Guide to Taxes for a Foreign Company in Thailand

Fri, 11/20/2020 - 14:37 -- tilalegaladmin
Thai law considers five different types of business organizations; the list includes the public limited company, limited company, limited partnership, ordinary registered partnership and ordinary partnership. In this list, the first one is governed under the public limited companies act, whereas the last four entities are managed by the Civil and Commercial Code (CCC). The representative offices, branch offices and regional offices get recognition under the Foreign Business Act.

Depending upon what kind of business you are planning to open, it will be governed by the appropriate type of organization. If we talk about a public limited company in which almost 50% or more shares are owned by a foreigner, it will be considered as a foreigner company, and as per the FBA regulations, it has to follow certain restrictions in some activities. The other option is to obtain approval from the Ministry of Commerce to proceed ahead in favourable conditions. The foreigner investors are more likely to carry their business via a representative office, branch office or limited company.

Tax policies for company registration in Thailand:
Companies that are registered as per CCC, as well as the foreign companies that are carrying some business activities in Thailand via branch or regional office, are subjected to corporate income tax. The list includes branch profits, remittance taxes and withholding taxes. Other than this, the company may also need to register the business for the VAT formalities. There are few specific types of business taxes that are applied over certain business transactions such as sales of immovable assets, interest on loans and banking business. The stamp duty can be levied over a few specific types of instruments and contracts. Few other taxes in the category include excise tax, customs duty, signboard tax and property tax.

The tax incentives and tax exemptions are also provided to different types of entities, and the benefits may vary as per the conditions of different tax privileges. The main tax law applicable to a variety of foreign businesses in Thailand is the Thai Revenue Code. It governs stamp duty, specific business tax, VAT, and corporate income tax. Furthermore, the Custom Duties are covered under the Customs Act, Excise Tax under the Excise Act and Petroleum Income Tax under the Petroleum Income Tax Act.

The corporate income tax is generally levied overall foreign and Thai companies. The foreign company has to pay taxes only over Thai-source income whereas the local company has to pay tax over worldwide income. The corporate tax rate is somewhere around 20% over net profits, and it is calculated by cutting down all the expenses as well as costs of the sold goods. On the other side, petroleum companies pay tax over net profits at an estimated rate of 50%.

The foreign company branches pay income tax as per the rate mentioned under corporate income tax; however, it is applicable over Thai source profit only. Other than this, the branch is also liable for a 10% levy over remitted profits. If it is not possible to determine profits, the official assessment can be made on the basis of 5% of the gross receipts.

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