Introduction
The withholding tax system in Thailand plays a central role in the collection of income tax. It requires payers to withhold a certain percentage of income payments and remit it to the Revenue Department on behalf of the recipient. The withholding tax system applies to both individual taxpayers and corporate taxpayers.
This article provides an introduction to the withholding tax system in Thailand and the different types of withholding tax, the rates applicable to various income categories, and the obligations of both individual and corporate taxpayers.
Key Points
- Withholding tax is deducted at the source of income in Thailand.
- Several types of income, including employment income, rental income, dividends, interest, royalties, and other income earned by non-residents are subject to withholding tax in Thailand.
- The withholding tax rate varies depending on the type of income, the residency status of the income recipient, and other factors.
- Foreign corporations receiving income in Thailand are typically subject to Thai Income Tax despite not conducting business there.
- Withholding tax rates may be reduced if a double taxation agreement (DTA) between Thailand and the foreign country is in question.
- Foreign companies that conduct business in Thailand are subject to a withholding tax on payments made by Thai customers. They must register for Thailand’s corporate income tax and Value-Added Tax (VAT).
What is Withholding Tax in Thailand?
Withholding tax is a tax that is deducted at the source of income in Thailand. Withholding tax is imposed on several types of income, including; employment income, rental income, dividends, interest, royalties, and other income earned by non-residents.
Withholding Tax is also an advance tax on the yearly Corporate Income Tax (CIT) payments made by a company. At the end of the financial year when preparing the annual tax returns, the amount of WHT tax already paid by the company can be deducted from the amount of CIT due by the company,
The withholding tax rate varies depending on the type of income, the residency status of the income recipient, and other factors.
What are the Withholding Tax Liabilities for Individual Taxpayers?
Every taxpayer in Thailand must submit a yearly tax report to the Revenue Department. This submission should include the total annual income earned by the taxpayer from all sources. This information is used to calculate the total personal income tax owed,
Please see below for the WHT tax rates for individuals:
| Type of income | WHT Rate |
| Salary and wages | 0-35% |
| Provision of services | 0-35%. 15% if the recipient (foreigner) of the income is not a resident of Thailand. |
| Interest | 15% (of payment), |
| Rent | 5% (of payment), |
| Dividend | 10% (of payment), |
| Royalties | 0-35%. 15% if the recipient (foreigner) of the income is not a resident of Thailand. |
What are the Withholding Tax Obligations for Corporate Taxpayers?
Thai companies that make payments to other Thai companies are generally not required to withhold income tax, unless specified by the Revenue Code. The exemptions include income from services provided, income from interest, income from dividends, income from rent, income from liberal profession, income from payments to contractors who provide essential materials besides tools, income from royalties, and income paid by a government agency.
However, the following sources of income are subject to WHT:
| Type of income | WHT Rate |
| Services provided | 3% of the payment |
| Interest | 1% of the payment paid to a Thai Company, 0% of the payment paid to a Thai Bank |
| Rent | 5% of all rental payments made; or 10% of rental payments made to associations and foundations |
| Income from liberal profession (e.g. laws, arts of healing, engineering, and architecture) | 3% of the payment |
| Income from payments to contractors who provide essential materials besides tools: | 3% of the payment |
| Royalties | 3% of the payment |
| Income paid by Government Agency | 1% of the payment |
| Income paid from the sale of goods | 0% of the payment |
What are the Withholding Tax Obligations for Foreign Companies who are “Not Carrying on Business in Thailand”?
A foreign company that does not carry on business in Thailand but derives income in Thailand is subject to withholding tax, as per Section 40 of the Revenue Code. The withholding tax rates for different income categories are as follows:
| Type of income | WHT Rate |
| Services provided | 15% of the payment |
| Interest | 15% of the payment |
| Dividends | 10% of the payment |
| Income from liberal profession (e.g. laws, arts of healing, engineering, and architecture) | 15% of the payment |
| Royalties | 15% of the payment |
However, the withholding tax rates may be lower if there is a double taxation agreement (DTA) between Thailand and the foreign company’s country of residence. The DTA can reduce the withholding tax rates or exempt certain types of income from withholding tax. For more information about Double Tax Agreements, please see here.
