Thailand Tax & Business Guide - Deloitte

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Basic facts
Population 65.5m Inflation 4.5% (2005)*
Main languages Thai, English GDP per head US$2,800*
Currency Baht (THB) GDP growth 4.5% (2005)*
Economic communities Asia Pacific Economic Co-operation, Association of South-East Asian Nations, WTO
GDP sources 9.4% agriculture, 44.1% industry, 46.5% services
*Economist Intelligence Unit.
Political environment

Thailand is a constitutional monarchy with a parliamentary democracy.

Thaksin Shinawatra, former prime minister and the leader of the Thai Rak Thai (TRT), resigned on October 3rd 2006 after a coup on September 19th. Surayud Chulanont, a retired general, was appointed prime minister.
Foreign trade and investment
Exports US$109.2bn (2005)* Imports US$106.1bn (2005)*
*Economist Intelligence Unit.

Leading export markets: Association of South-East Asian Nations (ASEAN) countries, the US and the EU.

Major exports: Computer components, electronic consumer goods and vehicles.

The government encourages foreign investment through incentives, and, over the next few years, will reduce restrictions on foreign participation in the economy, partly to meet World Trade Organisation obligations.
Business and financing
Business forms Ordinary partnerships, limited partnerships, limited companies

Thai law recognises four types of business organisation: limited company, public limited company, ordinary partnership and limited partnership. All companies are registered with the Ministry of Commerce and, for tax purposes, with the revenue department. Branches are often used for short-term projects.

Foreign investors may not have majority ownership in many sectors. Most foreign firms bring in investment capital from overseas and use local markets for short-term working capital and cash management.

Bangkok, the capital, is the centre of Thai economic and financial activity.
Labour environment
Unemployment rate 1.8% (2005)* Minimum wage Varies by province
*Economist Intelligence Unit.

Less than 2% of the total labour force is unionised; about 10% of the industrial workforce is organised. Wage regulations apply to all businesses, largely based on location.

Work permits are usually issued to foreigners only if a Thai national cannot fill the position.

Few fringe benefits are compulsory, although there are legal provisions for paid holidays, sick leave, maternity leave, severance payments and other basic benefits. A Social Security Fund, funded by employers and employees, covers payments for sickness, disability, death, maternity leave, child support and retirement.
Taxation
Corporate tax
Main rate 30% (and profit remittances tax 10%)

Resident companies are taxed on their worldwide income with a credit for foreign tax paid; non-resident companies are taxed only on their Thai-source income. Companies registered under Thai law are considered to be resident for tax purposes. Corporate tax is usually charged at a flat rate of 30%. However, lower rates are available to small and medium-sized enterprises (SMEs) and to companies newly listed on the stock exchange. Various exemptions and reliefs are available for companies involved in certain types of projects. A profit remittance tax of 10% applies. Where the profits of a non-resident company cannot be ascertained, a 5% tax on gross income may be imposed.
Individual tax
Progressive rates to 37%

Resident individuals are taxed on Thai-source income and on any foreign-source income remitted to Thailand in the same tax year in which it is received. Non-residents are taxed only on income sourced in Thailand. An individual who stays in Thailand for at least 180 days in a calendar year is considered to be resident for tax purposes. Individual income tax is imposed at progressive rates to 37% on total income, including dividends and capital gains.
Capital gains
Gains are taxed as income

Capital gains of companies and individuals are generally taxed as income. When a company disposes of immovable property, the payer is required to withhold 1% tax from the proceeds, and this is creditable against the tax liability of the company. Capital gains of a venture-capital company are exempt, subject to certain conditions. Special rules apply where an individual sells immovable property that was not acquired with a view to obtaining a profit.
Indirect tax
VAT standard rate 7%

Value-added tax (VAT) applies to most transactions at 7%. The 7% VAT rate has been extended to September 30th 2007. Exports of goods and services and international transport are zero-rated. Exemptions from VAT include domestic transport, renting of immovable property, and health and education services.

Registration is compulsory for businesses with annual turnover above THB 1.8m.
Tax administration and compliance
Tax year Corporations: accounting period; Individuals: calendar year

Companies pay estimated tax at mid-year, and the balance of tax is payable at the time of filing the tax return. A final tax return must be filed within 150 days of the end of the accounting period. Employment income of individuals is taxed by withholding. Individuals are taxed on a preceding-year basis and, where required, a tax return must be filed by March 31st following the end of the tax year.
Additional tax information
Withholding taxes Dividends 10%, Interest and Royalties 15%. Rates may be reduced by tax treaties.
Tax treaties Thailand has concluded more than 50 tax treaties.
Dividends Dividends are taxable.
Revenue protection There is transfer-pricing legislation.
Groups There is no provision for group income taxation.
Incentives International trading companies; offshore banking units; manufacture for export; activities of SMEs; industrial estate authority and investment board benefits.
Other taxes Excise duty, House and land tax, Import duties, Local development tax, Petroleum income tax, Signboard tax, Specific business tax, Stamp duty.