April 15 2014
What is personal income tax?
Personal income tax is the tax that is levied on the income of any person that is not subjected to corporate income tax such as:
- Individual, ordinary partnership, a body of person which is not a juristic person, a deceased person and an undivided estate.
Any person liable to the personal income tax has to compute his/her tax liability, file a tax return and pay tax, if any on a calendar year basis.
Like for the corporate income tax taxpayers are divided into “resident” and “non-resident”.
Note: This post is only the introduction to personal income tax only; some of the issues I dealt with been simplified on purpose. Also the principles below are general principle. Always check if there is a Double Tax Treaty between Thailand and your country that may provide for a different solution or tax rate.
A resident is any person residing in Thailand for a period or periods aggregating more than 180 days (or 183 days if there is a double tax treaty) in any tax year.
Note: The concept of ”resident” for tax purpose is not the same than a the concept “resident” as per immigration law. You may be a “resident” for tax purpose without being a resident pursuant to Thai Immigration law.
Sources of personal income that may be taxed?
Tax Residents of Thailand must pay taxes on their income resulting.
(1) From any sources in Thailand regardless where the money is paid; and
(2) On the portion of income from foreign sources that is brought into Thailand (here again you have to check the double taxes treaty if any is applicable).
Non-residents are only subject to taxes on income that come from a Thailand source.
On what type of income are taxes assessed?
Assessable income means any advantages received in cash or in kind.
Assessable income include benefits such as those provided by an employer to an employee (free-rent apartment) or the amount of taxes paid by the employer on behalf of the employee (if any).
There are 8 categories of assessable personal income:
(1) income from wage or salary;
(2) income from services;
(3) income from royalties (goodwill, copyright, franchise) other rights, annuity or in the nature of annual payments derived from a will or any other juristic Act or judgment of the Court;
(4) income such as dividends, interest on deposits with banks in Thailand, shares of profits or other benefits from a juristic company, juristic partnership, or mutual fund, payments received as a result of the reduction of capital, a bonus, an increased capital holdings, gains from amalgamation, acquisition or dissolution of juristic companies or partnerships, and gains from transferring of shares or partnership holdings;
(5) income resulting from leasing out a property and so on…;
(6) income resulting from liberal professions;
(7) income resulting from construction and other contracts of work;
(8) income from business, commerce, agriculture, industry, transport or any other activity not specified earlier. Note that number 8 above contain a carry-all clause that covers any income not specified less than 1 to 7.
What are the authorized allowances and deductions?
There are several authorized allowances and deductions.
Note: You have to calculate your assessable income first and once you have calculated it you can deduct allowances and deductions.
The following allowances are available:
|Type of allowance||Amount and conditions|
|(1) personal allowance,||30,000 baht|
|(2) Spouse allowance,||30,000 baht|
|(3) child allowance (child under 25 years of age and studying at educational institution, or a minor, or an adjusted incompetent or quasi-incompetent person)||15,000 baht per child / maximum three children|
|(4) parents allowance (parents over 60 years of age with income less than 30,000 Baht)||30,000 baht per person|
|(5) old age allowance (over 65 years of age),||190,000 baht|
|(6) education allowance (additional allowance for child studying in educational institution in Thailand)||2,000 baht per child|
|(7) allowance for life insurance premium paid by taxpayer or spouse||Actually paid / maximum 100,000 baht|
|(8) allowance for approved provident fund contributions,||Actually paid / rate not more than 15% of income and not exceed 500,000 baht / do to apply to mixed insurances (life and health)|
|(9) allowance for long term equity fund||Actually paid at rate not more than 15% of income and not exceed 500,000 baht|
|(10) allowance for home mortgage interest||Actually paid / maximum 100,000 baht|
|11) allowance for social insurance contributions paid by taxpayer or spouse||Actually paid / maximum 9,000 baht|
|(12) allowance for charitable contribution||Actually paid/ but not exceed 10% of net income after allowance deduction|
Other allowances available
They are also pre-calculated percentage of deductions that are deductible from certain type of income such as for example:
“Lessor Allowance”: a person that is renting out a property can deduct 30% of expenses from the income received if it is a building, 20% if it is agricultural land, 15% if it is another type of land, 30% if it is a vehicle and 10% for other types of properties.
“Liberal Profession Allowance:” Liberal profession can deduct 30% from their income or 60% if they are exercising a medical profession.
“Contractor Allowance”: Contractor that provides tools and materials can deduct 70% or actual expenses on their income. Those who derive an income from business, commerce, agriculture, industry, transport, or any other activities not specified earlier can deduct actual expenses or 65 to 85% on their income depending of the type of activities.
What are tax credits?
You will inevitably at some point execute transactions were the payer has to withhold tax at source and submit the amount of tax withheld to the Revenue Department.
There are many categories of income that are subjected to withholding tax the most known being of course the withholding tax on salaries.
Tax withheld is then credited against the tax liability of the taxpayer upon filing of the return.
For example, employees whose employers have paid the withholding taxes on their salary can claim the credit tax on their tax return. Resident taxpayers that receive dividends are also entitled to a tax credit if they include the dividend income in their tax return.
What type of income is not included in the assessable income tax?
There are several types of income that the taxpayer shall not include or may choose not to include in his/her assessable income. For example, dividends or interests payment that have been subjected to withholding tax may not be included into the assessable income.
Also income resulting from sales of immovable property acquired by gift or bequest does not need to be included. If the sale is for commercial purpose, it has to be included in the income but for the exception when the property sold was the principal residence and when the taxpayer can prove that, he has purchase a new home within one year.
What are Thailand personal income tax rates?
In Thailand like in most countries personal income rates are progressive. The rates for 2009 are as follows:
|Principle applicable||Amount of assessable income||Tax Rate|
|From 1 to 150,000||Exempt|
|From 150,000 to 500,000||10%|
|From 500,001 to 1,000,000||20%|
|From 1,000,001 to 3,000,000||30%|
|From 4,000,000 to 4,000,001||37%|
Note: This post is an excerpt of Rene Philippe Dubout next book: “How to Invest Safely Into Thailand” to be published in January 2010
About the Author:
The author Rene-Philippe DUBOUT is a lawyer since 1990 when he was admitted to Geneva bar (Switzerland). He practiced as a litigator there for 10 years until he moved to Thailand in 1999. In 2002 he founded with a group of Thai lawyers Rene Philippe & Partners Ltd a local law firm that specialized in Cross Borders Investments and Real Estate. He has been lecturing in several Thai Universities and a speaker to numerous conferences and seminars. He is the author of a must read book:”How to Purchase Real Estate Offshore Safely: The Case of Thailand”.
© Copyrights 2009 – Rene Philippe Dubout – This article may be reprinted if information about the author, the websites, and the URLs remain intact