The major taxes imposed in Thailand are:
- Corporate income tax: Thai-incorporated entities are generally subject to tax on their worldwide income, while foreign-incorporated companies are subject to tax on income derived from carrying on business in Thailand or on certain categories of income paid from Thailand;
- Petroleum income tax: petroleum (including natural gas) operations are subject to petroleum income tax;
- Personal income tax: individuals are subject to tax on Thai-sourced income. Tax residents of Thailand are also subject to tax on foreign-sourced income which is remitted to Thailand in the same year it is received;
- Value-added tax (VAT): imposed on certain goods sold in Thailand and on certain services performed in Thailand which are used in Thailand. Specified goods imported into Thailand are also subject to VAT, as are services performed outside Thailand that are used in Thailand;
- Specific Business Tax: imposed on the gross receipts of certain businesses that are exempt from VAT, including banking and similar businesses; finance, securities and credit foncier; life insurance; pawn broking; sale of immovable properties in a commercial manner or for profit; and factoring.
- Stamp duty: imposed on certain documents executed in Thailand, or brought into Thailand;
- Customs duty: imposed on importation of dutiable goods and export of certain goods comprising of rawhide and wood; and
- Excise tax: imposed on specified products, such as alcohol and passenger cars, and certain services.
The Board of Investment is empowered to grant a wide range of fiscal and non-fiscal incentives and guarantees to qualifying investment projects. The tax incentives can include:
- Exemption from corporate income tax for threeeight years with permission to carry forward losses and deduct them as expenses for up to five years after the end of the income tax holiday;
- Additional 50% reduction of corporate income tax for five years after the tax holiday period;
- Exemption from tax on dividends paid out of promoted profits during the income tax holiday period; and
- Exemption or reduction of import duties on imported machinery or raw materials and components.
Companies that establish their regional operating headquarters, international headquarters or an international trade centre in Thailand will receive a number of tax concessions on qualifying income and remittances offshore. Concessionary tax treatment is also granted to their expatriate employees.
Tax losses incurred by a company can be carried forward for five years for corporate income tax purposes and for 10 years for petroleum income tax purposes. Tax losses cannot be transferred to related companies.
Thailand has an extensive withholding tax system that requires withholding tax to be deducted from specified domestic and international payments, such as dividends, interest, rents and royalty payments.
Foreign Tax Credits
Thai-incorporated companies are entitled to claim a foreign tax credit for tax paid in a foreign country on income which is also subject to Thai corporate income tax. The foreign tax credit cannot exceed the amount of Thai corporate income tax payable on the income.
Transfer pricing guidelines have been issued by the Revenue Department based on the arm’s-length principle, supplementing the requirements under Thai tax law for market-rate pricing in both related and unrelated party dealings.
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