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Tax Knowledge and Structure

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Tax Knowledge - Tax Structure in Thailand

For both direct and indirect taxes of Property and Real Estate Business in Thailand, we have summarized the information and detailed explanations related to your property business:

 1.   Tax Structure Summary:

 Detailed explanations consisted of:

Direct Tax

Yearly Corporate Income Tax (PND.50)
This tax must be submitted to the Revenue Department within 150 days after the fiscal year has ended along with the audited financial statements. Case of ending period is December, the deadline for CIT in Thailand is around end of May.

Corporate income tax (CIT), imposed base on “net profit” below is tax rate for year 2008(2009 may be change);

Half Year Corporate Income Tax (PND.51)
This is the company’s corporate tax for 6 months (half year) of the fiscal year which must be filed to the Revenue Department within 2 months after the half year. (e.g. if the fiscal year of the company is ended on December, half year is June that means PND.51 must be submitted within August)

Personal Income Tax
Income tax is calculated as Progressive Tax Rates of
TAXABLE INCOME = Assessable Income - deductions – allowances
The income tax rate applicable to taxable income are as follows.

PND.91 Form, Taxpayer receiving income from employment during the period January to December, must pay personal income tax before the last day of March every year.
PND. 90 Form, Taxpayer receiving income from employment and the professions of law, medicine during the period January to December, must file and pay personal income tax before the last day of March every year.
PND.94 Form, is a half – year tax form of PND. 90, during the period January to June, must file a half-year return and pay personal income tax by September each year.

Indirect Tax

Withholding Tax
PND.1 Tax Form if the company had withheld the tax for salary of the staff.
PND.1 Kor. Tax Form if the company had withheld the tax for acquisition of salary of the staff.
PND.2 Tax Form if the company had withheld the tax for dividend, etc.
PND.3 and 53 Tax Form if the company had withheld the tax for services, rental, hiring, transportation, insurance, management fee, consulting, and etc (should to study withholding tax in Thailand).
PND.54 Tax Form if the company had withheld the tax from the company or juristic partnership incorporated under foreign laws and not carrying on business in Thailand but receiving assessable income from commission, fee of goodwill, dividend, share of profits or any other gain derived which is paid from or in Thailand.

Where the total of the payments due under a contract is less than Baht 1,000, the payments are not subject to withholding tax.

The following are the withholding tax rates on some important types of income:

• This W/H Tax must be submitted within 7 days of the following month otherwise, the company will have to pay for penalty and surcharge upon delayed submission.
• The person liable (Company’s financial officer) to withhold tax shall issue to the taxpayer, from whom tax is withheld, a withholding tax certificate in duplicate, each copy having the same contents, as follows:

- In the case of withheld tax from advertising fees and professional fees etc., the certificate shall be issued immediately every time tax is withheld.
- In the case of withheld tax from employment etc., the certificate shall be issued within the 15th day of February in the year following the tax year, or within one month from the date of the termination of employment during the tax year of the taxpayer from whom tax is withheld.

Value Added Tax
This tax (PP.30), based on 7% of sales or purchase detailed in tax invoice must be submitted within 15 days of the following month otherwise, the company will have to pay for penalty and surcharge. In case that there is no VAT incurred for the month, the company must still submit the blank VAT form with the zero amount of tax to comply with the Thai taxation law.

Value added tax remittance returns (PP.36)
Based on 7% for supplier providing services overseas and such services are used in Thailand and must be submitted within 7 days of the following month.

Special Business Tax (PT.40)
SBT is calculated as a percentage of gross receipts. The businesses subject to SBT and the applicable rates include:

SBT return must be submitted within 15 days of the following month.

2. Submission of the financial statement to Ministry of Commerce (MOC)

Must submit the financial statement to MOC within 1 months from Annual General Meeting (AGM) and AGM must be held within 4 months from the end of fiscal year so if the ending period is on December, must submit around May.

3. Social Security Fund (SSF)
The company with one or more employees is required to make contributions to the Social Security Fund (SSF). Contributions to the Social Security Fund are made by employees, employers and the Government in equal proportion. The present rate of contributions to be made by each party is five percent of the employees’ salaries, up to a maximum amount of Baht 750 per month(during June – December 2009 that rate reduce to be three percent and maximum amount is Baht 450). The company must be submitted to the Social Security Office within 29th day of the following month or earlier in case that the said date happened to be Saturday or Sunday.

