According to registration of limited company in Thailand, the important issue for limited company establishment is Corporate income tax in Thailand(CIT), which is required to process for tax registration together with the limited company registration. And, the limited company needs to submit the accounting filing document to Revenue Department for tax payment in each year in order to receive the benefits supported by the government especially for SMEs.
Corporate income tax in Thailand(CIT) is a direct tax collected from juristic companies or partnerships carrying on business in Thailand. Also, the Corporate income tax in Thailand regulations are covered the companies, which do not carry on business in Thailand but receive the income from Thailand. The issues about corporate income tax, which the business owners need to realize, are as following:
1. Taxable Person
A : Company or juristic person registered under Thai law as below.
- Limited company
- Public company limited
- Limited partnership
- Registered partnership
B : Company or juristic person incorporated under foreign law but;
- Carrying on business in Thailand
- Carrying on business in many places including Thailand
- Receive income or profits from any agent in Thailand
C:The business operating by foreign government or the organization of foreign government.
D: Joint venture
E: Foundation or association carrying on revenue generating business but not include governmental foundation or association
2. Tax Benefits
The limited company registered under Thai law will receive various benefits according to the government policy of foreign investors’ investment impulsion as below.
- Income tax exception from 3 to 8 years for business with Investment Promotion Privileges.
- Reduction or exemption import duties of raw material and imported machinery for business with Investment Promotion Privileges or industries setting up in Export Processing Zone and Free Trade Zone.
- Double deduction for the cost of transportation, electricity, and water supply for industries with Investment Promotion Privileges.
- 200% deduction for the cost of hiring qualified researchers doing research and development project.
- 150% deduction for the cost of employee’s training in order to improve human capital.
- Small and medium size company (SME) can choose to the special deduction of initial allowance on the date of acquisition for computer (40%), plant (25%) and machinery (40%).
The foreign limited companies carrying on business in Thailand in the form of a head office or a branch must process the tax registration to receive tax identification number from the Revenue Department. The companies need to submit the related document including; an application form (Lor Por 10.3), a copy of a company’s registration license, house registration, and etc. the Area Revenue Office (The revenue office, which the company office is located) within 60 days after the date of registration or operation. However, there are some countries, which have the tax treaty agreement with Thailand, so the companies from these nationalities need to check the tax treaty agreement of its own country first in order to avoid the double taxation between 2 countries.
57 Countries of Tax Treaty Agreement
|Malaysia||Mauritius||Nepal||the Netherlands||New Zealand|
|Ukraine||United Arab Emirates||Uzbekistan||Vietnam||United States of America|
|Estonia||United Kingdom of Great Britain and Northern Ireland|
4. File a Tax Return and Payment
Thai and foreign limited 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. In addition to the annual tax payment, any company subject to CIT on net profits 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 2 months after the end of the first six months of its accounting period. The prepaid tax is creditable against its annual tax liability.
5. Tax Calculation
The Corporate income tax in Thailand calculation is calculated from the company’s net profit on the accrual basis. The limited companies shall take into account all revenue in consequence of the business carried on in an accounting period and deduct all expenses in accordance with the condition prescribed by the Revenue Code.
In calculating CIT, deductible expenses are as follows:
- Ordinary and necessary expenses. However, the deductible amount of the following expenses is allowed at a special rate of following:
- 200% deduction of Research and Development expense,
- 200% deduction of job training expense,
- 200% deduction of expenditure on the provision of equipment for the disabled;
- Interest, except interest on capital reserves or funds of the company;
- Taxes, except for Corporate income tax in Thailandand Value Added Tax paid to the Thai government;
- Net losses carried forward from the last five accounting periods;
- Bad debts;
- Wear and tear;
- Donations of up to 2% of net profits;
- Provident fund contributions;
- Entertainment expenses up to 0.3% of gross receipt but not exceeding 10 million baht;
- Further tax deduction for donations made to public education institutions and for any expenses used for the maintenance of public parks, public playgrounds, and/or sports grounds;
- Depreciation of company’s asset. However, if a company adopts an accounting method, which the depreciation rates vary from year to year, the company is allowed to provide that the number of years over which an asset depreciated shall not be less than 100 divided of the percentage, which can consult with accounting and audit for more details.
- The following items shall not be allowedas expenses in the calculation of net profits:
- Reserves (with some exceptions).
- Fund except provident fund under the rules, procedures, and conditions prescribed by Ministerial regulations.
- Expense for personal, gift, or charitable purpose except expense for public charity
- Entertainment or service fees.
- Capital expense or expense for the addition, change, expansion, or improvement of an asset but not for repairing in order to maintenance.
- Fine and/or surcharge, criminal fine, income tax of the limited company.
- The withdrawal of money without remuneration of the limited company.
- The part of salary of a shareholder which is paid in excess of appropriate amount.
- Expense which is not actually incurred or expense which should have been paid in another accounting period. In case it cannot be entered in any accounting period, it may be entered in the following accounting period.
- Remuneration for assets which the limited company owns and uses.
- Interest paid to equity, reserves, or funds of the limited company itself.
- Damages claimable from an insurance or other protection contracts or loss from previous accounting periods. Except net loss carried forward for five years up to the present accounting period.
- Expense which is not for the purpose of making profits or for the business.
- Expense which is not for the purpose of business in Thailand.
- Purchasing cost of asset and expense related to the purchase or sale of asset, but only the amount in excess of normal cost and expense without reasonable cause.
- Value of lost or depleted natural resources due to the carrying on business.
- Value of assets apart from devalued assets subject to Section 65 Bis.
- Expense which a payer cannot identify the recipient.
- Any expense payable from profits received after the end of an accounting period.
- Similar expenses to those specified in (1) to (19) as will be prescribed by a Royal Decree.
6. Tax Rate
The Corporate income tax in Thailand rate in Thailand is 20% on net profit (accounting periods 2015). However, the various tax rates depend on types of taxpayers. Furthermore, SMEs will receive the great benefits of tax payment according to the Investment Promotion Privileges from the government of Thailand to increase the investment rate from foreign investors. The rates of taxation are provided in http://account.smebaas.com/corporate-income-tax-thailand-2018/ or can be consulted from SMEBAAS team for each own taxpayers types.
7. Withholding Tax
Withholding tax or retention tax is an income tax paid to the government by the payer of the income rather than by the recipient of the income. The tax is withheld or deducted from the income paid to the recipient. Also, withholding tax applies to employee wages and salary, which is concerned issue for payroll system in Thailand. The withholding tax rates depend on the types of income and the tax status of the recipient. The payer of income needs 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. And, withholding tax must be filed to Revenue Office together with all Corporate income tax in Thailanddocuments for annual submission. For more information about Withholding Tax you can find in http://account.smebaas.com/withholding-tax-in-thailand/
Resource from: http://www.rd.go.th/publish/52290.0.html
Corporate income tax in Thailand(CIT) is the base of every limited company to realize and process properly because it may cause many penalty charges in case there are some missing details for filing and submitting to Revenue Department. SMEBAAS can help you to process with professional teamwork and we can support you with full service of taxation process.
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