Thailand: Living There - Tax Issues

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Last Updated: Jan 05, 2009

Living There

INDIVIDUAL TAXATION

Residents are liable to pay tax on their worldwide income. A Married couples may opt to have joint tax liability; although the wife needs to file a separate tax return, the couple’s combined taxable income will essentially be credited to the husband’s.

INCOME TAX

There are eight categories of income:

Income from personal services rendered to employers
Income by virtue of jobs, positions, or services rendered
Income from goodwill, copyrights, franchise, other rights
Income in the nature of dividends, interest or deposits with banks in Thailand
Income from letting out property
Income from liberal professions
Income from construction and other contracts of work
Income from business, commerce, agriculture, industry, transport, or any other activity

Taxable income is computed by deducting deductions and allowances from the gross income. Income is taxed at progressive rates.

INCOME TAX
TAXABLE INCOME, THB (US$)	TAX RATE
Up to 100,000 (US$2,868)	nil
100,001 – 500,000 (US$14,338)	10% on band over US$2,868
500,001 – 1,000,000 (US$28,676)	20% on band over US$14,338
1,000,001 – 4,000,000 (US$114,703)	30% on band over US$28,676
Over 4,000,000 (US$114,703)	37% on all income over US$114,703
Source: Global Property Guide

Residents are entitled to various deductions and allowances. Deductions are expenses related to specific categories of income while allowances are expenses related to the taxpayer’s family circumstances.

Deductions

Type of Deductions

Income from employment – 40% of income but not exceeding THB60,000 (US$1,721)
Royalty income (received from copyright) – 40% of income but not exceeding THB60,000 (US$1,721)
Rental income

     - income from buildings and wharves: 30% of income
     - income from agricultural land: 20% of income
     - income from all types of land: 15% of income
     - income from vehicles: 30% of income
     - income from other types of properties: 10% of income
Income from liberal professions (such as lawyers, engineers, architects, accountants, contractors) – actual expenses incurred or 30% of income
Income from medical professions – actual expenses incurred or 60% of income

Allowances

TYPE OF ALLOWANCES	AMOUNT, THB (US$)
Single taxpayer	30,000 (US$860)
Spouse allowance	30,000 (US$860)
Undivided estate	30,000 (US$860) for the taxpayer’s spouse
Child allowance (up to three)	15,000 (US$430) each
- under 25 years old and studying, a minor, adjusted incompetent or quasi-incompetent person
Education	2,000 (US$57) each
- for children studying in a school in Thailand
Parent-care allowance	30,000 (US$860)
Old-age allowance	190,000 (US$5,448) each
- over 65 years of age
Life insurance premiums	maximum of 50,000 (US$1,434) each
- paid by taxpayer or spouse
Provident fund contributions	maximum of 15% of income
Social insurance contributions
Long-term equity fund	300,000 (US$8,603) or 15% of income
Home mortgage interest	maximum of 50,000 (US$1,434)
Charitable contributions	up to 10% of income after deductions
Source: Global Property Guide

RENTAL INCOME
The taxable income is determined after deducting expenses incurred from gross income. A standard deduction of 10% to 30% is permitted for rental income depending on the type of property leased.

If houses, buildings, and floating houses are rented out by the owner, 30% of the gross rent can be deducted for expenses. The actual expenses incurred can be deducted, especially if it is higher than the standard deduction stated above, but it must be supported by documents.

Rental income is subject to a 5% withholding tax. This tax is then credited to the final tax liability of the taxpayer, when he files an income tax return.

CAPITAL GAINS
Capital gains derived from the sale of immovable property are taxed at the standard income tax rates. The capital gains can either be included in the aggregate income or taxed separately.

If the gains are taxed separately, the tax liability is subject to a special computation and the maximum tax rate applicable is 20%.

The taxable gains earned from selling a Thai property are computed as the selling price or the market value of the property less some deductions. The deductions are percentages of the gross amount, and these percentages depend on how long the property was held before the sale or the transfer.

STANDARD DEDUCTION FOR CAPITAL GAINS
HOLDING PERIOD	DEDUCTIBLE EXPENSES
1 year	92%
2 years	84%
3 years	77%
4 years	71%
5 years	65%
6 years	60%
7 years	55%
8 or more years	50%
Source: Global Property Guide

The actual expenses incurred can be deducted, especially if they are higher than the standard deductions stated above, but it must be supported by documents.

The balance from the above computation will be divided by the number of years the property was held, whereby the outcome is taxed at the appropriate tax rate. The resulting tax liability will then be multiplied by the number of years the property was in the taxpayer’s possession to arrive at the final tax liability.

But if the property was acquired as a gift or by inheritance, 50% of the proceeds (selling price or market value) are deductible as expenses. The balance or 50% of the proceeds will be divided by the number of years the property was held, and the outcome taxed at the appropriate tax rate. The resulting average tax liability will then be multiplied by the number of years the property was held to arrive at the final tax liability.

PROPERTY TAX

House and Land Tax

This is a property tax levied on rented properties. It is payable annually at a flat rate of 12.5% of the assessed annual rental value of the property. Only owner-occupied and vacant dwellings are exempt.

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