Digital Tax Ecosystem: Thailand’s Steps to Tax Compliance and Preventing Fraud

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Digital Tax Ecosystem: Thailand’s Steps to Tax Compliance and Preventing Fraud

In pursuit of fully leveraging the Digital Tax Ecosystem by 2028, Thailand’s Revenue Department has rolled out regulations related to digital systems. The latest development in this endeavor is the release of Notification No. 438 by the Director-General on Income Tax, focusing on Tax Returns Concerning Withholding Tax at Source for Individuals, dated September 21, 2023.

This notification serves several pivotal objectives:

  1. Simplifying Taxation for Individuals: The primary aim of this notification is to streamline the tax filing process for individual taxpayers. It enables them to conveniently access their income information through the “My Tax Account” platform while filing their personal income tax returns.
  2. Preventing Tax Refund Fraud: A key focus of these regulations is to deter fraudulent claims for tax refunds by individuals.
  3. Combatting False Expenses: The notification also seeks to prevent juristic persons or individuals, from fabricating expenses, thereby ensuring the accuracy and integrity of financial reporting related to taxes.

Notification No. 438 outlines specific provisions that employers and payers are obligated to adhere to:

Digital Filing Requirements: Employers and payers are required to submit their withholding tax returns, specifically P.N.D. 1 and P.N.D. 1 Kor, exclusively through designated digital channels. These channels include e-filing, e-withholding tax, and other digital media channels i.e., SWC user interface program.

Non-Digital Filing: In situations where employers or payers encounter challenges in filing tax returns via digital channels, they are required to formally notify the Director-General in writing. This notification must include a comprehensive explanation of the obstacles preventing the use of digital channels for tax return submissions.

Submission of Notification Letter: The notification letter, explaining the incapability to file digitally, must be submitted alongside the tax return to the Revenue Officer at the Area Revenue branch office.

Understanding P.N.D. 1 and P.N.D. 1 Kor:

  • N.D. 1: Effective from the tax month of October 2023 onwards, employers shall file the monthly tax return for employees’ income via digital systems on a monthly basis by the 15th day of the following month. It encompasses various income sources, including salary, wage, per diem, bonus, pension, and house rent allowance. Moreover, it also encompasses income derived from a post or performance of work paid to individuals, such as commissions, subsidies, and meeting allowances.
  • N.D. 1 Kor: Effective from the tax year of 2023 onwards, this annual tax return is utilized to consolidate income from employment and income from a post or performance of work over the course of a year.

As Thailand continues its transition toward full digital integration in taxation, stakeholders are urged to remain vigilant and well-informed about these evolving regulations to ensure compliance with the law. For specific inquiries, please contact law@ilct.co.th.

Digital Tax Ecosystem: Thailand’s Steps to Tax Compliance and Preventing Fraud

Investing in Thailand: A Legal Overview for Japanese Outbound Investors

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Introduction:

Thailand maintains its position as a popular destination for foreign investment, with a stable economy, favorable investment climate, and strategic location in Southeast Asia. In 2022, foreign investment increased by 56% to 129 billion baht. With 151 investors (or 26% of the overall foreign investors) investing a total amount of 39.5 billion Baht, Japan is the leading foreign investor in Thailand. For Japanese investors, Thailand offers a range of investment opportunities across various sectors, from manufacturing and electronics to tourism and renewable energy.

In this article, we will provide an in-depth guide to investing in Thailand for Japanese outbound investors. We will discuss the legal and regulatory framework governing foreign investment in Thailand, the industries and sectors that offer the most promising investment opportunities for Japanese investors, and the investment strategies and structures that are most effective in the Thai market.

By the end of this article, readers should have a fairly good understanding of the Thai investment landscape and the key considerations for Japanese investors looking to invest in the country. Whether you are a seasoned investor or new to the Thai market, this article will provide you with the insights and knowledge you need to make informed investment decisions and maximize your chances of success in Thailand.

Section 1: Understanding Thailand’s Legal and Regulatory Framework

Foreign investors need to seek advice on Thailand’s legal and regulatory framework prior to investing in Thailand for there are various investment structures available to be considered, from branches of overseas parents to subsidiaries and unincorporated joint ventures (popularly chosen for construction or fixed-term projects). Each structure has its own advantages and disadvantages, and it is important to carefully consider the specific needs and goals of the investment before deciding on a structure.

The country has a range of laws and regulations that govern foreign greenfield investments, including the Foreign Business Act and the Investment Promotion Act. In this regard, understanding Thailand’s legal and regulatory framework is crucial for foreign investors looking to invest in the country. By navigating these laws and regulations carefully, foreign investors can unlock the full potential of Thailand’s economy and maximize their chances of success in the country.

