Overview of Tax Compliance in Thailand
Thailand, sometimes referred to as the Kingdom of Thailand is located at the centre of the Indochina Peninsula. The nation is renowned for its vibrant cultural history, breathtaking natural beauty, and burgeoning economy. Thailand has drawn significant international investment and developed into a hub for trade and industry in the area because of its advantageous location and robust infrastructure. Thailand has many chances for enterprises and investors as a major international commercial hub with a booming economy. The Revenue Department, which is a division of the Finance Ministry, is in charge of running Thailand's tax system. The Revenue Department is in charge of enforcing Thai tax laws and collecting different taxes in accordance with those laws.
Why is tax compliance necessary?
Tax payments made by individuals and corporations go towards the government's tax income. The government uses the tax income it receives to fund a number of vital initiatives, including keeping a balanced budget and offering the populace basic goods and services. Businesses must now declare their taxes clearly to maintain confidence in the current context of increased scrutiny. Maintaining tax compliance is essential to ensuring that the whole system and the programmes and services it supports run properly and improve people's lives. Serious legal implications may occur if tax regulations are broken, including fines, penalties, and even jail.
What are the two main types of Taxes?
Taxes can be categorized into two main categories: direct tax and indirect tax.
Direct Tax: A direct tax is a type of tax the government imposes on individuals or corporations. The taxpayer is solely responsible for paying this tax, which is determined by the taxpayer's income, profits, or wealth. Direct taxes are frequently progressive, which means that the tax rate rises in proportion to the taxpayer's wealth or taxable income. Personal income taxes, corporation taxes, and property taxes are a few examples of direct taxes.
Indirect Tax: Contrarily, an indirect tax is one that is levied on the use, purchase, or exchange of products and services rather than directly on people or other businesses. Contrary to direct taxes, which are paid by the taxpayer directly, indirect taxes are paid by the end customer as part of the cost of the goods or services. These taxes are often regressive, which means that people with lower incomes or smaller purchasing power are typically more affected.
Types of taxes in Thailand
- Corporate Income Tax: The corporate income tax rate is 20%. A final withholding tax must be paid if a foreign corporation gets certain types of taxable income. With the exception of dividends, when the rate is 10%, withholding tax is typically 15%.
- Petroleum Income Tax: A petroleum company involved in petroleum exploration and production is subject to an annual direct tax called the Petroleum Income Tax (PT), which is levied on its net earnings. When profits are transferred outside of Thailand, it also applies. The Petroleum Income Tax Act and other relevant laws govern the precise policies and provisions for Petroleum Income Tax. This tax has different rates, penalties, surcharges, and other features than the corporate income tax.
- Value-Added Tax: At every step of manufacturing or distribution, sales of goods and services which are subject to the consumption tax known as value-added tax (VAT). In order to ensure that tax is paid proportionately along the whole supply chain, it is based on the value contributed to a good or service at each stage. The VAT in Thailand is at the rate of 10%. But in the current situation, the VAT rate has been reduced to 7%.this rate will be followed till 30th September 2023.
- Special Business Tax: In 1992, the Business Tax was replaced by the Specific Business Tax (SBT). It applies to specific companies that fall under the VAT exemption category. These companies are liable to the SBT in place of the VAT, which is computed using set rates applied to their gross income. Businesses, including commercial banking, financial institutions, the sale of real estate, and life insurance, are subject to the SBT. For certain forms of revenue, the tax rate for commercial banking and related financial firms have been lowered to 0.01%.
- Lands and Buildings Tax: The Land and Building Tax in Thailand is a yearly tax on real estate that is based on the use-agricultural, commercial, industrial, or residential of property. This tax must be paid by individuals or organizations that own or possess land or structures. Based on the property's official appraised value, the tax amount is determined. Depending on the intended use, Thailand's statutory maximum tax rates for land and building tax range from 0.15% to 3%. However, a royal decree lays out and establishes the precise rates that are used each year.
Stamp Duty Requirements
Instead of being levied on the transactions or the people involved, stamp duty is a sort of tax that is applied to certain legal documents or instruments. Any document that is subject to tax under the Revenue Code is referred to as an instrument in the context of stamp duty. Chapter six of Title II of the Revenue Code contains the rules and regulations pertaining to stamp duty.
The transfer of property, lease contracts, stock transfers, debentures, mortgages, life insurance policies, annuities, power of attorney forms, promissory notes, letters of credit, and traveler’s checks are just a few examples of the numerous instruments that are susceptible to stamp duty.
Tax Period in Thailand
A company's tax year, which must last 12 months, corresponds to its accounting year. There are several situations in which the accounting period may be less than a year. The first accounting period following the company's founding, the accounting period during dissolution, or when the Revenue Development Department gives permission to alter the accounting period are examples of these exceptions.
Services offered by Enterslice
To assist individuals and companies in managing their tax obligations quickly and efficiently, Enterslice provides a wide range of services. Here are a few of their main services provided:
Advice on Corporate Tax (R&D):
- Enterslice acknowledges the value of research and development (R&D) activities for businesses under its Corporate Tax (Research and Development Tax) policy.
- They offer complete tax services for businesses.
- Expert guidance on getting R&D tax benefits.
- By utilizing Enterslice's knowledge in this area, clients can maximize their tax benefits and optimize their tax situation.
International Tax Advisory Services:
- International tax planning
- Transfer pricing
- Double taxation agreements
- International tax compliance
- Provide customers with in-depth advice.
- Expert Guidance
Corporate Tax and Regulatory Compliance:
Enterslice offers professional guidance on
- Tax planning
- Reporting to help firms fulfill their corporate tax obligations.
They make sure that business -
- minimize risks,
- optimize their tax strategies,
- Keep current with ever-evolving tax legislation.
Services for Corporate Tax Advice:
Enterslice offers corporate tax advisory services that are specialized to the demands of different types of enterprises. Their team of skilled tax professionals provides individualized solutions, including strategies for tax planning, structuring, and risk control. Businesses can make wise decisions, reduce their tax obligations, and increase their profitability by utilizing Enterslice's skilled experts.
Corporate Tax Implementation:
- Assessing the impact of the organizational legal framework on the business.
- Examining any impacts on the business's net income and profits after taxes.
- Evaluating the company's selected tax year to see if it is sufficient and making any required adjustments if it is not.
- Examining the company's procedures to make sure they comply with all the tax laws and regulations.
Advisory Services on Mergers and Acquisitions:
The provision of mergers and acquisitions advisory services includes a number of essential elements, including conducting in-depth tax investigations, developing plans for buying or selling assets, developing tax models, supporting clients with vendor documentation, and coordinating the tax positions of the acquiring and acquired companies.
Guidance and Advice relating to Corporate Taxes:
Corporate Tax Registration, calculating the payable taxes, creating accurate corporate tax returns, meeting other tax reporting requirements, reviewing the company's tax return, and assisting with handling any inquiries from tax authorities.