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Aug 11, 2016

Living There


INDIVIDUAL TAXATION

Residents are liable to pay tax on their Thai-sourced income and foreign income, when repatriated back to Thailand. Married couples may opt to have joint tax liability; although the wife needs to file a separate tax return on her employment income, the couple’s combined taxable income will essentially be credited to the husband’s.

Personal income tax returns must be filed on or before 21 March in respect of taxable income received during the preceding calendar year.

INCOME TAX

There are eight categories of income: (1) income from personal services rendered to employers, (2) income by virtue of jobs, positions, or services rendered, (3) income from goodwill, copyrights, franchise, other rights, (4) income in the nature of dividends, interest or deposits with banks in Thailand, (5) income from letting out property, (6) income from liberal professions, (7) income from construction and other contracts of work, and (8) 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 2016

TAXABLE INCOME, THB (US$)
TAX RATE
Up to 150,000 (US$4,286) 0%
150,000 – 300,000 (US$8,571) 5% on band over US$4,286
300,000 – 500,000 (US$14,286) 10% on band over US$8,571
500,000 – 750,000 (US$21,429) 15% on band over US$14,286
750,000 – 1,000,000 (US$28,571) 20% on band over US$21,429
1,000,000 – 2,000,000 (US$57,143) 25% on band over US$28,571
2,000,000 – 4,000,000 (US$57,143) 30% on band over US$57,143
Over 4,000,000 (US$114,286) 35% on all income over US$114,286
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$1,714)
  • Royalty income (received from copyright) – 40% of income but not exceeding THB60,000 (US$1,714)
  • 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$857)
Spouse allowance 30,000 (US$857)
Undivided estate 30,000 (US$857) for the taxpayer’s spouse
Child allowance (up to three) 15,000 (US$429) 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$857) each
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.

The standard deductions for rental income vary according to the rental income classification:

  • 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

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 from property tax.

Property taxes are deductible against income tax liability, if the property is utilized in earning rental income.


CORPORATE TAXATION

INCOME TAX

Income and capital gains earned by companies are generally taxed at a flat rate of 20%. Income-generating expenses are deductible from the gross income. Depreciation and interest payments on loans used to finance the acquisition of the property are also deductible.

If the property is purchased and rented through a company, the gross rent is subject to a 15% withholding tax rate, which can be credited to the actual income tax due.






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