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Corporate Income Tax

A. Entities Subject To Taxation
  All companies and partnerships registered in Thailand are subject to the Corporate Income Tax. The Corporate Income Tax applies to other entities as well, including most notably "joint ventures", which includes virtually any profit seeking joint enterprise comprised of individuals and/or other companies or partnerships. Subject to possible exceptions under tax treaties, the Corporate Income Tax also applies to foreign companies and other entities either doing business in Thailand or receiving income, which is paid from or within Thailand.
B. Basics Of Tax Computation
  The basic Corporate Income Tax is imposed at a flat rate of 30% of net profit earned on income arising from or in consequence of business carried on in Thailand. A special graduated rate is available for Small and Medium Sized Enterprises (SME). An SME is defined as a company having registered capital of Baht 5 million or less. The first Baht 1 million of an SME's net profit is taxed at the rate of 20% and the next Baht 2 million of net profit is taxed at 25%. An SME's net profit in excess of Baht 3 million is taxed at the usual 30% rate.

Net profit is calculated by deducting from gross income the expenses that are allowed under the Revenue Code and supplemental regulations. The rules on what expenses are allowable deductions can be complicated, and there are specific limitations on the deductibility of many types of expenses. Still, in general terms, necessary and ordinary expenses incurred in pursuing profit are deducted in computing net profit. Straight-line depreciation is used for capital assets. For most movable property depreciation is over a five-year period. For buildings, depreciation is over a twenty-year period.

The Thai Revenue Department is very particular about the type of records that a company can rely on to verify expenses. It is critical that a start-up company in Thailand establish proper record-keeping after consultation with qualified accountants

C. Tax Accounting
  A company subject to the Thai Corporate Income Tax normally can choose any twelve-month period as its fiscal and tax year, though a large majority of companies doing business in Thailand choose the calendar fiscal year. Most companies must use the accrual basis of accounting for purposes of the Corporate Income Tax, although certain types of companies- notably those engaged in a service industry- may elect to use cash basis accounting.
D. Of Special Note To Foreign Businesses
  There are two provisions of the Corporate Income Tax particularly worthy of note to foreign businesses involved in commerce in Thailand.

Sec. 70 of the Revenue Code requires 15 percent withholding on payments from or in Thailand of taxable income to foreign companies not doing business in Thailand. For example, if a foreign company performs a service from abroad but the payment for the service is from Thailand, it may be subject to 15 percent withholding.

Sec. 76 bis of the Revenue Code provides that a foreign company or partnership which carries on business through an employee, representative or go-between in Thailand, is subject to the Corporate Business Tax. A foreign entity falling under the provisions of Sec. 76 bis must file Thai corporate income tax returns as if it were registered in Thailand. The provisions for determining what constitutes a representative or go-between in Thailand are complicated, but any company having a distributor or agent in Thailand is well advised to seek a determination from an accounting or law firm as whether the distributor or agent triggers the provisions of Sec. 76 bis. The provisions of tax treaties for entities from qualifying countries may significantly impact the application of Secs.70 and 76 bis, so the availability of tax treaty protections should also be explored.

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