Laying the groundwork: A wide range of incentives exists for qualifying investment projects

There are eight major taxes imposed in Thailand:

• Corporate income tax: incorporated entities are generally subject to tax on their worldwide income while foreign incorporated companies are subject to tax on income derived from business in Thailand or on certain categories of income paid from Thailand;
• Petroleum income tax: taxes on petroleum and natural gas operations;
• Personal income tax: individuals are taxed on Thai-sourced income. Tax residents are also subject to tax on foreign-sourced income remitted to Thailand in the same year it is received;
• Value-added tax (VAT): imposed on certain goods and services performed in Thailand and used in Thailand. Specified imported goods are also subject to VAT, as are services performed abroad and used in Thailand;
• • Specific Business Tax: imposed on the gross receipts of businesses that are exempt from VAT, such as: ◦ Banking and similar businesses; ◦ Finance, securities and credit foncier; ◦ Life insurance; ◦ Pawn broking; ◦ Sale of immovable properties in a commercial manner or for profit; and ◦ Factoring.
• Stamp duty: imposed on certain documents executed in Thailand, or brought into Thailand;
• Customs duty: imposed on the importation of dutiable goods and export of certain goods comprising of rawhide and wood; and
• Excise tax: imposed on specified products such as alcohol, passenger cars, and on certain services.

Tax Incentives 

The Board of Investment is empowered to grant a wide range of fiscal and non-fiscal incentives and guarantees to qualifying investment projects. The taxation incentives can include:

• Exemption from corporate income tax for three to eight years with permission to carry forward losses and deduct them as expenses for up to five years after the end of the income tax holiday period;
• Exemption from tax on dividends paid out of promoted profits during the income tax holiday period; and
• Exemption or reduction of import duties on imported machinery or raw materials and components. Additional incentives are available to projects in Thailand’s special investment promotion zones, including a 50% reduction in corporate income tax after the end of the income tax holiday period.

Regional operating headquarters (ROH) can obtain a tax exemption on income derived from foreign operations and a concessionary tax rate of 10% on other qualifying net profits. Dividends received by an ROH from Thai or foreign subsidiaries, or paid by an ROH to foreign shareholders that do not carry on business in Thailand, can qualify for exemption from corporate income tax. Concessionary tax treatment is also granted to expatriate employees of an ROH.

Tax Losses

Losses incurred can be carried forward for five years for corporate income tax purposes and 10 years for petroleum income tax purposes.

Witholding Taxes

There is an extensive system that requires withholding tax to be deducted from specified domestic and international payments, such as dividends, interest, rents and royalty payments.

Tax Treaty Network

As of March 2014, Thailand has a total of 56 tax treaties in force.

Foreign Tax Credits

Thai incorporated companies are entitled to claim a foreign tax credit for tax paid in a foreign country on income that is also subject to Thai corporate income tax. The foreign tax credit cannot exceed the amount of Thai corporate income tax.

Transfer Pricing

The Revenue Department has issued transfer pricing guidelines based on the “arm’s length” principle, which add to tax rules for market rate pricing for related and unrelated party dealings.

Anti-Avoidance Rules

Thai tax law has limited general anti-avoidance provisions pursuant to which the Revenue Department may deny a tax deduction for artificial or fictitious expenses or those not exclusively expended for a business purpose or acquiring profits.