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Tips for Small Business Tax Deductions in Thailand

March 04, 2016 | Trinh Danh

Here are some tips and info you should know when it comes to acquiring tax deductions for your Thailand small business company. Tax deductions are important to many small to medium businesses (SMBs) and startups because it allows them to reduce their overhead expenses and invest more of their money to things that contribute to the company's growth. 

Local Thailand SMBs 

A typical Thai company pays about 20 percent tax on net profit, although this has changed in 2015. Some company types are entitled to tax rate deductions, as enumerated below. 

  • SMBs with less than 5 million baht in paid-up capital are required 20 percent taxation of their net profit. This used to be 23 percent tax, but the percentage has decreased since 2013. 
  • SMBs with only 1 million baht of capital get 15 percent taxation between 300,000 to 1 million baht. This used to be 20 percent tax, but the percentage has dropped after 2013. 
  • SMBs that have less than 300,000 baht of profit are exempt from taxation. This used to be 150,000 baht, but the range has widened in later years from 2013 onwards. 
  • Ordinary partnerships and sole proprietors have to pay at a rate of 10 percent to 35 percent of their net profits. 
  • Limited companies, registered ordinary partnerships, and limited partnerships pay a corporate income tax rate of 20 percent. This used to be 23 percent back in 2012. 

Foreign Company SMBs 

The case is slightly different from international companies. Foreign company SMBs are asked to pay 30 percent tax only on the profit derived from Thailand business, which means the profit they are getting elsewhere won't be taxed at all. However, there's a 3 percent tax on gross receipts for international transportation companies. 

With regards to foreign firms abroad that don't carry on business based in Thailand, they are subject to withholding tax on certain Thailand-derived income categories. Exemptions and Reductions can be granted depending on the types of income involved in the Double Taxation Agreement provision. Here are the specific taxes: 

  • There's a 10 percent tax on remittance of profits.
  • 10 percent tax on dividends.
  • 15 percent tax on professional fees, rents, capital gains, royalties, and interests. 

Tax Benefits and Tax Cuts in Thailand 

Companies registered under Thai law availing of Investment Promotion Privileges can enjoy the following tax breaks and cuts. 

  • For businesses with Investment Promotion Privileges, they are eligible for an income tax holiday from 3 to 8 years.
  • SMBs could pick and choose deductions on special initial allowances on the date of acquisition of machinery (40 percent), computer (40 percent) and plant equipment.
  • 200 percent deduction for the cost of hiring competent and qualified researchers for your development and research projects.
  • Industries setting up in the Free Trade Zone and Export Processing Zone, as well as business with Investment Promotion Privileges, can get reductions and exemptions of import duties on imported machinery and raw materials.
  • Double deduction for the cost of water supply, electricity, and transportation.
  • 150 percent deduction for employee training costs for the sake of human capital improvement. 

Go to the Revenue Department website for a complete list of all taxable entities in Thailand, which includes property, VAT, personal, and business taxes. The site also details regulations, time frames, and withholding percentages of each entity. 

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