Personal Income Tax (PIT)

|Personal Income Tax (PIT)

Personal Income Tax (PIT) is a direct tax levied on the income of a person. A person means an individual, an ordinary partnership, a non-juristic body of person, and an undivided estate.

Taxpayers are classified into residents and non-residents. A resident is a person residing in Thailand for a period or periods cumulating more than 180 days in a year, no matter what nationality he has. A resident must pay tax on income obtained from Thailand, as well as on the income obtained from outside Thailand that is brought into Thailand during the same taxable year. A non-resident must pay tax only on income obtained from Thailand no matter if such income is paid in or outside Thailand.

Under the international and bilateral agreements, certain persons including United Nations officers, diplomats, and certain visiting experts may be exempt for paying personal income tax.

Assessable Income
The taxable income is called assessable income and covers income both in cash and in kind.

Assessable income is divided into eight different types, as follows:
1. Income derived from hire of labor, including salaries, wages, per diems, bonuses, gratuities, pensions, house rent allowances, rent-free residences provided by an employer, payments made by an employer for settlement of any obligation of an employee, or any other income derived from hire of labor
2. Income derived from rendering services, including service fees, brokerages fees, meeting fees, directors’ fees
3. Income derived from goodwill, copyrights, franchises, rights, annuities and income in the nature of annuities, including derived from wills, juristic acts, or court judgments
4. Income derived from interest, dividends, shares of profits or other such income from juristic entities or mutual funds, reduction of capital or increase in capital holdings, gains from amalgamation, acquisition or dissolution of juristic entities, or capital gains from transfers of shares in juristic entities
5. Income derived from renting out property and from branches of installment sales or hire-purchase contracts
6. Income derived from liberal professionals (law, medicine, engineering, architecture, and accountancy)
7. Income derived from construction and other work contracts
8. Income derived from businesses, commerce, agriculture, industry, transport, or other activities not specified above

There are several types of income that the taxpayer shall not include or may choose not to include to the assessable income when calculating the tax liability. They are as follows:
a) Income from sale of immovable property acquired by bequest or by way of gift, except the case when the sale is made for a commercial purpose
b) Interest
The following forms of interest income may, at the taxpayer’s selection, be excluded from the computation of PIT provided that a tax of 15% is withheld at source:
• Interest on bonds or debentures issued by a government organization
• Interest on saving deposits in commercial banks if the aggregate amount of interest received is not more than 20,000 Baht during a taxable year
• Interest on loans paid by a finance company
• Interest received from any financial institution organized by a specific law of Thailand for the purpose of lending money to promote agriculture, commerce or industry
c) Dividends or shares of profits received from a registered company or a mutual fund which tax has been withheld at source at the rate of 10%. In this case, the taxpayer will be unable to claim any refund or credit.

Deductions Allowed in the Calculation of PIT
A deduction of 50% of income (but not exceeding 100,000 Baht) is permitted against:
• Employment income or other fringe benefits derived from an employment contract
• Service income derived from services that are not professional services and are not services provided as part of a business that requires substantial capital investment
• Goodwill, copyright, other rights, annuity

Standardized deductions ranging from 10% to 60% are allowed for other types of taxable income as categorized below:
• Rental income: 30% of assessable income for houses, buildings, and vehicles, and 10-20% for other property
• Liberal professions income: 60% of assessable income for medical practice, 30% for others professionals
• Construction income: 60% of the assessable income or actual and provable expenses
• Income from other business activities (derived from business, commerce, agriculture, industry, transport): 60% of the assessable income or actual and provable expenses
• Any income category derived by a taxpayer who is 65 years or older: 190,000 Baht

The taxpayer shall first make deductions from assessable income and after that the allowances will be granted.

Allowances (Exemptions) Allowed in the Calculation of PIT
General allowances:
• The personal allowance is 60,000 Baht and where the taxpayer and spouse both earn taxable income, the maximum deduction for both of them is 120,000 Baht
• The non-working spouse allowance is 60,000 Baht
• The child allowance (under 25 years) is 30,000 Baht per one child and 60,000 Baht for the second legitimate child
• The taxpayer’s parents or spouse’s aged parents (if such parent is above 60 years old and earns less than 30,000 Baht) allowance is 30,000 Baht per each parent
• Disabled/incompetent persons care allowance is 60,000 Baht for each such person
• The prenatal care and child delivery allowance for medical expenses paid is the actual amount paid but no more than 60,000 Baht per each childbirth

Specific allowances:
• Contributions made by taxpayer and spouse to an approved provident fund is 15% of assessable income, but not exceeding 500,000 Baht per year
• Home loan interest cost allowance for interest paid on a home mortgage loan is the amount paid but not exceeding 100,000 Baht
• Social security allowance for contributions to the SSF is the amount contributed
• The allowance for an undistributed estate is 60,000 Baht
• The allowance for a non-juristic partnership or a non-juristic body of persons is 60,000 Baht for each partner, but not exceeding 120,000 Baht
• Contributions made by taxpayer and spouse to approved retirement mutual funds at the amount contributed but not exceeding 15% of wages or 500,000 Baht per year
• Contributions made by taxpayer and spouse to approved long term equity funds at the amount contributed but not exceeding 15% of wages or 500,000 Baht per year
• Donations for the support of charitable organizations (if the organization is on the government’s current list of approved charities) in Thailand is 100% of the donation paid, but not more than 10% of the amount of assessable income after standard deductions and allowances
• Donations for the support of education, reading, teaching faculty and juvenile offenders is 200% of the donation paid, but not more than 10% of the amount of assessable income after standard deductions and allowances
• Contributions made by taxpayer and spouse for a life insurance premium at the amount contributed but not exceeding 100,000 Baht each

Tax Rates
Personal income tax is applied on a progressive scale as follows:
Annual Taxable Income (Baht) Marginal Tax Rate
0 – 150,000 Exempt
150,001 – 300,000 5%
300,001 – 500,000 10%
500,001 – 750,000 15%
750,001 – 1,000,000 20%
1,000,001 – 2,000,000 25%
2,000,001 – 5,000,000 30%
Over 5,000,000 – 35%

An expatriate working for a IBC in Thailand can be subject to 15% flat rate of the assessable income for the period the IBC receives the tax benefits or until the last day of employment, whichever happens first.

PIT Returns and Payment
Each taxpayer must file personal income tax return with the Revenue Department within the last day of March following the year in which the income was earned and pay tax on that sum.
An individual taxpayer with the liability to pay income tax for the year in an amount exceeding 3,000 Baht shall be eligible to apply for an approval of tax payment in installments. The eligible individual may be allowed to make up to 3 equal monthly installments without any surcharge. The first installment shall be made upon the filing of the annual income tax return.

Legal Consequences
A monthly surcharge of 1.5% applies 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.

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