Simple Tax Guide for Americans in Thailand
US Expat Taxes - Thailand
At Taxes for Expats we have been preparing U.S. tax returns for U.S. Citizens and green card holders working in Thailand for over 8 years. We have been checked by the State Department and are listed on the list of approved Tax Preparers by the US Consulate in Bangkok. Our clients hail from all parts of the country - Bangkok and Nonthaburi, Phuket and Hat Yai, Nakhon Ratchasima and Chiang Mai.
As a U.S. Citizen or green card holder you are legally required to file a U.S. tax return each year regardless of whether you already pay taxes in your residence country.
We offer professional tax services. That means we figure out the best and most optimal way to file your U.S. tax return and avail you of all possible exclusions and deductions. But just as importantly - avoid the errors that would allow IRS to disallow your return and levy fines & penalties on top. You can also do them yourself - not that we recommend it. For more information please see IRS.
The expatriate Foreign Earned Income Exclusion can only be claimed if you file your tax return on a timely basis. It is not automatic if you fail to file and can even be lost.
We have many clients living in Thailand and know how to integrate your U.S. taxes into the local income taxes you pay. Any Thai income tax you already pay can be claimed as against the tax liability on your U.S. return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the calendar year as is standard in Thailand for U.S. tax purposes). You must, however, pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these form or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
We have helped hundreds of expats around the world catch up with their past U.S. taxes because they have failed to file U.S. tax returns for many years. This is, in fact, our specialty and we offer a 10% discount to clients to wish to file multiple tax returns at once and get in full compliance with the IRS.
Work with a recognized expert to help you prepare your American tax return. We can also provide tax planning and advice with other expatriate tax; we look forward to working with you.
Below we include information on the Thai Tax System for the American Expatriates.
Thailand individual income tax rates are progressive to 37%.
|Taxable Income (Baht)||Tax Rate||Tax Amount||Accumulated Tax|
|0 - 150,000||Exempt||-||-|
|150,001 - 500,000||10%||35,000||35,000|
|500,001 - 1,000,000||20%||100,000||135,000|
|1,000,001 - 4,000,000||30%||900,000||1,035,000|
|4,000,001 and over||37%|
For expatriates qualifying as employees of a regional operating headquarters, a flat income tax rate of 15% can apply for up to 4 years.
Basis Â– Thailand residents and nonresidents are taxed on their Thailand-source income. Thai residents are taxed on their foreignsource income only if the income is brought into Thailand in the year it is derived (repatriation in later years is exempt from personal income tax).
Residence Â– An individual is resident in Thailand for personal income tax purposes if present for 180 days or more in a given (calendar) tax year.
Tax Filing status Â– A married couple may opt for a joint or separate assessment on employment income. If the wife derives passive income, it must be included in the husband's return even if the couple elects to file separately.
Taxable income Â– Employment income, including most employment-related benefits, is subject to personal income tax. Profits derived from the carrying on of a trade or profession generally are taxed under the personal income tax regime. Dividends and interest are taxed at source at a rate of 10% and 15%, respectively. An individual can elect not to report such investment income on the annual personal income tax return for the tax year.
Capital gains tax Â– Capital gains are exempt from personal income tax if the shares sold were of a public company registered on the stock exchange of Thailand. Otherwise, gains are subject to the normal progressive personal income tax rates.
Tax Deductions and allowances Â– Subject to certain restrictions, deductions are granted for insurance, mortgage interest, retirement or long-term equity plans, charitable contributions, etc. Personal allowances are available for the taxpayer, his/her spouse, children and parents.
Other taxes on individuals:
Capital duty Â– No
Stamp duty Â– Stamp duty generally applies at a rate of 0.1% to leases, the hire of work, the transfer of shares/debentures, loans (capped at THB 10,000), etc.
Capital acquisitions tax Â– No
Real property tax Â– A tax of 12.5% is levied on the appraised rental value of real property.
Inheritance/estate tax Â– No
Net wealth/net worth tax Â– No
Social security contributions Â– Employees are required to contribute 5% of their monthly compensation (up to THB 15,000) (i.e. the monthly contribution cap is THB 15,000 times 5%, or THB 750).
Thailand Tax year Â– Thai tax year is the calendar year
Tax Filing and payment of tax Â– Tax on employment income is withheld by the employer and remitted to the tax authorities, generally on a monthly basis. The individual is liable for filing an annual personal income tax return on or before 31 March of the following year and must pay any additional income tax due at that time.
