Nowadays, a great number of foreigners have worked and earned a living in Thailand so the question the author is frequently asked is related to income tax for foreigners, as to whether or not, foreigners have to pay income taxes and how? It is a general misconception that foreigners, who live in Thailand for less than 180 days, do not have to pay taxes.
First of all, one should understand that in Thailand, personal income tax collection is based on the principle of 1) source of income and 2) residency as stipulated in Section 41 of the Thai Revenue Code, which can be summarized as follows;
The Principle of Source of Income
1) Income derived from employment carried on in Thailand * Example: Mr. A, relocated to carry on his work in Thailand by a company located in the USA, Mr. A, therefore, has to file a personal income tax for his salaries or wages, derived during the working periods in Thailand.
However, Mr. A may be exempt from personal income tax in Thailand should exception criteria under the Double Taxation Treaty apply.
2) Income derived from business carried on in Thailand * Example: Mr. Aek opened a restaurant in Thailand, therefore, Mr. Aek has to pay personal income taxes for income derived from such business.
3) Income derived from the employer’s business in Thailand * Example: Company B, a legal company under the Thai laws, relocates Mr. Aek to work for the company branch in France and pays him a monthly salary. Therefore, Mr. Aek has to pay personal income taxes for the income derived from Company B.
4) Income derived from assets in Thailand: Tax which is levied from the value of an asset located in Thailand, regardless of whether or not an owner is Thai or non-Thai. Such incomes are as rent from property, interest from money deposit, dividend from a share in the company, capital gain from the sale of property et cetera.
In summary, a person, regardless of being Thai or foreigner, who derives income from the aforementioned sources, is obligated to pay personal income taxes in Thailand. No matter where the income is paid in Thailand or outside Thailand, the Thai law obligates a person to pay taxes for incomes derived as above mentioned.
The Principle of Residency
In order for a person to bind by this principle, 3 criteria apply;
1) Income is derived from work carried on overseas or from business done overseas or from an asset located overseas.
2) Such income derived overseas is brought into Thailand during the tax year
3) Such a person has resided in Thailand for an aggregate period of up to 180 days.
Therefore, a person, regardless of being Thai or non-Thai, who derives income overseas, brings in income derived overseas into Thailand and has resided in Thailand for a period of up to 180 days, is obligated to file personal income tax. If any of the three criteria is not met, a person is tax-exempt.
A lot of taxpayers in Thailand, who once paid income to foreigners, misunderstand that foreigners, living in Thailand for less than 180 days, do not have to pay personal income taxes or are not obligated to be deducted tax at source. As a matter of fact, foreigners who derive income from sources in Thailand have to pay personal income taxes except those are exempted by the Double Taxation Treaty that Thailand has signed with their countries.
Tax rates of the Personal Income Tax
• Taxable Income (Thai Baht Currency) Tax Rate (%)
• 0-150,000 • Exempt
• more than 150,000 but less than 300,000 • 5
• more than 300,000 but less than 500,000 • 10
• more than 500,000 but less than 750,000 • 15
• more than 750,000 but less than 1,000,000 • 20
• more than 1,000,000 but less than 2,000,000 • 25
• more than 2,000,000 but less than 5,000,000 • 30
• Over 5,000,000 • 35
This article is a general briefing note which does not replace the advice for any individual situation, the firm shall not be rendered liable for its content.