income from liberal, professional, from contract work, from business, commerce or other income not specified may be made on an actual basis only if satisfactory evidence of the expenditures can be provided to the tax authority.
A resident may deduct personal and specific allowances:
|2017 (Baht)||2018 (Baht)|
|Dependent (maximum 3 children), each||30,000 per child,no limit except to 3 with adopted children
||30,000 per child, no limit except to 3 with adopted children|
|Parental care, each||30,000||30,000|
|Care of disabled or incapacitated family members, each||60,000||60,000|
|Care of a disabled or an incapacitated person other than a family member||60,000||60,000|
|Taxpayer’s contributions to the social security fund||maximum of 9,000 per annum||maximum of 9,000 per annum
|Life insurance premiums with the insurance policy for the duration of 10 years or more paid by the taxpayer to a Thai insurer||
maximum of 100,000 per annum for taxpayer
maximum of 10,000 per annum for taxpayer's spouse
|maximum of 100,000 per annum for taxpayermaximum of 10,000 per annum for taxpayer's spouse
|Health insurance premium to a life or non-life insurance business in Thailand for taxpayer’s parents and/or parents-in-law||Up to 15,000||Up to 15,000
|Mortgage interest incurred for the purpose of purchase or construction of a residential building in Thailand||maximum of 100,000 per annum||maximum of 100,000 per annum
|contribution to a registered provident fund and/or retirement mutual fund (RMF) in Thailand and/or pension insurance premium||maximum of 500,000 per annum||maximum of 500,000 per annum
|Contribution to long-term equity fund in Thailand that is held for at least five calendar years||Maximum of 500,000 per annum||maximum of 500,000 per annum
|Donations to specified charities||Actual donated amount up to 10% of taxable income after all other allowances are deducted||Actual donated amount up to 10% of taxable income after all other allowances are deducted
|Donations for rendering educational support to a state education institute, a government organization education institute, a private school established under the law of governing private schools or a private university established under the law governing private universities||200% of actual donation not exceeding 10% of taxable income after all other allowances are deducted||200% of actual donation not exceeding 10% of taxable income after all other allowances are deducted
A non-resident taxpayer may be entitled to claim some personal and specific allowances.
What are the tax reimbursement methods generally used by employers in Thailand?
Tax paid by employer which requires tax to be computed on gross-up method (tax on tax).
How are estimates/prepayments/withholding of tax handled in Thailand? For example, Pay-As-You-Earn (PAYE), Pay-As-You-Go (PAYG), and so on.
For employment income, the withholding tax will be imposed whereby the employer shall withhold tax every time it makes payment to employees and/or taxable benefits for employees.
Individual who earns certain non-employment income e.g. rental income or legal, engineer, architecture or accounting profession is required to pay tax on income earned for the first half-year.
When are estimates/prepayments/withholding of tax due in Thailand? For example: monthly, annually, both, and so on.
Withholding tax on employment income is due on monthly basis by the 7th day of the month following the month in which employment income is paid.
Tax on certain non-employment income received during the first half-year (January to June) is due at the end of September of the said tax year.
Is there any Relief for Foreign Taxes in Thailand? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?
Foreign tax cannot be taken as credit against Thai tax unless permitted under a double tax treaty.
What are the general tax credits that may be claimed in Thailand? Please list below.
There is a host of credits that may be claimed as relieveson taxpayers’ annual tax liability, such as the following:
This calculation3 assumes a married taxpayer resident in Thailand with two children whose three-year assignment begins 1 January 2016 and ends 31 December 2018. The taxpayer’s base salary is USD100,000 and the calculation covers three years.
|Moving expense reimbursement/ repatriation
|Interest income from non-local sources||6,000||6,000||6,000|
Exchange rate used for calculation: USD1.00 = THB31.00.
Calculation of taxable income
|Days in Thailand during year||365||365||366|
|Earned income subject to income tax|
|Net housing allowance||372,000||372,000||372,000|
|Moving expense reimbursement||0||0||0|
|Total earned income||4,681,000||4,836,000||4,681,000|
|Total taxable income||4,518,000||4,547,000||4,392,000|
Calculation of tax liability
|Taxable income as above||4,519,800||4,547,000||4,392,000|
|Thai tax thereon||1,146,930||1,129,100||1,082,600|
|Foreign tax credits||0||0||0|
|Total Thai tax||1,146,930||1,129,100||1,082,600|
1Certain tax authorities adopt an "economic employer" approach to interpreting Article 15 of the OECD model treaty which deals with the Dependent Services Article. In summary, this means that if an employee is assigned to work for an entity in the host country for a period of less than 183 days in the fiscal year (or, a calendar year of a 12-month period), the employee remains employed by the home country employer but the employee's salary and costs are recharged to the host entity, then the host country tax authority will treat the host entity as being the "economic employer" and therefore the employer for the purposes of interpreting Article 15. In this case, Article 15 relief would be denied and the employee would be subject to tax in the host country.
2For example, an employee can be physically present in the country for up to 60 days before the tax authorities will apply the ‘economic employer’ approach.
3Sample calculation generated by KPMG Phoomchai Tax Ltd., a Thai Limited company and a member firm of KPMG International Cooperative, based on the Thai Revenue Code, Revenue Department of Thailand.
© 2018 KPMG Phoomchai Tax Ltd., a Thailand limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.