The Foreign Business Act (FBA), B.E. 2542 (1999) is the primary law regulating foreign investment in Thailand. It sets out the rules and procedures for foreign businesses operating in the country and defines the types of businesses that are restricted or prohibited from foreign ownership. Under the FBA, foreign ownership is restricted or prohibited in certain sectors, such as banking, telecommunications, and media. However, foreign investors may be allowed to invest in these sectors through incorporated joint ventures with Thai investors or by obtaining special permission from the relevant government agencies. The FBA also governs the establishment of foreign representative and regional offices in Thailand. While these procedures are optional, they can be beneficial for limited “non-trading” activities such as market surveys, quality control work, and the search for Thai products to be exported. However, if a foreign company engages in such activities, it will be required to obtain a Foreign Business License from the Department of Business Development, Ministry of Commerce. This process typically takes around three months, and if approved, the company will be entitled to receive up to two visas and work permits for a representative office and five for a regional office for its expatriate managers. Foreign banks, securities companies, and finance companies may establish representative offices under separate regulations.

The Foreign Business License (FBL) allows foreigners to own 100% of a company incorporated under Thai law, the FBL is required for all foreign-owned businesses operating in Thailand, except for those that are exempt under the FBA or the Investment Promotion Act (IPA). The application process for the FBL requires detailed information about the proposed business activities and shareholding structure and the key to successfully obtaining the FBL is to show that such foreigner can transfer knowledge and technology to the Thai people, including hiring Thai people. Once the FBL is obtained, the next step is to register the business with the Department of Business Development and obtain a company registration number. Foreign-owned companies must also obtain various licenses and permits, such as tax identification numbers, VAT registration, and work permits for foreign employees.

The IPA is another key piece of legislation that encourages and regulates foreign investment in Thailand. The IPA provides various incentives to foreign investors, such as tax holidays, exemptions on import duties, and permission to own land. The incentives offered by the IPA are intended to attract foreign investment to certain targeted industries and regions.

Section 2: Factors to be considered when establishing a business organization in Thailand

When establishing a business organization in Thailand, there are several factors to consider, including non-tax considerations and tax considerations. From a non-tax perspective, it may be advantageous to form a Thai limited company instead of a branch of a foreign corporation, as the former allows for more flexibility in terms of ownership, and may be easier to obtain registrations and licenses. When dealing with the Thai government, it is also generally advantageous to be a company incorporated in Thailand, as this may lead to the granting of certain privileges and permissions.

On the tax front, all companies incorporated under Thai law or incorporated under foreign law and carrying out business in Thailand are subject to Thai corporate income tax on net profit. However, net profits of branches operating business abroad will be subject to Thai corporate income tax if the head office is incorporated under Thai Law. The activities of representative offices and regional offices may not incur a corporate income tax liability if they are limited to some specific one. Dividends paid to foreign parent companies or shareholders are subject to a withholding tax. The withholding tax may be exempted under the mentioned IPA. The remittance of profits by a branch to the head office is also subject to a withholding tax. Interest, fees, and other amounts remitted to foreign corporate shareholders are subject to a withholding tax, but payments of such amounts by a branch to its head office may be treated as a taxable remittance of profit.

Foreign tax credits may be available in some cases. Moreover, double taxation may be eliminated with the methods specified in the Avoidance of Double Taxation Agreement between Thailand and relevant countries, i.e., underlying tax credit and tax sparing credit. It is recommended to consult with tax counsel to determine the availability of double taxation elimination agreements and the impact of any applicable treaties.

Section 3: Opportunities in Thailand’s Investment Landscape

The Japan-Thailand Economic Partnership Agreement (JTEPA) is a key factor that makes Thailand an attractive destination for Japanese investors. The JTEPA is a bilateral free trade agreement that was signed in 2007 and aimed at strengthening economic ties between Japan and Thailand. The agreement offers various benefits for Japanese investors, including reduced tariffs on goods and services, streamlined customs procedures, and protections for intellectual property rights. Consequently, the manufacturing sector offers attractive investment opportunities for Japanese investors, also considering that most manufacturing businesses are not on the restricted list and can be 100% Japanese-owned. Thailand offers a skilled workforce, a strategic location in Southeast Asia, and a favorable investment climate. It has a well-established manufacturing industry, with a strong focus on food processing, electronics, and automotive. Japanese companies, historically, have been among the largest investors in Thailand’s manufacturing sector, with a particular focus on automotive production and assembly. In addition, the Industrial Estate Authority Act also provides the benefit of allowing foreign investors to own a land provided that certain conditions are met.

Another sector that offers significant potential for Japanese investors is renewable energy. Thailand has set ambitious targets for renewable energy development, aiming to increase the share of renewable energy in its total energy mix to 30% by 2037. The country offers a range of incentives for renewable energy development, including tax incentives, feed-in tariffs, and soft loans. Japanese companies have already made significant investments in Thailand’s renewable energy sector, with projects in solar, wind, and biomass energy.

Tourism-related businesses also offer potential investment opportunities for Japanese investors. Tourism industry accounts for a significant share of the country’s GDP and Japan is one of the top sources of foreign tourists in Thailand, with millions of Japanese visitors traveling to the country each year. Several Japanese companies invested, subject to the FBA, in Thailand’s tourism sector, with projects in hotel and resort development, entertainment, and leisure. In the past few years, and with more strength after the Covid-19 pandemic, the Thai government has launched various initiatives to promote tourism all over the world, such as the “Amazing Thailand” campaign, which aims to boost the number of international visitors to the country.

