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.
Read Also : How to Issue a Tax Invoice/Receipt in Thailand
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.
FAQ
What is withholding tax in Thailand and how does it work?
Withholding tax in Thailand is a tax deducted at the source of income, requiring payers to withhold a certain percentage of income payments and remit it to the Revenue Department on behalf of the recipient. It applies to employment income, rental income, dividends, interest, royalties, and other income earned by non-residents. VB & Partners provides comprehensive withholding tax compliance services to ensure businesses meet all Thai Revenue Department requirements accurately.
What are the withholding tax rates for individual taxpayers in Thailand?
Individual withholding tax rates vary by income type: salary and wages (0-35%), services provision (0-35% or 15% for non-resident foreigners), interest (15%), rent (5%), dividends (10%), and royalties (0-35% or 15% for non-resident foreigners). These rates depend on the recipient’s residency status and income type. VB & Partners ensures accurate withholding tax calculations and deductions for all individual taxpayer categories.
What withholding tax obligations apply to Thai companies making payments to other businesses?
Thai companies must withhold tax on specific payments including services (3%), interest (1% to Thai companies, 0% to Thai banks), rent (5% or 10% to associations/foundations), liberal professions (3%), contractor payments with materials (3%), royalties (3%), and government agency payments (1%). Sale of goods payments are exempt at 0%. VB & Partners provides monthly accounting services to ensure proper withholding tax compliance for corporate taxpayers.
How does withholding tax apply to foreign companies not doing business in Thailand?
Foreign companies not carrying on business in Thailand but deriving Thai income face withholding tax rates of 15% on services, interest, liberal professions, and royalties, and 10% on dividends. However, rates may be reduced under double taxation agreements (DTAs) between Thailand and the foreign company’s country. VB & Partners helps foreign companies understand applicable rates and DTA benefits to optimize their tax obligations.
What are the withholding tax rates for foreign companies operating in Thailand?
Foreign companies carrying on business in Thailand face different rates: services (5%), interest (1%), dividends (10%), rent (5%), liberal professions (3%), and royalties (5% or 3% if they have a permanent branch office). These companies are subject to Thai income tax and must register for corporate income tax and VAT. VB & Partners assists foreign companies with proper registration and ongoing compliance requirements.
How do you calculate withholding tax in Thailand with VAT included?
To calculate withholding tax with VAT: first calculate WHT on the gross amount (e.g., 5% of 10,000 THB = 500 THB), then calculate 7% VAT (700 THB), then adjust the payment: 10,000 – 500 + 700 = 10,200 THB total. Withholding tax is calculated before deducting other taxes like VAT. VB & Partners ensures accurate calculations and proper invoice formatting for all withholding tax and VAT requirements.
What penalties apply for failing to properly deduct withholding tax in Thailand?
Penalties include fines of 100 THB per day for the first 7 days, then 200 THB per day thereafter for late submission. An additional penalty of 1.5% monthly interest on outstanding amounts applies to those who fail to properly deduct WHT. Non-compliance can also prevent CIT reduction and create issues with company audits or sales. VB & Partners’ monthly accounting services help avoid these costly penalties through timely and accurate compliance.
Can withholding tax be used to reduce corporate income tax in Thailand?
Yes, withholding tax serves as an advance payment on yearly Corporate Income Tax (CIT). At year-end, WHT amounts already paid can be deducted from the total CIT due, provided you have proper WHT certificates. Failure to comply with WHT obligations prevents this reduction and affects your annual tax calculations. VB & Partners ensures proper WHT documentation and certificates are obtained to maximize your CIT deductions.
How do double taxation agreements affect withholding tax rates in Thailand?
Double taxation agreements (DTAs) between Thailand and foreign countries can significantly reduce withholding tax rates or exempt certain income types entirely. DTAs provide relief from the standard 15% rates typically applied to foreign companies not doing business in Thailand. VB & Partners helps businesses identify applicable DTA benefits and properly claim reduced withholding tax rates to optimize international tax obligations.
Why is proper withholding tax compliance important for businesses in Thailand?
Proper withholding tax compliance is essential for CIT reduction eligibility, avoiding auditor flags during company sales, and meeting requirements for company closure. Non-compliance prevents obtaining necessary WHT certificates and can result in significant penalties and interest charges. VB & Partners provides monthly accounting and bookkeeping services to ensure businesses meet all withholding tax obligations effectively and maintain good standing with Thai authorities.
