Personal income tax is a tax on an individual’s earnings or income. One of the very basic things that one should know about the personal income tax in Thailand is that whoever receives assessable income from sources in the Kingdom of Thailand, whether Thai national or foreign national, is responsible to pay personal income tax, regardless of whether the income is paid within or outside Thailand.
In other words, assessable income may come from inside Thailand or outside Thailand. As long you are located in Thailand and if you are receiving income, you are to pay a personal income tax.
Included in the assessable incomes sourced within Thailand are:
- Income from a Thailand-based post or office
- Income from a Thailand-based business
- Income from a Thailand-based employer’s business
- Income from a Thailand-based property
Included in the assessable incomes sourced outside Thailand are:
- Income from an overseas post or office
- Income from an overseas business
- Income from overseas property
Classification of Taxpayers
Taxpayers in Thailand can be classified as:
- Resident Taxpayer
A person (Thai or foreign) who dwells in Thailand for an aggregate period of 180 days or more in any tax (calendar) year is considered a resident of Thailand.
A Thai resident’s assessable income can be generated from sources within Thailand and sources outside Thailand which is both subject to personal income tax.
- Non-Resident Taxpayer
A non-resident is only required to pay tax on income earned within Thailand.
The Formula in Getting the Personal Income Tax
Before proceeding, please remember this simple formula in identifying personal income tax:
Assessable Income-Expenses & Allowances = Personal Income Tax (Taxable Income)
Categories of Taxable Person
Who are those people who are subjected to personal income taxes?
Well, according to the Revenue Code of Thailand, there are 5 categories of people who are subject to personal income tax. Listed below are the categories:
- A natural person
- A collection of individuals who do not form a legal entity
- An unregistered ordinary partnership
- A deceased person for their assessable income and estate for the year in which death occurred
- A deceased person’s undistributed estate.
Categories of Taxable Income
Now, you might ask “Are there any specifics on what types or sources of assessable income can be taxed?”.
The answer is unless specifically exempted by Thai law, all sources of assessable income are subject to taxation. And as stated in the Revenue Code of Thailand, Section 40, there are eight categories of assessable income:
- Earnings from providing personal services to employers, also known as employment income
- Earnings produced from a job, a place of employment, or a service provided
- Earnings from goodwill, copyrights, franchises, patents, other rights, annuities, and other sources of revenue;
- Earnings from interest, dividends, investor bonuses, capital reductions, capital increases, gain on amalgamation, acquisition, or dissolution, and gain on transfer of shares
- Earnings from property rentals, violations of an installment sale or hire-purchase agreements
- Earnings from liberal occupations including law, engineering, architecture, and accounting
- Earnings from work contracts in which the contractor supplies all necessary materials in addition to tools
- Earnings from business, commerce, agriculture, industry, transportation, or any other non-specified activity
Note that the tax absorbed by the payer of assessable income, or any other person at any level, is included in assessable income.
Assessable Income – Expenses & Allowances = Personal Income Tax (Taxable Income)
The total assessable income is calculated by adding the amounts from the various income categories.
Exemptions in Personal Income Tax
Incomes to be taxed were introduced above, but there are incomes excluded in the formula in getting the personal income tax. What are those incomes that are exempted from being taxable income?
Here are some of the specifications of income that is exempt from personal income tax:
- Transportation expenditures that are incurred in good faith by an employee, holder of the office, or person rendering services that are necessary, exclusive, and solely for the performance of his or her obligations.
- The portion of travel expenses paid by an employer to an employee for traveling from another location to begin employment or for returning to his or her place of origin at the termination of employment if such expenses are incurred for those purposes.
- Employer-paid medical expenses for an employee and his or her family.
- Maintenance income comes from moral responsibility, a legacy, or an inheritance, or gifts given in a ceremony or on special occasions as per established custom.
- Revenues from the sale of movable property are received through a gift or without the intent of commerce or profit.
- Rewards for educational or scientific research purposes.
- Unlawful deed recompense, monies derived from insurance, or a funeral assistance scheme.
- A portion of earnings earned by an unregistered ordinary partnership or a group of people;
- Income from the selling of securities on Thailand’s Stock Exchange, excluding income from debentures and bonds.
- Under the statute governing social insurance, a compensation reward received by an insured person from the social insurance fund
- Red Cross lottery reward, profits from a sale, or a discount on Red Cross lotteries purchased.
- Profits from the sale of mutual fund investment units.