Conclusion:

Thailand offers a promising investment destination for Japanese outbound investors, thanks to its strategic location, skilled workforce, and business-friendly environment. However, investing in Thailand requires a thorough understanding of the legal and regulatory framework, as well as the cultural nuances of doing business in the country.

It is important for Japanese investors to work with experienced legal counsel and seek out professional advice to maximize their chances of success in Thailand. By carefully evaluating potential investment opportunities, negotiating contracts effectively, understanding cultural differences, and selecting the appropriate investment structure, Japanese investors can successfully navigate the Thai market and realize significant returns on their investments.

We encourage readers to explore potential investment opportunities in Thailand and seek out the expertise of ILCT professionals to guide them through the investment process.

Authors:

LinkedIn: https://th.linkedin.com/company/ilct—international-legal-counsellors-thailand-ltd-

Facebook: https://www.facebook.com/ILCTBangkok/?locale=th_TH

Legal overview for Japanese investment in Thailand-download

Thailand’s Royal Decree Announces Tax Exemptions for Digital Token Corporate Transfers

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Thailand’s Royal Decree Announces Tax Exemptions for Digital Token Corporate Transfers

On March 6, 2023, in a significant move, the Thai Cabinet approved tax measures pertaining to Digital Investment Tokens. Following this, Royal Decree No. 779 was unveiled, exempting tax on the transfer of Digital Investment Tokens, effective from August 16, 2023.

“Digital Investment Tokens” are specific digital tokens structured to represent the rights of individuals to invest in various projects or businesses under the Digital Asset Business Act B.E. 2561 (2018) as amended.

Key Points of the Royal Decree:

  • Exemption in the Primary Market:
    • Companies and juristic partnerships will now be exempt from corporate income tax and VAT for revenues or taxable values derived from transferring digital investment tokens. This is applicable for tokens offered publicly according to the Digital Asset Business Act. This includes transactions as far back as May 14, 2018.
    • For hybrid digital tokens—those that function as both Investment Tokens and Utility Tokens or are designed for other purposes—the exemption is solely granted to the portion identified as Investment Tokens.
  • VAT Implications in the Secondary Market:
    • Transfers of digital investment tokens conducted since May 14, 2018, are exempt from VAT.

This decree underscores the rising prominence of digital assets in the contemporary financial realm. Aiming to equate the tax treatments of digital investment tokens with traditional securities, the Thai Government is solidifying its dedication to an unambiguous and uniform regulatory architecture, encouraging heightened investments in the digital asset sector.

For additional information on this or any other aspect of the Digital Asset Business regulations in Thailand, please reach out to ILCT Co., Ltd. at law@ilct.co.th

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Thailand Approves Corporate Income Tax and Value Added Tax Exemptions on Investment Tokens

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The Cabinet recently approved a corporate income tax and VAT exemption on the public offering and trading of investment tokens in both primary and secondary markets. This tax exemption applies to companies or juristic partnerships that issue and offer investment tokens to the public in the primary market, as well as individuals, companies, or juristic partnerships that transfer or trade investment tokens in the secondary market.

The tax incentives include a corporate income tax exemption and VAT exemption for companies or juristic partnerships that offer investment tokens to the public in the primary market under the Emergency Decree on Digital Asset Businesses B.E. 2561 (2018) (“Digital Asset Businesses Law”).

For the transfer or trading of investment tokens in the secondary market, VAT is also exempted. This tax exemption is applicable to both companies and individuals.

In the event of hybrid tokens i.e., a mixture of both investment and utility tokens or tokens issued for other purposes under the Digital Asset Businesses Law, the tax base for investment tokens would be exempted from VAT if the investment tokens can be segregated from utility tokens or tokens issued for other purposes.

It is important to note that these tax incentives are subject to specific conditions as specified in the Notification of the Director-General of the Revenue Department. Moreover, the measure will apply retroactively from May 14, 2018. Therefore, it is advisable to consult a tax specialist to ensure compliance with all requirements before taking advantage of these tax exemptions.

In conclusion, this recent approval of corporate income tax and VAT exemptions on public offering and transfer or trading of investment tokens is a positive development for companies and individuals involved in digital asset businesses. These tax incentives provide a significant boost to the digital asset industry and further establish Thailand as a hub for digital asset businesses. Companies and individuals should seek professional advice to ensure compliance with all regulations and requirements. ILCT remains your preferred choice to seek tax advice relating to all businesses and industries.

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Thailand’s Work from Home Bill introduces an amendment to the Labor Protection Act B.E. 2541

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Thailand’s Work from Home Bill introduces an amendment to the Labor Protection Act B.E. 2541, a critical labor law in the country. In particular, the amendment adds Section 23/1 to the Act, providing a clear regulatory framework for employers and employees who engage in remote work relationships, outlining their respective rights and obligations. The bill aims to offer additional options for work arrangements, elevate the level of labor protection, provide work stability, and enhance the quality of life for employees in Thailand.

