For purposes of taxation, anybody who had lived in Thailand for more than 180 days is considered a resident of the country. Thailand residents are required to pay taxes on all income earned within and outside Thailand. Non-residents or those who have stayed in Thailand for less than 180 days per year will only be required to pay taxes on the income earned only within Thailand. Even those without a work permit but earn income in Thailand are not exempt from paying taxes.
To begin with, any expat working in Thailand must have his own tax ID number. This can be issued by the tax office after presenting passport or ID card. You will also need to justify the reason for needing a tax ID number.
Personal Income Tax
All earnings that are considered to be assessable are categorized as Personal Income Tax. This includes non-cash payments such as accommodation or the use of a car. Personal Income Tax is classified as follows:
- Income from employment
- Income from a position held
- Income from royalties or dividends
- Income from rental arrangements
- Income from construction work
- Income from any business
Deductible Expenses and Allowances
Taxpayer may deduct the Deductible expenses and allowances from his assessable income before applying the tax rate. This will lower the taxpayer’s tax base. In essence:
Taxable Income = Assessable income less deductions (expenses) less allowances
A person completing a tax return will start with the assessable income amount less deductions such as expenses, then deduct any personal allowance. The remaining amount will be the amount that will be subject to tax.
Personal Allowances
The following personal allowances are allowed in Thailand:
- Individual taxpayer : 30,000 Baht allowance
- Spouse of taxpayer (unemployed) : 30,000 Baht allowance
- Child allowance (below 25 years old, studying at educational institution, or a minor, or an adjusted incompetent or quasi-incompetent person) : 15,000 Baht allowance per child for up to 3 children maximum
- Additional education allowance for child studying in educational institution in Thailand: 2,000 Baht for each child
- Parents allowance: 30,000 Baht for each of taxpayer’s and spouse’s parents if parents are over 60 years old and earns less than 30,000 Baht
- Life Insurance Premium: Amount actually paid by taxpayer or spouse on the taxpayer’s own life but not exceeding 100,000 Baht each.
- Contributions to approved Provident Fund or Retirement Mutual Fund (RMF): Amount actually paid by taxpayer or spouse at the rate not more than 15% of wage, but not exceeding 500,000 baht
- Contribution to Long Term Equity Fund (LTF): Amount actually paid up to 15% of wage, but not exceeding 500,000 baht in a tax year, provided that the invested unit is held for at least 5 years, except in the case of incapacity or death during the investment period
- Home mortgage interest: Amount actually paid for the purpose of purchase or construction of a residential building in Thailand but not exceeding 100,000 baht
- Social insurance contributions: Amount actually paid by taxpayer or spouse
- Donations to specified charities: Amount actually donated but not exceeding 10% of assessable income after all standard deductions and allowance
- For individual taxpayer who is over 65 years old: 190,000 Baht allowance
Tax Exemptions and Tax Rates
- Expats earning less than 150,000 Baht are exempt from income tax.
- Expats earning more than 150,000 Baht but less than 500,000 Baht will be taxed at 10%.
- Expats earning more than 500,000 Baht up to 1 Million Baht will be taxed at 20%.
- Over 1 Million but less than 4 Million Baht will be taxed at 30%.
- Over 4 Million Baht will be taxed at 37%.
Deductible Expenses
- Income from employment and income from copyright: deductible expenses = 40% of income but not exceeding 60,000 baht
- Income received from copyright and income from dividends and interests: No deductions are allowed.
- Income from rental of property: Actual and reasonable expenses, or a lump sum deduction of 10% to 30% depending on the type of rented property
- Income from breach of hire-purchase contracts or installment sales contracts / Income from liberal professions: Deductible expenses = A lump sum deduction of 20%
- Income from liberal professions: Deductible expenses = Actual and reasonable expenses, or a lump sum deduction of 30% (except for the medical profession whereby 60% is allowed)
- Income derived from contract of work whereby the contractor provides essential materials besides tools: Deductible expenses = Actual and reasonable expenses, or a lump sum expense of 70%
- Income derived from business, commerce, agriculture, industry, transport, or any other income not specified above: Deductible expenses = Actual and reasonable expenses, or 65% – 85% depending on the types of income
Employers deduct a certain amount corresponding to withholding tax at source. This accumulated amount will be offset against the tax bill when filing a tax return, thus reducing the possibility of paying high tax amount.
The Thai tax year begins from 1st January to 31st December and tax return should be filed with the tax office by 31st March of the following year. Prompt payment of tax is encouraged in order to avoid incurring penalties for late filing and payment.
Tax levied on every individual is common all over the world. So, before moving to another country, knowing how taxation works would help you decide whether the move would be more beneficial or not. Make sure that you will consult a reputable accounting firm that has experience in the field of taxes paid by expats to accommodate all questions and clarifications that would help you create an educated decision. Here is a sample of an accounting firm that can help you with taxes.