4. Property Taxes
A House and Land Tax is levied at the rate of 12.5 percent of the assessed rental value of the property. It is levied on the owner of the building, but does not apply to owner-occupied residences.

Knowledge in Accounting and Tax in Thailand for new company and investor

1.  Accounting and Auditing
It is necessary for a juristic company or partnership to prepare account, audit; and file the financial statement that was audited (by a Certified Public Accountant) to:
1.1 The Ministry of Commerce, within 1 month from Annual General Meeting (AGM) and AGM must be held within 4 months from fiscal year of accounting period. The documents to be submitted are:

• The audited financial statement, 2 sets.
• Shareholders List, 1 set.
• Form for submission the audited financial statement (Sor.Bor.Chor.3), 1 set (2 pages per set)

1.2 The Revenue Department, within 150 days from the closing date of each accounting period. The documents to be submitted are:

• The audited financial statement, 1 set.
• Form PND.50, 1 set.
(The above are list for submit in Bangkok area)

2. Corporate Income Tax (PND form)

Corporate Income Tax (CIT) is a direct tax levied on a juristic company or partnership which is established under Thai or foreign law and carries on business in Thailand or derive certain type of income from Thailand.

The term “juristic company or partnership” (hereinafter called “company”) means a limited company, a limited partnership or a registered ordinary partnership incorporated under Thai or foreign law as well as an association and a foundation engaged in business producing revenue. The term also includes any joint venture and any trading or profit-seeking activity carried on by a foreign government or its agency or by any other juristic body incorporated under a foreign law.

Juristic company or partnership is required to pay income tax from net profit, below is the sample of calculation and rate:
Income                                                                   300
Expense                                                                  200
Net profit                                                                100
Tax (15%, 25%, 30%, depending on cases)          15, 25, 30

Remarks
The tax rate for net profits which occurred on or after January 1st, 2007 (B.E.2550) of the juristic company or partnership that has paid-up capital in the closing date of the accounting period not exceeding 5 million Baht are:

Income
Juristic company or partnership should record income according to the regulation of accrued income; when any services or products were rendered, though cash have not yet received, they should be recognized as income. The received income should be deposited to bank for selling and receiving controlling.   

Expenses
Juristic company or partnership should record expenses according to the regulation of accrued expenses; when any expenses were incurred, though they have been paid yet, they should be recorded as expenses. The expenses should be business related to show the actual status of financial statement.  The recorded expenses should have evidences to prove that:

1. The company / partnership is the payer.
2. The expenses are actually paid (by having receipts). If the recipient could not provide a receipt, the company or partnership should provide a receipt form the recipient to be filled up and sign in.
      
Some expenses can not be used in tax computation; we call these “Un-deductible Expenses”. But according to the principles of accounting, these have to be recorded to show the correct status of financial statement. Below are some examples of un-deductible expenses:

-   Entertainment expenses that are not covered in ministerial regulations. But if they are, they have to have sum exceeding 0.3% of the sum of income or the paid-in capital, whichever is larger.
-   Tax penalty or penalty for criminal case.
-   Expenses that cannot be proved who is the recipient or expenses that do not have any financial evidences.
-   Expenses that do not involve business process.
-   Un-reasonable high expenses, etc.

Tax Calculation
Juristic company or partnership is required to pay tax with the corresponding tax rates of 15%, 25% or 30% depending on their net income or net profit. The tax amount is computed by multiplying the net income or profit by the corresponding tax rate. If in any case that half year tax is paid already, then the total tax to be paid is computed by subtracting the half year tax from the tax computed in the net income.

In the calculation of CIT of a company carrying on business in Thailand, it 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 carried on in an accounting period and deducting therefore all expenses in accordance with the condition prescribed by the Revenue Code. As for dividend income, one-half of the dividends received by Thai companies from any other Thai companies may be excluded from the taxable income. However, the full amount may be excluded from taxable income if the recipient is a company listed in the Stock Exchange of Thailand or the recipient owns at least 25% of the distributing company's capital interest, provided that the distributing company does not own a direct or indirect capital interest in the recipient company. The exclusion of dividends is applied only if the shares are acquired not less than 3 months before receiving the dividends and are not disposed of within 3 months after receiving the dividends.