According to the amendment, an employer and employee can reach an agreement on home and remote working in the employment contract or in the form of electronic information where it can be accessed and utilized without changing the meaning. The agreement may allow the employee to work outside the business premises using information technology, like computers and smartphones if the job nature permits. The agreement must be in writing, whether physical or electronic, and contain specifics such as the period of the agreement, working hours, rest periods, overtime work and holiday work criteria, leave types, work scope, and employer control and supervision.

Under the amendment, remote employees can refuse contact from their employers or supervisors beyond working hours, unless they gave prior written consent. Furthermore, the bill also requires employers to treat on-premises and remote employees equally. As such, it requires the adoption of policies to regulate every aspect of remote working, including the amendment of current work policies. Other topics that may be included in remote work policies would be the distribution of company supplies among all employees and related costs, the protection of company data, and IT security. In addition, employers shall ensure that remote working settings will not undermine teams’ collaboration and instead will support innovation.

It is worth noting that the amendment does not compel employers to allow remote work; it only provides the option and the regulatory guidelines to do so if mutually agreed. The amendment also does not impose any criminal penalties for violating its provisions. However, the employees who violate the consent letter and the employment contract may be penalized by the Company’s Work Rules.

The Work From Home Bill will be effective on April 18, 2023, 30 days after its publication. The regulation will significantly impact the labor landscape in Thailand, offering flexibility and added benefits to both employers and employees.

ILCT can support can advise and assist companies in all labor matters, including compliance with labor protection and labor relations law, preparation of work policies, and dispute resolution in the Labor Court.

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Foreign actors to be exempt from paying Personal Income Tax in Thailand

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On June 21, 2022, the Cabinet of the Royal Thai Government decided to exempt the Personal Income Tax (PIT) collection from foreign actors when working on films shot in Thailand in the next five years, with the expectation of increasing the revenue in Thailand, publicizing and promoting the image of Thailand through foreign films, and developing the skills and potential of personnel in Thai film industries. The regulation will be effective starting from August 2, 2023.

In general, foreign actors or actresses shall be liable to pay PIT in Thailand on income derived from shooting films in the Kingdom. The said income may be exempted from PIT under the Avoidance of Double Taxation Agreement between Thailand and the foreign country in which the foreign actor has its tax residency.

However, the new measures exempt actors and actresses from PIT under the conditions that the actor or actress is domiciled abroad, and receives an income due to his or her performance in a foreign film produced by a company or juristic partnership incorporated under foreign law which obtains a filmmaking permit under the law governing films and videos.

In addition, it is useful to remind that the Department of Tourism provides measures to promote foreign film shooting in the form of cash rebates at the rate of 15-20% of the expenses incurred in the country – with the ceiling being fixed at 75 million baht – when the funds are obtained from foreign sources and paid to Thai individuals or Thai juristic persons.

For any inquiries related to regulation on movie production in Thailand or taxation regulation, please contact ILCT Ltd. via email at law@ilct.co.th.

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Amendment to the Civil and Commercial Code with an aim to introduce a new form of merger and changes in the structure of a private limited company.

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On November 8, 2022, the Act Amending the Civil and Commercial Code (“CCC”) (No. 23) B.E. 2565 (2022) (the “Amendment Act”) was published in the Royal Gazette and will enter into force 90 days from the day after the publication date, i.e., on February 7, 2023.

Key amendments introduced by the Act

Shareholding Structure

Prior to the Amendment, the minimum number of promotors required to form a company is three individuals. This has been changed to just two individuals.

CCC Amendment Act
  • The minimum number of promotors is three
  • If the number of shareholders is reduced to two, the court may order the company to be dissolved or the company may file for dissolution.
  • The quorum requirement for the shareholders’ meeting is at least one-fourth of the company’s capital
  • The DBD allows the shareholders to agree on the Memorandum of Association remaining in force for 10 years from the date of registration of the MOA; if the shareholders do not express an agreement on this, the general rule is that the MOA will remain in force perpetually
  • The share certificate shall present a director’s signature
  • The notice of convening the shareholders’ meeting shall be delivered to all shareholders via registered mail and made public in a local newspaper.
  • The minimum number of promotors is two
  • If the number of shareholders is reduced to one, the court may order the company to be dissolved or the company may file for dissolution
  • The quorum requirement for the shareholders’ meeting is the presence of at least two shareholders (or their proxies) representing at least one-fourth of the company’s capital
  • If the company is not registered within 3 years from the date on which the Registrar registered the Memorandum of Association, the latter shall no longer be valid
  • The share certificate shall bear at least a director’s signature and stamped the company’s seal (if any)
  • The notice of convening the shareholders’ meeting shall be delivered to all shareholders via registered mail at least 7 days prior to the meeting, and only in case the company has issued share certificates to bearers, it shall be made public in the local newspaper at least once or posted in the electronic media in accordance with the procedure prescribed in the Ministerial Regulation no less than 7 days before the meeting. A notice convening a general meeting where a special resolution is required to be obtained shall be made in the stated manner at least 14 days in advance of the meeting.

