Home PageNews & PublicationsTaxation Regulations Update

Taxation Regulations Update

Summary: The Thai government (“Government”) announced changes to certain regulations under the Thai Revenue Code (“Revenue Code”) to reflect the growth of the Thai economic status and cost of living. Most notably were changes to the rules on deduction of personnel expense, personal allowances and personal income tax rates.

For greater incentive to carry on business, the Government is encouraging business owners to establish a legal entity having only one shareholder by providing additional tax benefits to companies incorporated between 10 August 2016 and 31 December 2017 upon transfer of individual assets as payment in kind for capital payment in such company.

New Deductible Expenses and Allowances

The Revenue Code has been amended by Amendment of the Revenue Code Act (No. 44) B.E. 2560 (“Act No. 44”) and Royal Decree No. 629 to provide more deduction of personnel expense, personal allowances and change of the maximum personal income tax rate. The comparison of the former and current deduction of expenses and allowances is provided in the table below:

Topic Former Deductions Current Deductions
Deductible Expense for Income from Employment and Hire of Work. Section 40(1)(2) Standard deduction of 40% with a cap at 60,000 Baht. Standard deduction of 50% with a cap at 100,000 Baht
Deductible Expense for Income from Goodview, Copyright or Other Rights. Section 40(3) Standard deduction of 40% with a cap at 60,000 Baht. *Rate will be announced by the Royal Decree.
Deductible Expense for Income from a Contract of Work where the Contractor has to Provide Essential Materials Besides Tools. Section 40(7) Standard deduction of 70%. Standard deduction of 60% unless actual expense is proved by taxpayer.
Deductible Expense for Income from Employment and Hire of Work. Section 40(1)(2) Standard deduction of 40% with a cap at 60,000 Baht. Standard deduction of 50% with a cap at 100,000 Baht.
Deductible Expense for Income from Goodview, Copyright or Other Rights. Section 40(3) Standard deduction of 40% with a cap at 60,000 Baht. *Rate will be announced by the Royal Decree.
Deductible Expense for Income from a Contract of Work where the Contractor has to Provide Essential Materials Besides Tools. Section 40(7) Standard deduction of 70%. Standard deduction of 60% unless actual expense is proved by taxpayer.
Deductible Expense for Income from any Business which is Not Specified in Section 40(1) – (7). Depending on the type of business but generally standard deduction of 60-85%. Depending on the type of business but generally standard deduction of 60%.
Allowances:    
Personal Allowance 30,000 Baht 60,000 Baht
Couple Allowance 30,000 Baht (where both husband and wife have income and their marital status exists throughout the tax year, the total allowance under personal allowance and couple allowance shall be 60,000 Baht).  60,000 Baht(where both husband and wife have income, the total allowance under personal allowance and couple allowance shall be 120,000 Baht).
Taxpayer is an Undivided Estate 30,000 Baht 60,000 Baht
Legitimate or Adopted Children 15,000 Baht for each child, not exceeding 3 children in total. 30,000 Baht for each child, not exceeding 3 children in total. (Legitimated children shall be deducted first. If the number of legitimated children exceeds 3 persons, adopted child cannot be used for deduction.)
Educational for Children Additional education allowance of 2,000 Baht for each child. Canceled.
Taxpayer is a Non-Registered Ordinary Partnership or Non-Juristic Body of Persons Deductible allowance shall depend on the number of partners or persons who are residents of Thailand but shall not exceed 60,000 Baht in total. Deductible allowance shall depend on the number of partners or persons who are residents of Thailand but shall not exceed 120,000 Baht in total.
Minimum Assessable Income Subject to Personal Income Tax A taxpayer having assessable income from 60,000 Baht shall be taxed and the tax calculated shall not be less than 0.5% of the total amount of assessable income. A taxpayer having assessable income from 120,000 Baht shall be taxed and the tax calculated shall not be less than 0.5% of the total amount of assessable income.
Minimum Assessable Income for Personal Income Tax Returns Filing  
· No spouse 30,000 Baht 60,000 Baht
· No spouse and has the assessable income from the employment only 50,000 Baht 120,000 Baht
· With spouse 60,000 Baht 120,000 Baht
· With spouse and has assessable income from employment only 100,000 Baht 220,000 Baht

Act No. 44 also provides the following new personal income tax rate schedule which will be effective and applied to the 2017 tax year.

Amount of Net Assessable Income Rate
Not Exceeding 300,000 Baht 5%
Exceeding 300,000 – 500,000 Baht 10%
Exceeding 500,000 – 750,000 Baht 15%
Exceeding 750,000 – 1,000,000 Baht 20%
Exceeding 1,000,000 – 2,000,000 Baht 25%
Exceeding 2,000,000 – 5,000,000 Baht 30%
Exceeding 5,000,000 Baht 35%

Tax Benefits on Incorporations of Legal Entities

For a legal entity incorporated between 10 August 2016 and 31 December 2017, Royal Decree No. 630 specifically provides tax benefits for the respective shareholders and such incorporated legal entity as follows:

  1. Shareholders: Personal income tax, VAT, specific business tax and stamp duty exemption for shareholders who transfer any of their assets to the incorporated legal entity as a consideration of issuing ordinary shares at the time which the legal entity is incorporated.
  2. Legal Entity: Corporate income tax exemption for the incorporated legal entity equal to the amount of fee for registration of incorporation of the legal entity, accounting fee and audit fee. The exemption is provided for 5 continuing fiscal years from the year which the legal entity is incorporated. There are conditions that the legal entity must have a paid-up capital not exceeding 5 million Baht and generating income from the sale of goods and services performed not exceeding 30 million Baht in a fiscal year.

Timing

All amended regulations and tax benefits have already been published in government gazette and are in force as of 27 January 2017.

Please contact us to further discuss the specific implications of these issues to your business.

 

By Praphan Phichaiwatkomol (Partner) and Keerada Rungtanakiat (Associate) © January 2017
Khun Praphan can be reached at Praphan@siampremier.com