In calculating CIT, deductible expenses are as follows:

Remarks  This statement is just an example. In reality, the tax computation is more complex.
More information for Corporate Tax in Thailand

3. Half-Year Tax (PND.51 Form)

Juristic company or partnership is required to file half-year tax. The half-year tax is computed from the approximate figure of the whole year net profit divided by two.

The tax must be filed within 2 months after the closing date of the first half of the accounting period. Example: if the accounting period closes on December 31st, 2009, the tax must be filed within 2 months after June 30th, 2009; that mean the tax must be filed within August 31st, 2009.

Remarks

-   If the accounting period in the 1st year of business operation is less than 12 months, the company or partnership is not required, by law, to file the half year tax.
-   If a company or partnership is required to pay tax but did not file the PND.51 form, nor file after the last date, 20% of the taxable income should be paid as penalty.
-  If a company or partnership did not file the PND.51 form nor file after the last date, a 2,000 baht penalty may also be required to be paid.
-  Company or partnership is required to file PND.51 form together with the financial statement that is audited by a certified public accountant within 150 days from the closing date of each accounting period. Also, it should pay tax (if any), after deducting the half year tax paid.

4. Monthly Withholding Tax Form

Certain types of income paid to companies are subject to withholding tax at source. The withholding tax rates depend on the types of income and the tax status of the recipient. The payer of income is required to file the return (Form CIT 53) and submit the amount of tax withheld to the District Revenue Offices within seven days of the following month in which the payment is made. The tax withheld will be credited against final tax liability of the taxpayer. The following are the withholding tax rates on some important types of income:

Remarks
1)   Juristic company or partnership is required to provide 2 copies of withholding tax certificate for the withholder.
2)   Tax rate of withholding tax for PND.3 and PND.53 are mentioned in the Revenue code of TP.4/2528 that was revises by the revenue code of TP.101/2544 and the summarize table of tax rate is on page A2.
3)   Procedures for the monthly withholding tax computation are:

a. Income (whole year assessable income =salary*12 months)
b. Deductible expenses 40% of income (a.) but not exceeding Baht 60,000.
c. Income before Deductible allowances.
d. Deductible allowances:

i. Tax payer, if single Baht 30,000.
ii. Spouse, Baht 30,000.
iii. Studying children, Baht 17,000.(Studying outside Thailand, only Baht 15,000)
iv. Un-studying children, Baht 15,000.
v. Interest paid on purchased or construction of building but not exceeding Baht 100,000.
vi. Health insurance for tax payer, not exceeding Baht 100,000.
vii. Accumulated contribution to provident fund, not exceeding Baht 500,000.
viii. Accumulated contribution to Social security fund
ix. Donation to charity organization warranted by law, not exceeding 10% of the income after deducting the expenses and allowances
ix.Parent Baht 30,000 each, and must over 60 years old.
e. Taxable income (net income).
f. Tax computation according to the progressive tax rate from the taxable income.

g. Monthly withholding tax must be computed by dividing taxable income by number of months.
Remarks   The tax rate above is in accordance with the August 2009 update.
(See an example of personal income tax as below)

5. Summary Withholding Tax Form for Whole Year.

6. Value Added Tax (VAT)

The value added tax has been used since January 1st, 1992 replacing the commercial tax, in order to be consistent with the current economic situation. The concept is the tax will be paid by the consumer but it will be collected and transferred to the government by the company or partnership.

The company or partnership which gains income more than Baht 1.8 million is required to file for VAT registration and VAT Form (PP.30) should be filed every month.

However this information is just an introduction. Value added tax is every complicated and there are many related rules. The tax payer should study the details and observe the updates.

Tax Calculation

VAT liability = Output Tax - Input Tax
"Output Tax" is a tax collected or collectible by VAT registered person from his customers when goods or services are supplied.
"Input Tax" is a tax charged by another registered person on any purchase of goods or provision of services. The term also includes any tax charged on imported goods.