Consolidation of private limited companies

The CCC before the Amendment recognizes only the concept of “amalgamation” in which two or more companies can amalgamate into one new legal entity. The Amendment introduces the merger in which one company merges with another company without forming a new legal entity.

CCC Amendment Act
  • Amalgamation is the only type of business consolidation: two or more companies consolidating cease to exist and form a new entity
  • There is no protective measure for a shareholder objecting to the business consolidation
  • Creditors can object to the business consolidation within 60 days from the notification date
  • A Joint Shareholders’ Meeting is not provided by the Code
  • There are no provisions regarding the handover of the business
  • Business consolidation can happen in two ways: Amalgamation; Merger, with one of the companies surviving and the other consolidating companies being dissolved
  • The company must arrange for the shareholders who participated in the general meeting where the special resolution was passed who objected to the consolidation resolution to sell their shares at an agreed price, or at a price determined by an appraiser. Such shareholders will become shareholders of the merged or new entity if they do not accept the offer to buy their shares within 14 days of receipt of the offer to purchase.
  • Creditors can object to the business consolidation within 1 month from the notification date
  • Within 6 months from the date of the last company’s shareholders’ meeting resolving to consolidate, a Joint Shareholders’ Meeting shall be convened to consider a prescribed agenda * The 6-month deadline can be extended by the resolution of the Joint Shareholders Meeting, but for no more than 1 year.
  • The handover of the business shall occur within 7 days from the last Joint Shareholders’ Meeting.

*The regulation specifies the agenda items that must be considered at the Joint Shareholders’ Meeting. To mention some, the name of the Company resulting from the consolidation, the objectives, the appointment of directors, and the appointment of an auditor. In addition, the Joint Shareholders’ Meeting shall be held in proximity to the headquarter of one of the consolidating companies. A quorum to be met is provided, namely, a minimum of half of each company’s total shares must be represented. A Chairperson of the meeting shall be elected by the attending shareholders. Unless otherwise agreed, resolutions shall be resolved by the majority votes of the attending shareholders.

Transitional provisions

The Amendment Act also provides a set of transitional provisions to address the transition period and allows limited companies to adapt. In particular, Section 19 of the Amendment Act provides that in the event that an MOA is already registered prior to the date the Amendment Act becomes effective (i.e., February 7, 2023, the “effective date”) but the company has not yet been registered, the company shall be registered within 180 days from the effective date of the Act. However, as we already mentioned in the first table above, in case the MOA has not yet been registered prior to the effective date of the Act, the company shall be registered within 3 years from the MOA registration to avoid the latter being invalid.

Moreover, any business consolidation approved by a shareholders’ meeting prior to the effective date of the Amendment Act can be carried out according to the unamended version of the CCC.

What ILCT Ltd. can do for you

ILCT Ltd. can support companies in evaluating and carrying out the procedures for a business consolidation, either in the form of Amalgamation or Merger.

The firm has extensive experience in mergers, takeovers, and acquisitions of both private and public-listed companies. Our services include performing due diligence investigations, handling tender offers, tax planning and handling other formalities with the Securities Exchange Commission and the Securities Exchange of Thailand (in the case of public-listed companies), as well as preparing the necessary documentation to effect the change in ownership and the taking of necessary corporate actions, etc.

Contact us at law@ilct.co.th.

Amendment to the Civil and Commercial Code with an aim to introduce a new form of merger and changes in the structure of a private limited company. Download

The Cabinet approved tax measures and fee reductions for the beginning of the new year

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On December 20, 2022, the Cabinet approved tax measures and fee reductions for the transfer of residential property proposed by the Ministry of Finance as a New Year’s gift to the public. Following, we summarize the relevant information; ILCT offers a wide range of services encompassing all taxes relating to business and industry, for companies and individuals, do not hesitate to contact us at law@ilct.co.th for any inquiry related to taxation matters.

1. Reduction of Personal Income Tax (PIT) calculation under the “Shop Dee Mee Kuen” Project

The “Shop Dee Mee Kuen” Project will allow an individual taxpayer (excluding ordinary partnership or non-juristic body of persons) to reduce PIT of the tax year 2023 up to Bath 40,000 by using domestic goods or service expenses paid between January 1 and February 15, 2023, as an allowance for PIT calculation.

Conditions apply to the goods and services that, if purchased, can be used as an allowance:

  • Purchase of goods or services from VAT registrants;
  • Purchase of books or e-books; and
  • Purchase of registered One Tambon One Product (OTOP) goods.

Moreover, there are two additional guidelines to record the expenses as an allowance:

  1. Expenses for goods or services not exceeding Baht 30,000 must be accompanied by a full-form tax invoice or receipt in paper form, e-tax invoice, or e-receipt, as the case may be;
  2. Expenses for goods or services exceeding Baht 30,000 by no more than Baht 10,000 (limit of Baht 40,000) must be accompanied by an e-tax invoice or e-receipt, as the case may be.

