Thai Tax Returns

As an expatriate working in the Kingdom of Thailand, you may not be clear what Thai personal income tax obligations you have. As your 2008 personal income tax return should be filed before April 2009, there are several key issues that you should be aware of in order to be ready for this upcoming tax-filing season.

Who is subject to Thai personal income tax?

Taxpayers are classified in Thailand as either ‘resident’ or ‘non-resident’ depending upon the time that they have spent in the Kingdom. The term resident refers to those individuals who have been present in Thailand for at least 180 days in any given year. Non-residents are individuals other than residents.

Every person, resident or non-resident, who derives assessable income from employment or from business carried out in Thailand, is subject to Thai personal income tax, unless exempted under a specific provision. This is regardless of whether the income is paid in or outside of Thailand. Resident individuals are also liable to pay tax on foreign sourced income to the extent that it is paid in or remitted to Thailand in the same tax year. A non-resident’s income tax liability is limited to the income arising from employment, property, or business carried out in Thailand.

What is Taxable Income?

Taxable income is divided into several categories, including income from employment, rent of property, independent professional practice income, royalties, interest, capital gains and other business income. Employment income includes most monetary and non-monetary compensation derived from employment in Thailand, for example salary, wage, per diem, bonus, gratuity and pension.

This definition of income covers a wide range of benefits provided by your employer, including school fee subsidies, rent-free accommodation and stock options. Under a stock option plan taxable capital gains can arise on both the exercise of the option and the sale of the stock. Upon exercise of a stock option the capital gain is the difference between the value of shares at the exercise date and the exercise price. Upon subsequent sale of the shares the capital gain is the difference between the sale price and the value of the shares at the exercise date.

Deductions and Allowances

Thai personal income tax law provides different deductions for the various classes of income. For some, standard deductions apply; for others, actual expenses incurred in connection with the derivation of the income may be deductible.

For employment income, you are granted a standard deduction of 40% of your gross income, up to a maximum of THB 60,000. There is a separate set of rules used for calculating deductions for other types of income earned by individuals.

Readers are reminded that there are various allowances available. Taxpayers are granted a personal allowance of THB 30,000 and a THB 30,000 allowance for their spouse. A taxpayer may also qualify for a child allowance of THB 15,000 per child, depending upon age and educational status. An education allowance of THB 2,000 is also available where a child is studying in school or university in Thailand.

Other allowances are also available for life insurance premiums, provident fund contributions, interest payments on loans for residential purposes and charitable donations. We note that there have been some recent changes to the above allowances. For life insurance policies, the exemption for 2008 has been increased from THB 50,000 to THB 100,000. For 2008, there is no limit to the number of policies that you can claim.

Individual taxpayers should also look closely at the various funds that they have contributed to over the calendar year, as the exemption for 2008 increased from THB 300,000 to THB 500,000. This was further increased to THB 700,000 for contributions made between 1 October 2008 and 31 December 2008. However, a cap of 15% of your salary still applies.

If you have invested in retirement mutual funds (RMFs) you can claim a tax deduction of 15% of your income, up to a maximum of THB 500,000. The ceiling of THB 500,000 includes investments in RMFs and contributions to provident funds and the Government Pension Fund. The increased cap of THB 700,000 also applies to these contributions for the period 1 October 2008 and 31 December 2008.

An increased tax deduction is also available for optional savings plans. For example, if you have invested in long-term equity funds you can now claim a tax deduction of 15 per cent of your income up to THB 500,000.

Tax Rates

In Thailand progressive income tax rates apply. The current individual tax rates for both residents and non-residents are shown in Table 1. Table 2 illustrates the comparative average tax rates for several other countries in the Asia-Pacific region. You will see that although we all like to complain about high taxes in Thailand, the effective rate is relatively competitive within the region.

This past year has seen an increase in the tax-free threshold, which means the first THB 150,000 (previously THB 100,000) of your net taxable income will now be exempt from income tax. It is important to note that where you derive more than THB 60,000 of income during the 2008 year (excluding employment income) the tax payable as calculated under the progressive tax rates cannot be less than 0.5% of that income.

Exempt Income

There are some exemptions from Thai personal income tax. Most importantly, tax treaty provisions relating to personal services often provide relief to persons who work temporarily in Thailand. Income earned by United Nations and diplomatic personnel in Thailand is generally exempt from Thai personal income tax. Furthermore, capital gains from the sale of shares listed on the Stock Exchange of Thailand or from the sale of investment units in a mutual fund are tax exempt.

Tax Administration

If you have annual employment income exceeding THB 50,000, you are required to file a year-end tax return. Income tax returns must be filed before 31 March in respect of taxable income received during the preceding (calendar) year. Any outstanding tax on this income must also be paid on or before this date.

Where you derive at least THB 30,000 of certain classes of income including rent, professional fees and contracting income (but excluding employment income) during the first six months of the year, you are also required to file a half-year return and make a payment to the Revenue Department on or before 30 September. Any withholding tax or half-yearly tax which has been paid to the Revenue Department can be used as a credit against the tax liability at the end of the year.

If you are filing your personal income tax return for the first time, you should pick up a tax return form from the Revenue Department’s Offices. Once you have filed your first tax return, next year’s forms will be mailed to you. Alternatively, you can file electronically at www.rd.go.th.

For married couples, the husband is normally responsible for filing a joint return and paying any tax due. However, if desired, a separate return may be filed by the spouse in respect of employment income only. It should be noted that the combined tax liability might be lower if separate returns are filed.

This information is intended as a general guide only. Tax law is complex and professional advice should be taken before acting on the information provided.