7. Tax Invoice

VAT registered person or entity is required to issue tax invoices every time the transactions are made showing details of nature and value of goods sold or services provided and also amount of VAT due. Tax invoice is used as evidence for claiming input tax credit. Tax invoice must contain at least the following elements;

- The word "Tax invoice" in a prominent place,
- Name, address and tax identification number of the issuer,
- Name and address of the purchaser or customers,
- Serial numbers of tax invoice and tax invoice books (if applicable),
- Description, value and quantity of goods or services;
- Amount of VAT chargeable, and
- Date of issuance.
- Another content that was specified by the director-general of the Revenue Department such as:

If a company or partnership would like to produce a tax invoice together with other commercial documents, receipts and invoices etc, but the tax invoice is not the first page of the set, it should be executed as the following:

a) Other documents, except the tax invoice, have to contain the word “Not Tax Invoice”.
b) Every page has to contain the word “A Set Document”
c) Every copy pages have to contain the word “Copy

8.  Tax Return and Payment (Corporate Income Tax)

Thai and foreign companies carrying on business in Thailand are required to file their tax returns (Form CIT 50) within 150 days from the closing date of their accounting periods. Tax payment must be submitted together with the tax returns. Any company disposing funds representing profits out of Thailand is also required to pay tax on the sum so disposed within seven days from the disposal date (Form CIT 54). 

In addition to the annual tax payment, any company subject to CIT on net profit is also required to make tax prepayment (Form CIT 51). A company is obliged to estimate its annual net profit as well as its tax liability and pay half of the estimated tax amount within two months after the end of the first six months of its accounting period. The prepaid tax is creditable against its annual tax liability.

As regards to income paid to foreign company not carrying on business in Thailand, the foreign company is subject to tax at a flat rate in which the payer shall withhold tax at source at the time of payment. The payer must file the return (Form CIT 54) and make the payment to the Area Revenue Branch Office within seven days of the following month in which the payment is made.

9.  Tax Return and Payment (Value Added Tax)

VAT taxable period is a calendar month. VAT return therefore must be filed on a monthly basis. VAT return (Form VAT 30) together with tax payment, if any, must be submitted to the Area Revenue Branch Office within 15 days of the following month. If taxpayer has more than one place of business, each place of business must file the return and make a payment separately unless there is an approval from the Director-General of the Revenue Department. Services utilized in Thailand supplied by service providers in other countries are also subject to VAT in Thailand. In such a case, service recipient in Thailand is obliged to file VAT return (Form VAT 36) and pay tax, if any, on behalf of the service providers.
In the case where supply of goods or services is also subject to Excise tax, VAT return and tax payment, if any, must be submitted to the Excise Department together with Excise tax return and tax payment within 15 days of the following month. In case of imported goods, VAT return and tax payment must be submitted to the Customs Department at the point of import.

Basic knowledge in Accounting

10. Petty Cash Controlled System
A Juristic company or partnership should separate its petty cash out the cash of employee, committee or shareholder.

Remarks
A Juristic company or partnership should produce a book of controlled income and expenses on the cash at bank.

This document contains only basic information gathered on January, 2008.
In reality, a company or partnership should study more details have awareness with the updates.

Yours sincerely,
Panwa Group Co., Ltd.
Panwa Auditing Co., Ltd.
Panwa Accounting and Tax Co., Ltd.

_______________________________________________________________

Below is Example of Personal Income Tax Computation

 Monthly tax, paying in the same level every month

1. The tax year of 2007, Mr. Tony gains income Baht 30,000. He filed the withholding tax as:
a)  An unemployed spouse and two not yet in school children.
b)  Health insurance on July, 2007, Baht 9,600.
c)  Interest paid on Baht purchased or construction of building as whole year, Baht 13,200.

So, the tax payer has to be withheld tax in the following computation:

Therefore, Mr. Tony’s withholding tax is Baht 276.63 per month for Jan to November and Baht 276.63 for December.

For more information, please feel free to contact us:
Mr.Prasert Poothong,
Managing Director, CPA Thailand
Phone Nos.: +66(0)2-933 6121, +66(0)2-933 6122, +66(0)2-933-5601
(for call inside Thailand use 0 instead of +66)
Fax: +66(0) 2 933 6120
Email: bkk@panwagroup.com