What is Withholding Tax?
Withholding tax is essentially a tax that is withheld by the buyer on certain services, which is then paid to the revenue department.
The seller receives the withholding tax form which they can submit with their end of year accounting to offset any taxes due.
Withholding tax has 2 important purposes for the governement.
First it helps raise some of the corporate income tax due when purchases are made, rather than at the end of the financial year.
Secondly it makes buyers responsible for tax collection, reducing the risk of tax evasion from the sellers.
Withholding Tax Rates
The following services will require Withholding tax to be deducted if either:
- Expenses are greater than 1,000 THB
- Expenses less than 1,000 THB but a long term contract is in place (eg. a phone bill)
Some companies are exempt from having withholding tax deducted including Government departments, BOI promoted companies, Chambers of Commerce etc.
|Service Type||Withholding Tax Rate|
|Public Transportation & Air tickets||None|
|Life Insurance Premiums||None|
|Insurance Premiums (Non-Life)||1%|
Company with branch in Thailand
Company without branch in Thailand
Dividends to another Thai company may be eligible for withholding tax exemption if specific conditions are met, under the Revenue Code or investment promotion law.
Dividends paid to a non-resident company and individual are also subject to 10% withholding tax, but this may be reduced under a tax treaty.
Interest paid to a non-resident company or individual is subject to withholding tax at 15% unless it can be reduced under a tax treaty.
Royalties paid to a non-resident company or individual is subject to a 15% final withholding tax which can be reduced under a tax treaty.
Calculating Withholding Tax
Calculating the withholding tax is fairly simple, but needs a little thought if the services are subject to VAT.
The amount to withhold is simply the percentage of the matching rate, from the Net Price.
This is then deducted from the Gross price.
|Service Type||Net Price||VAT (7%)||Gross Price||Withholding Tax (3%)||Pay to Supplier|
|Professional services (Thai company)||10,000||700||10,700||300||10,400|
Or if the price is inclusive of VAT, you need to deduct the VAT first and calculate based on the Net Price.
|Service Type||Gross Price||VAT (7%)||Net Price||Withholding Tax (3%)||Pay to Supplier|
|Professional services (Thai company)||10,000||654.21||9,345.79||280.37||9,719.63|
You can also use the calculator at the top of this page to calculate withholding tax automatically.
Also the "Calculate Original Price" button is useful if you have received a payment in your bank but unsure what amount or customer or invoice the payment relates to. Entering 9,719.63 and hitting this button will determine that this payment was for 10,000 THB minus withholding tax.
Withholding Tax Filing
Withholding tax must be reported to the revenue department every month, with the forms submitted by the company which withheld the tax.
The deadline for reporting is the 7th of the following month after the payment was made.
Failure to submit withholding tax returns ontime will incur a penlaty of 100 THB if submitted within 7 days of the deadline (eg the 14th) or 200B if later.
In addition a penalty of 1.5% of the unpaid amount will also be charged each month the tax goes unpaid.
The form or forms that you submit will vary depending on who the money has been withheld from and what the payments were for.
PND1 - Withholding Salary Tax From Full Time Employees
PND2 - Withholding Tax From Copyright, interest, dividends
PND3 - Withholding Tax From an Individual (With Attachment Page)
PND53 - Withholding Tax From a Company
A Withholding Tax Certificate would be created at the time of payment with 3 copies, 1 to be provided to the seller, 1 to be kept by the buyer and 1 attached to the buyers Withholding Tax Return.
Technically Salary Tax is counted as a Withholding Tax, but apart from the filing requirements you can disregard the details on this page as it is treated and calculated differently. To calculate Salary tax check out our article on Personal Income Tax, then the amount deducted would be filed monthly using PND1