Please note that Dividend payments for companies may be eligible for certain tax breaks and incentives, please see this article for more information.
What are the WHT Rates for Foreign Companies who are “Carrying on Business in Thailand”?
Carrying on Business in Thailand refers to companies who undertake commercial activities or operations within Thailand
Foreign companies that carry on business in Thailand are subject to Thai income tax, and payers to such companies are required to withhold income tax. The withholding tax rates for different income categories are as follows:
| Type of income | WHT Rate |
| Services provided | 5% of the payment |
| Interest | 1% of the payment |
| Dividends | 10% of the payment |
| Rent | 5% of the payment |
| Income from liberal profession (e.g. laws, arts of healing, engineering, and architecture) | 3% of the payment |
| Royalties | 5% of the payment. 3% of the payment if the foreign entity has a permanent branch office in Thailand |
A foreign entity is deemed to have a permanent office in Thailand if the following criteria is satisfied, per Departmental Instruction No. Paw 8/2528 .
a) Own an office in Thailand, or,
b) Conduct other businesses in Thailand in addition to the contract works, such as buying and selling goods, or
c) Set up a provident fund for the benefit of their employees in Thailand.
How is Withholding Tax Calculated?
To calculate withholding tax in Thailand, the following calculation can be used:
Identify the tax rate: The WHT rate varies depending on the payment type and the tax status of the recipient. Typically, the tax rates range from 0.5% to 15%.
Calculate the Withholding Tax amount: To calculate the withholding tax amount, multiply the payment amount by the applicable tax rate.
For example, if the payment is 10,000 THB and the tax rate is 5%, the withholding tax amount would be 500 THB (10,000 x 5%).
Please note that the amount of Withholding Tax to be deducted is calculated before deducting any other taxes, such as VAT.
How to Calculate Withholding Tax with VAT?
To calculate the withholding tax amount with VAT (7%), using the same example as above i.e. a payment of 10,000THB subject to 5% WHT, the following process must be followed.
Firstly, you calculate the WHT amount. In this case it would be 5% of THB 10,000 = THB 500
Next, you calculate the VAT owned. VAT in Thailand is 7%, therefore the VAT owed on THB 10,000 = THB 700.
Once you have calculated the WHT and VAT, you deduct the WHT from the payment price and you add the VAT amount i.e THB 10,000 – THB 500 + THB 700 = THB 10,200
For an example of how this would look on an invoice, please see below:
Once you have calculated the amount, you then deduct the withholding tax amount from the payment made to the recipient and remit the tax amount to the tax authority within the specified time frame.
What are the Penalties for Failing to Properly Deduct Withholding Tax?
Typically, penalties for non-compliance with withholding tax obligations may include:
Fines
Failure to deduct withholding tax properly may result in fines imposed by the tax authorities. The amount of the fine may be determined based on the severity of the non-compliance.
The fine for late submission is:
100 THB per day within the first 7 days
200 THB per day after 7 days
Interest Charges
In addition to fines, interest charges may be levied on the overdue withholding tax amount. These charges typically accrue for each day that the tax remains unpaid after the due date.
An additional penalty of 1.5% of the outstanding amount will also be imposed on anyone who fails to properly deduct WHT. Please note, the interest will be calculated and charged monthly.
Our Thoughts
Adhering to withholding tax obligations is an important requirement for companies in Thailand. Monthly accounting and bookkeeping are necessary to fulfil these obligations effectively. Failure to comply accurately may result in the inability to reduce Corporate Income Tax (CIT) at the end of the year, as obtaining a Withholding Tax (WHT) certificate is necessary for deducting it from the CIT, considering the taxes already paid.
Incorrect payment of WHT can be flagged by auditors, creating challenges in selling the company to potential buyers. Additionally, it’s important to note that closing a company is not possible until all outstanding taxes, including withholding tax, have been settled.