For more specifications of exemptions in personal income taxes, you can locate it at the Revenue Code of Thailand, Section 42.
Assessable Income-Expenses & Allowances= Personal Income Tax (Taxable Income)
As mentioned previously, the total assessable income is calculated by adding the amounts from the various income categories… after deducting certain permissible expenses from each category’s assessable income.
Deductions for Expenses and Allowances
Assessable Income – Deductions & Allowances = Personal Income Tax (Taxable Income)
In the formula, to determine the personal income tax, the assessable income will get subtracted by the deductions and allowances of an individual.
“What are the specifics of the said deductions and allowances?”, you ask.
Deductions for Expenses
Depending on the category of taxable income, a standard deduction in the percentage of assessable income or actual expenses incurred in generating revenue is allowed.
The following are examples of deductible expenses:
- Under Sections 40(1) and 40(2), a standard deduction of 40% is provided for income, with a maximum deduction of THB 60,000. If a lump-sum payment is made due to retirement or termination, an expenditure deduction of THB 7,000 multiplied by the number of years of employment is possible, but not in excess of the payment. For the remainder, a 50% discount is available.
- Sections 40(3) and (4) enable no expense deductions, with the exception of income from copyrights, which allows a basic deduction of 40% with a maximum deduction of THB 60,000.
- Under Sections 40(5) – 40(8), the actual expenses paid in obtaining such revenue, or alternatively, the optional standard deductions ranging from 10% to 85% in respect of each category of income.
For the deduction to be granted, you must prove that expenses were present, necessary, and reasonable.
Non-deductible expenses of personal income tax are like non-deductible expenses for corporations.
Expenses stated under the Revenue Code of Thailand, Sections 65 bis and 65 ter, such as:
- Personal expenses and presents
- Revenue Code tax penalties, surcharges, and criminal fines
- Any artificial or fictitious expense
- Any harm recoverable under an insurance contract or contract of indemnification
- Any disbursement if the payer cannot confirm the identification of the beneficiary.
Are likewise not allowed to be deducted from an individual’s assessable income.
Deductions for Allowances
Different types of allowances can be deducted from a taxpayer’s total assessable income to arrive at taxable income. The following are examples of such allowances:
- THB 30,000 for the taxpayer.
- THB 30,000 for the taxpayer’s spouse.
- THB 15,000 for each child, a maximum of 3 children.
- THB 2,000 for education allowance for each child studying in Thailand.
- THB 30,000 per person for parent care allowance.
- THB 100,000 for premium life insurance.
- THB 10,000 for spouse’s premium life insurance.
- THB 15,000 for a parent’s health insurance premium (per person).
- Interest on a loan for the purchase of a house that does not exceed THB 100,000.
- THB 10,000 donation to the provident fund (for a sum exceeding THB 10,000, it shall be deducted from the assessable income with a maximum deduction of THB 490,000).
- When combined with a THB 500,000 provident fund contribution, payment for the purchase of investment units in a Retirement Mutual Fund (RMF) that does not exceed 15% of gross income.
- Payment for the acquisition of investment units in a Long-Term Equity Fund (LTF), up to a maximum of 15% of the gross income of THB 500,000.
- Allowance for social security in the amount actually paid.
- THB 30,000 for a deceased person’s estate.
- THB 30,000 per person, not to exceed Baht 60,000, for each partner in a non-juristic partnership or group of persons residing in Thailand.
- Allowance for charity, not to exceed 10% of the amount after all other allowances have been deducted.
Assessable Income–Deductions & Allowances= Personal Income Tax (Taxable Income)
After all expenses and allowances have been subtracted from the assessable income, the taxable income (Personal Income Tax) is calculated.
Taxable income will be taxed at progressive rates ranging from 5% to 35%, with an exemption on the first THB 150,000 in net assessable income, as follows:
THB 0 – 150,000
THB 150,000 – 300,000
THB 300,000 – 500,000
THB 500,000 – 750,000
THB 750,000 – 1,000,000
THB 1,000,000 – 2,000,000
THB 2,000,000 – 5,000,000
THB 5,000,000 ↑
To individuals with a gross income of Baht 60,000 or more, excluding income under Section 40 (1) of the Revenue Code (employment income), must pay at least 0.5% of their gross income in income tax.
It is important to note that paying Personal Income Tax is very important especially when you are renewing your work permit here in Thailand. Without proof of payment of personal income tax, Work permits or any other permits will not be renewed.