Penalties Â– A monthly surcharge of 1.5% will apply to underpayments of tax up to the additional tax amount that was due, and a penalty of up to 100% of the tax due will apply when the income tax liability is formally assessed by the tax authorities.
Thailand Corporate Tax Rates
Thailand corporate tax rate is 30% for net taxable profits.
Certain public limited companies and small and medium-size limited companies are subject to lower progressive rates up to a certain amount of net taxable profits:
|Small company tax rates:|
|- Net profit not exceeding 1 million baht||15%|
|- Net profit over 1 million baht but not exceeding 3 million baht||25%|
|- Net profit exceeding 3 million baht||30%|
|Companies listed in Stock Exchange of Thailand (SET)|
|- Net profit for first 300 million baht||25%|
|- Net profit for the amount exceeding 300 million baht||30%|
|Companies newly listed in Stock Exchange of Thailand (SET)|
|- Net Profit||25%|
|Company newly listed in Market for Alternative Investment (MAI)|
|- Net Profit for first 5 accounting||20%|
|- Net Profit after first 5 accounting periods||30%|
|Bank deriving profits from International Banking Facilities (IBF)|
|- Net Profit||10%|
|Foreign company engaging in international transportation|
|- Gross receipts||3%|
|Foreign company not carrying on business in Thailand receiving dividends from Thailand|
|- Gross receipts||10%|
|Foreign company not carrying on business in Thailand receiving other types of income apart from dividend from Thailand|
|- Gross receipts||15%|
|Foreign company disposing profit out of Thailand|
|- Amount disposed||10%|
|Profitable association and foundation|
|- Gross receipts||2% or 10%|
Residence Â– A limited company is considered resident if it is incorporated in Thailand or registered as a partnership with the Ministry of Commerce.
Basis Â– Residents are taxed on worldwide income; nonresidents are taxed only on Thailand-source income. Foreign-source income derived by resident taxpayers is subject to corporate income tax in the same manner as Thailand-source income. Registered foreign branches and partnerships are taxed, but only on Thailand-source income. Non-registered entities with a taxable presence in Thailand also are taxed in the same manner as limited companies on Thailand-source income.
Taxable income Â– Corporate income tax is imposed on an entity's net profits, which normally consist of business/trading income, passive income and capital gains/losses. Expenses that relate specifically to generating profits for the business or the business itself may be deducted in determining net taxable profits.
Taxation of dividends Â– Dividends paid by a limited company to another limited company may be exempt from corporate income tax if certain conditions are satisfied. Otherwise, 50% of the dividends are subject to corporate income tax at the normal rate. Any tax withheld on the payment of the dividends may be used to offset the final corporate income tax due for the company in the relevant tax year. In certain cases, dividends received from a foreign affiliate are exempt from further corporate income tax in Thailand.
Taxation of Capital gains Â– Capital gains are subject to the normal corporate income tax rate with no restrictions on using capital losses to offset net taxable profits.
Losses Â– Net operating losses may be carried forward for up to 5 accounting periods. If the net operating losses relate to a business promoted by the Thailand Board of Investment during a tax holiday period, the losses may be carried over to the first year after the tax holiday period and carried forward up to 5 accounting periods from that time.
Surtax Â– No
Alternative minimum tax Â– No
Participation exemption Â– No
Foreign tax credit Â– Under tax treaties, the foreign income tax paid on profits that also are subject to corporate income tax in Thailand normally may be credited up to the income tax paid in Thailand on such foreign income.
Holding company regime Â– A tax exemption is available for dividend income received from foreign affiliates, provided the foreign profits were subject to income tax at a minimum rate of 15%. Capital gains derived from the sale of shares of an affiliate are still subject to corporate income tax at the 30% rate.
Tax Incentives Â– Tax holidays of 3 to 8 years are available for business activities promoted by the Board of Investment. Companies listed on Thailand's stock market that invest in new projects involving machinery, equipment, vehicles and software can obtain an additional deduction of 25% of the total qualifying cost for income tax purposes. Regional operating headquarters and their expatriate employees may benefit from a 10% rate on net profits and a personal income tax rate of 15%, respectively.
Dividends Â– Dividends paid to another Thailand company are subject to a 10% withholding tax or exempt if certain requirements are met. Dividends paid to nonresident companies are subject to a 10% withholding tax. Dividends paid to resident or nonresident individuals are taxed at a 10% rate that can be considered final. Resident individuals can obtain a dividend tax credit, so they may choose to include the dividends in their taxable income for the relevant tax year.