Receipts and e-receipts are accepted in the case of purchasing books, e-books, or OTOP goods only.

Goods and services that are excluded from the measure are:

  • Liquor, beer, and wine
  • Cigarettes
  • Cars, bicycles, and boats
  • Newspapers, magazines
  • E-newspapers and e-magazines
  • Tour guide fees
  • Accommodation fees paid to hotels
  • Utility fees, water fees, electricity fees, telephone fees, internet fees
  • Service fees under a long-term service agreement incurred before January 1, 2023, or ending after February 15, 2023, although they will be paid from January 1 to February 15, 2023, such as membership fees
  • Non-life insurance premiums

 

The Ministerial Regulation providing the details on the “Shop Dee Mee Kuen” Project was published in the Government Gazette on December 29, 2022.

2. Reduction of Land and Building Tax (L&B Tax)

L&B Tax calculated for the tax year 2023 will be reduced by 15% of the amount.

 

3. Reduction of Transfer Fee and Mortgage Registration Fee

  • Transfer Fee will be reduced from 2% to 1%; and
  • Mortgage Registration Fee will be reduced from 1% to 0.01%

 

Conditions to the reductions apply:

  • The reductions apply to the transfer of immovable property, including residential properties, such as a single house, a semi-detached house, a townhouse, a commercial building, a condominium unit, and lands.
  • The purchase price and the appraised price of the property shall not exceed Baht 3 million;
  • The mortgage value shall not exceed Baht 3 million;
  • The buyer shall hold Thai nationality; and
  • The registration of the transfer and mortgage is made at the same time.

The Ministerial Regulations providing the details on the fee reduction was published in the Government Gazette on January 3, 2023. As a consequence, the fee reduction will be effective from January 3, 2023, to December 31, 2023.

The Cabinet approved tax measures and fee reductions for the beginning of the new year Download

Taxation for foreigners under Thai laws

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Thailand is a popular destination for expats and retirees from around the globe. If you’re a foreigner living in Thailand, or with properties or ties in the country, it is important to know what type of income is subject to taxes under Thai laws.

This brief summary of taxes will give you an overview of the various taxes that the foreigners are subject to under Thai laws.

Personal Income Tax (“PIT”)

Thailand imposes a Personal Income Tax (“PIT”) on worldwide income, through the application of source rule and residence rule.

Source rule applies to foreigners who earn Thai-sourced income, and thus, are subject to PIT in Thailand, whether or not such income is paid in Thailand.

Residence rule applies to foreign-sourced income, depending on the status of the foreigner as a tax resident in Thailand or not. The Thai tax year follows the calendar year, and tax residency is defined as when a foreigner stays in Thailand for a period or periods aggregating 180 days or more in any tax year. A tax resident earning foreign-sourced income shall be subject to PIT in Thailand if such income is brought into the Kingdom in the same tax year in which such income is gained. On the other hand, if the foreigner is not a tax resident, PIT in Thailand does not apply to foreign-sourced income.

The tax rate on PIT is progressive, from 0% to 35% of the net assessable income after deducting any exempt incomes, expenses, and allowances. In general, taxpayers have until March 31 of the following (tax) year to file the annual PIT return (PND 90 or 91). If a foreigner earns certain income, such as income from rental, or income from a business, a half-year PIT return (PND 94) shall be filed within September 30 of the same tax year.

Foreigners deemed liable to pay PIT shall apply for a tax identification number within 60 days from the date they begin earning assessable income.

Gift Tax

The Gift Tax is a particular type of PIT for which the above source rule and/or residence rule also apply. In this case, a foreigner receiving movable properties (cash, car, jewelry, etc.) from an ancestor, a descendant, or a spouse as a sustentation, support, or gift, will be subject to a 5% Gift Tax on the portion exceeding 20 million THB, in each tax year.

However, if the movable properties are given to the foreigner in the event of a formal ceremony, on customary occasions, or under moral responsibility, by a person who is not an ancestor, a descendant, or a spouse, the 5% Gift Tax will apply on the portion exceeding 10 million THB, in each tax year.

Lastly, the 5% Gift Tax shall be applied on the portion exceeding 20 million THB of the appraised value of immovable assets (land, building, condominium unit, etc.) per legitimate child, in each tax year, which ownership is transferred without compensation from Parents to their legitimate children (but not adopted children).

Withholding Tax (“WHT”)

Certain types of income shall be subject to Withholding Tax (“WHT”). The duty to deduct the WHT from a tax resident or a non-tax resident rises at the time a payment is made. For instances:

Types of income A tax resident A non-tax resident
Income from employment Progressive rates from 0% to 35% of the net assessable income Progressive rates from 0% to 35% of the net assessable income
Income from a position or performance of work Progressive rates from 0% to 35% of the net assessable income 15% of the fee
Interest 15% of the interest 15% of the interest
Capital gains Progressive rates from 5% to 35% of the capital gains 15% of the capital gains
Dividends 10% of the dividends 10% of the dividends
Rental fee 5% of the rental fee 15% of the rental fee

Eventually, the WHT rate may also be reduced or exempted in case of a Double Taxation Agreement (“DTA”) being in place between Thailand and the country where the foreigner is a tax resident, or in case other domestic Laws are applicable i.e., the Investment Promotion Act.

