Corporate Income Tax (CIT) is a direct tax levied on legal entities established under Thai law, as well as legal entities established under a foreign law that conduct business activities in Thailand or which obtain certain types of income from Thailand. Legal entities include limited companies, limited partnerships, registered partnerships, branches of foreign companies, joint ventures, and businesses operated in a commercial or profitable manner by a foreign government or its organizations.
Companies incorporated in Thailand are subject to corporate income tax on all gains obtained in Thailand or outside Thailand, while entities established under a foreign law carrying on business in Thailand are subject to corporate income tax only on the net profits arising from or as a consequence of their business activities in Thailand.
Corporate Income Tax Returns and Payment
Companies must file a half-year and annual corporate income tax return.
The annual return must be filed within 150 days from the last day of their accounting period and must be accompanied by audited financial statements certified by an authorized auditor. These needs be submitted to the Revenue Department and Commercial Registration Department. All companies repatriating profits out of Thailand, must pay tax on that sum within 7 days from the repatriation date.
The tax paid at the half year is a prepayment calculated on the forecasted net profit for the year and companies must pay 50% of that amount. The payment must be made within two months after the end of the first six months of the company’s accounting period. The tax paid at half year is credited against the full-year tax liability.
Foreign companies not carrying on business activities in Thailand shall withhold tax at source at the time of payment. The payer must file the return and make the payment to the Revenue Department within 7 days of the following month in which the payment is made.
The usual fiscal year for corporate income tax submission is for the 12-month period ending 31 December. However, this may be shorter in the following cases:
• A newly incorporated company or juristic partnership can use as the first accounting period the period between the date of incorporation to any date
• The Director-General of Revenue Department agrees to change the last day of an accounting period
Corporate Income Tax Calculation
For a company carrying on business in Thailand, the CIT is calculated from the company’s net profit on the accrual basis. A company shall take into account all revenue arising from or in consequence of the business in an accounting period and deduct all expenses as prescribed by the Revenue Code.
One half of the dividends received by Thai companies from any other Thai companies may be excluded from the taxable income. If the recipient is a company listed in the Stock Exchange of Thailand or the recipient owns at least 25% of the voting shares in another Thai company, without any cross shareholding, either directly or indirectly, the entire amount may be excluded from the taxable income. The only condition is that the receiving company has held the shares in the other company for a period of at least three months before and three months after the dividends were received.
In general, expenses made with the purpose of acquiring profits or for conducting business in Thailand are deductible and must be claimed in the tax year in which they are incurred.
The following expenses are allowable:
1. Ordinary and necessary expenses. However, the deductible amount regarding the following expenses is allowed at a special rate:
• 200% deduction of Research and Development expense
• 200% deduction of job training expense
• 200% deduction of expenditure on the provision of equipment for the disabled
2. Interest expenses, except interest on capital reserves or funds of the company
3. Taxes, except for CIT and Value Added Tax paid to the Thai government
4. Net losses carried forward from the last five accounting periods. However, the law doesn’t specify anything about carry back of losses to previous accounting periods.
5. Bad debts
6. Wear and tear
7. Donations of up to 2% of net profits
8. Provident fund contributions
9. Entertainment expenses up to 0.3% of gross receipts but not exceeding 10 million Baht
10. Further tax deduction for donations made to public education institutions, and also for any expenses used for the maintenance of public parks, public playgrounds, and sports ground
11. Accelerated depreciation methods may be applied to certain asset classes. If an asset is acquired during a tax year, the depreciation allowance must be pro-rated
The Revenue Department does not allow the following as an allowable expense:
• Expenses without sufficient supporting documentation
• Expenses where the recipient cannot be identified
• Tax penalties, surcharges, and criminal fines imposed by any tax law
• Reserves (with some exceptions)
• Expenditures incurred relating to a prior period which had not been accrued as at the end of that period
• Withholding tax paid absorbed on behalf of the supplier unless agreed in writing
Corporate Income Tax Rates
Incorporated firms operating in Thailand generally pay income tax at a rate of 20% of net profits, although reduced tax rates apply to companies listed on the Stock Exchange of Thailand (SET) and the Market for Alternative Investment (MAI).
Small and medium sized companies, with a paid-up capital less than 5 million Baht and a revenue less than 30 million Baht, pay taxes at reduced rates on a progressive scale on profits below 3 million Baht.
Foreign companies not carrying on business in Thailand receiving dividends from Thailand face a rate of 10% of gross receipts and those receiving other types of income apart from dividend face a rate of 15% of gross receipts.
Profitable foundations and associations face rates of 2 to 10% of gross receipts, depending on the type of income. Public charity organizations are exempted from income tax.
Foreign companies engaging in international transportation face a rate of 3% of gross ticket receipts and 3% of gross freight charges.
BOI companies may face corporate income tax exemption for a period of up to 13 years for certain R&D and advanced technology, and innovation activities.
Failure to file a tax return, late filing or filing a return containing false or inadequate information may subject the taxpayer to various penalties. All penalties must be paid within 30 days of being assessed.
Failure to pay the estimated half year tax or underpayment by more than 25% may subject the taxpayer to a fine of 20% of the amount in deficit.
Late submission of the annual tax return involves a surcharge of 1.5% per month or a fraction thereof of the tax payable, without exceeding the amount of tax payable.