Interest Â– Interest paid to another Thailand company that is not considered a financial institution is subject to a 1% advance withholding tax, which may be used as a credit against the final corporate income tax due for the accounting period. Interest paid to a nonresident company is subject to a 15% final withholding tax unless the rate is reduced under an applicable tax treaty.
Interest paid to a resident or nonresident individual is subject to a 15% withholding tax and can be considered a final tax in both instances.
Royalties Â– Royalties paid to another Thailand company are subject to a 3% advance withholding tax, which may be used as a credit against the final corporate income tax due for the accounting period. Royalties paid to a nonresident are subject to a 15% final withholding tax unless the rate is reduced under a tax treaty.
Branch remittance tax Â– The rate is 10% on after-tax profits paid or deemed paid to a head office.
Other taxes on corporations:
Capital duty Â– No
Payroll tax Â– Tax on employment income is withheld by the employer and remitted to the tax authorities generally on a monthly basis.
Real property tax Â– A tax of 12.5% is levied on the appraised rental value of real property. The tax is deductible in calculating the corporate income tax liability.
Social security contributions Â– Employers and employees are required to contribute 5% of the monthly compensation (up to THB 15,000) paid to the employee (i.e. the monthly contribution cap is THB 15,000 times 5%, or THB 750).
Stamp duty Â– Stamp duty generally applies at the rate of 0.1% to leases, the hire of work, transfers of shares/debentures, loans (capped at THB 10,000), etc.
Transfer tax Â– A specific business tax applies to the gross proceeds from the transfer of immovable property at a rate of 3.3% (including a municipal tax of 10%), a withholding tax of 1% of the gross proceeds from the transfer and a transfer fee of 2% of the appraisal value. The specific business tax and transfer fee are reduced to 0.11% and 0.1%, respectively, for transfers that take place before the end of March 2010.
Other Â– Foreign companies that carry on an international transportation business and that have an office in Thailand can be taxed at a percentage of gross proceeds rather than at the normal corporate income tax.
Transfer pricing Â– Under Thailand's developing transfer pricing regime, taxpayers must declare on their annual corporate tax return whether revenue and expense transactions are based on market prices, and the tax authorities may adjust income.
Advance pricing agreements (APAs) may be obtained and, while transfer pricing documentation is not formally required to be maintained, there is an assumption (based on filing requirements and directives to revenue officers) that documentation should be available by the corporate income tax return filing date. Taxpayers may initiate an adjustment (up or down) if there is adequate documentation to substantiate the adjustment.
Thin capitalisation Â– No
Controlled foreign companies Â– No
Disclosure requirements Â– No
Thailand Tax year Â– Thai tax year is 12 months (a shorter year is permissible in the year of incorporation, when there is a change of accounting period or in the year of dissolution).
Consolidated tax returns Â– Consolidated returns are not permitted for corporate income tax purposes. Each company must file its own return.
Tax Filing requirements Â– Taxpayers self-assess and must make an advance corporate income tax payment for the first 6 months of the tax year. The half-year return must be filed within 2 months after the first 6 months of the tax year. The annual income tax return must be filed within 150 days from the company's year end. Extensions are not available.
Penalties Â– If a firm underestimates its profits for an entire year by more than 25%, a 20% fine is charged on the first half-year instalment. In other circumstances, a surcharge of 1.5% per month on outstanding tax applies. A penalty of up to 100% of the tax due will apply when the income tax liability is formally assessed by the tax authorities.
Rulings Â– Taxpayers may request nonbinding private letter rulings, and APAs are available under the transfer pricing regime.
Thailand vat (Value Added Tax) Rates
The standard VAT rate in Thailand is 7%. A 0% rate applies to exported goods and services.
At the Sept 22 annual symposium of the Bank of Thailand, a proposal was made to raise the VAT from 7% to 10%, in order to increase tax revenues. This could be postponed depending on economic circumstances.
Taxable transactions Â– VAT is levied on the sale of goods and the provision of services.
VAT Registration Â– The registration revenue threshold for VAT must exceed THB 1.8 million for any given tax period. Nonresident suppliers that are carrying on business on more than a temporary basis must register.
Filing and VAT payment Â– VAT is payable by the 15th of the month following that in which it is collected. In cases in which a self assessment of VAT output is required on the payment of certain income to nonresidents (primarily services or royalties on rights used in Thailand), the VAT is payable on the 7th of the month following the month when the actual payment occurred.