Value Added Tax (“VAT”)

Any foreigner who regularly sells goods or provides services in Thailand and whose annual revenues exceed 1.8 million THB shall register for Value Added Tax (“VAT”) before the starting of business operations or within 30 days of the earnings reaching the threshold of assessable income.

It has to be noted that foreigners providing an electronic service (“e-Service”) from abroad to users in Thailand who are non-VAT registrants shall register for VAT as well.

However, certain activities are exempt from VAT, i.e., services under an employment agreement, rental of immovable property, and performance of an actor/actress.

Currently, the general VAT rate is equal to 7% of the goods or service value. Activities such as the export of goods and services are subject to 0% VAT. VAT returns (P.P. 30 or P.P. 30.9) shall be filed monthly, together with the due tax payment (if any) within the 15th day of the following month.

Importers are also subject to VAT in Thailand, no matter whether they are VAT registrants or not. In this case, VAT shall be collected by the Customs Department at the time of the goods being cleared at customs for import.

Specific Business Tax (“SBT”)

Any foreigner who sells or transfers an immovable property within 5 years from the date of acquisition shall be subject to a Specific Business Tax (“SBT”) at a rate of 3.3% (including a 10% local tax) of the appraised value or sale price, whichever is greater, at the time of registering the transfer at the Land Office.

Stamp Duty (“SD”)

The execution of certain instruments is subject to a Stamp Duty (“SD”), which can be affixed or paid by cash at the Revenue Office or via the e-stamp duty system on the website of the Thai Revenue Department, depending on the case. These instruments include rental of land or building, transfer of shares, transfer of immovable property, hire of work, loan of money, power of attorney, guarantee, and duplication of an instrument.

The SD rate is fixed or may be calculated as a percentage of a specific value according to the transaction. For instance:

  • rental of land or building is subject to an SD of 0.1% of the rental fee, or key money, or both, for the entire lease period;
  • transfer of share is subject to an SD of 0.1% of the paid-up value of the shares or shares sale value, whichever is greater;
  • transfer of immovable property is subject to an SD of 0.5% of the appraised value or sale value, whichever is the greater
  • hire of work contracts are subject to an SD of 0.1% of the remuneration provided for the work under the contract
  • duplication of an instrument is subject to an SD of 1.00 THB if the SD of the original instrument does not exceed 5.00 THB, or 5.00 THB if the SD of the original instrument exceeds 5.00 THB.

The person liable to pay or affix the SD is the lessor, share transferor, contractor, lender, land or building seller, guarantor, etc., in the transaction. The holder of a legal instrument as mentioned above, or a beneficiary, are also subject to pay SD to execute the instrument.

Inheritance Tax

Any foreigner who is domiciled in Thailand under the Immigration Law shall be liable to pay Inheritance Tax within 150 days from the date the net inheritance value from each testator exceeds 100 million THB, together with the tax payment. In case the beneficiary is an ancestor or a descendant of the testator, a rate of 5% applies to the net inheritance value (the inheritance value received after deduction for any liabilities) exceeding 100 million THB from each testator. In other cases, a rate of 10% applies to the net inheritance value exceeding 100 million THB.

The above tax rates shall also apply to other foreigners, but only to an inheritance that is situated, registered, withdrawn, or claimed in Thailand.

Land and Building Tax (“L&B Tax”)

Any foreigner being the owner of a land, building or condominium unit (“owner”) in Thailand shall be required to pay a Land and Building Tax (“L&B Tax”) within April of each year.

Currently, the L&B Tax is calculated based on progressive rates ranging from 0.01% to 0.70% of the net appraised value of the land, building and/or condominium unit, depending on the use of the land and/or building, i.e., agricultural, residential, unused/vacant, or other uses.

What ILCT Ltd. can do for you

ILCT offers a wide range of services encompassing all taxes relating to business and industry, for companies and individuals. These include tax planning, interpretation of tax laws, regulations and double tax treaties, defending tax assessments and litigating tax claims.

Contact us at law@ilct.co.th for any inquiry related to taxation matters.

 

Taxation for foreigners under Thai laws Download

The Immigration Bureau launches “e-Extension” to allow foreigners to extend certain types of visas by electronic means

News & Articles

What is the “e-Extension”

The “e-Extension – Save time at Immigration” is a service system aimed at increasing the convenience for people requesting permission to extend their stay in the Kingdom of Thailand temporarily, through digital technology. The new system is in line with the government development guidelines to digitalize the management of state affairs. With the e-Extension, foreigners can submit an application for permission to extend their stay in the Kingdom and pay any related fees electronically and on their own. Then, they will need to visit the Immigration office to verify their identity and receive a stamp.

How to apply for the “e-Extension”

The Immigration Bureau partnered with VFS Global, the most important outsourcing specialist for governments worldwide, to provide the online channel for the E-Extension application.

To begin with, the applicant must register on the website providing all the necessary information and documents. The passport used for the application shall be the same one used to get the e-Extension visa and shall be valid after the date of application. The application can be created for an individual or a family (maximum of 5 members).

Then, the applicant shall book an appointment at the immigration office to get the e-Extension visa stamp on the passport and pay the fee through a secured payment gateway. Usually, the processing time of the e-Extension visa is between 1 and 7 days. However, a super urgent visa service is provided at additional cost to process the visa within the next day.

The last step, provided that the application will be approved and given an e-Extension code, is to print out and save a pdf file with the outcome and visit the immigration office to get the stamp. Once at the immigration, the new E-Extension area is clearly indicated to queue for the E-Extension counter. Presenting the necessary required documents and passport to the officer shall be enough to get the E-Extension visa stamp.

Eligible visa and documents required
To apply for an electronic extension, foreigners must have a stamp for a temporary stay after possessing certain types of visas. In particular, there are 12 categories of visas that are eligible to apply for the e-Extension:

  1. Carry out duties for the government (Non-Immigrant and Official visa): Non-Immigrant and Official visas are required prior to the application for the extension visa, and a valid Work Permit
  2. Tourism: A tourist visa is required before applying for the extension visa
  3. Teacher, professor, or expert in government educational institution (Non-Immigrant and Official visa): Non-Immigrant and Official visas are required prior to the application for the extension visa, and a valid Work Permit and a Teaching license or equivalent
  4. Study in a government educational institution (Non-Immigrant and Official visa): Non-Immigrant is required prior to the application for the extension visa, and a Letter of confirmation and request for a temporary stay issued by the educational institution
  5. Teaching practice or conducting training or research in an educational institution or research institution (Non-Immigrant and Official visa): Non-Immigrant and Official visas are required prior to the application for the extension visa, and a Letter of confirmation and request for a temporary stay issued by Head of research or head of the educational institution.
  6. Performing duties in the mass media (Non-Immigrant and Official visa): Non-Immigrant and Official visas are required prior to the application for the extension visa, and a valid Work Permit and a Letter of confirmation and request for a temporary stay issued by the Government Public Relations Department or MFA’s the department of information
  7. Skilled laborer, medical expert, or practitioner of other professions (Non-Immigrant): Non-Immigrant is required prior to the application for the extension visa, and a Letter of confirmation and request for a temporary stay issued by the relevant organization or agency
  8. Installation or repair of machines, aircrafts, or ocean vessels (Non-Immigrant): Non-Immigrant is required prior to the application for the extension visa, and a Letter of confirmation and request for a temporary stay issued by the relevant organization or agency
  9. Family member of a Thai residence (Non-Immigrant): Non-Immigrant is required prior to the application for the extension visa, together with the documents proving the relationship, the residence certificate and alien registration certificate of the alien granted residence permit in Thailand, and proof of address notification
  10. Used to have Thai nationality or whose parent is or was of Thai (Exemption visa type), (TR 60 days) and (Non-Immigrant): an Exemption visa (POR30, PORPOR30, PORPOR14), TR15, Non-30, Non-90, APEC, a TR 60 days visa, and a Non-Immigrant visa are required prior to the application for the extension visa, together with documents proving that the applicant previously held Thai nationality or whose parent holds or held Thai nationality and proof of address notification
  11. Necessity case, Confirmation or request by the embassy (any reasons), Exemption visa, TR 60 days, Non-Immigrant and Official visa: an Exemption visa (POR30, PORPOR30, PORPOR14), TR15, Non-30, Non-90, APEC, a TR 60 days visa, and a Non-Immigrant and Official visa are required prior to the application for the extension visa, together with a Letter of confirmation and request for a temporary stay from the embassy and consulate in Thailand
  12. Training case, Confirmation, or request by the embassy (Non-Immigrant): Non-Immigrant is required prior to the application for the extension visa, and a Letter of confirmation and request for a temporary stay from the embassy and consulate in Thailand together with a valid Work Permit

A Person in charge of conveyance or crew of conveyance having an Exemption visa (Transit) can also apply for an extension visa, provided that they have a Letter of confirmation and request for a temporary stay from the relevant government or private organization or agency.

Please, note that the indicated required documents do not cover the full set of documents that the immigration will require to extend the visa. Applicants may find the complete list of required documents for each type of visa on VFS Global’s website.

What ILCT Ltd. can do for you

ILCT offers expatriation and immigration services, including advice and assistance in obtaining/renewing visas and work permits for expatriates and their families, obtaining Tax Identity Cards, customs Clearance Cards, Thai and International Drivers’ Licenses, etc., and personal tax planning.

Contact us at law@ilct.co.th for any inquiry related to immigration matters.

 

The Immigration Bureau launches “e-Extension” to allow foreigners to extend certain types of visas by electronic means Download

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