Withholding tax (“WHT”) is a deduction from payments made to suppliers who provide a service. The withholding tax rates can vary depending on the types of income and the tax status of the recipient.
How to calculate
Not all outward payments are subject to withholding tax. It is only expenses greater than 1,000 THB and expenses lower than 1,000 THB for which there is a long-term contract in place (telephone, Internet, etc.). Other exceptions are payments made to non-taxpayers, such as governmental organisations or BOI companies.
- Remittances made to overseas suppliers may also incur a WHT deduction.
- Countries with a double tax treaty with Thailand have different applicable rates.
Withholding Tax rate
|Transportation||1% (Not including fare for public transportation)|
|Service and professional fees||3% (paid to a Thai or foreign company having a permanent branch in Thailand)|
5% (paid to a foreign company not having a permanent branch in Thailand)
When calculating the amount to pay the WHT deduction is calculated net of VAT.
A company is making a 107,000 THB gross payment to a Construction company for its services (taxed by the rate of 3%). Since withholding tax is calculated net of VAT (Net = 100,000 THB), the amount to be withheld will account for 3,000 THB (=3% of Net). In the end, instead of getting paid 107,000 THB, the construction company will receive only 104,000 THB and the withheld 3,000 THB will be credited against its final tax liability once submitted by the company to the Revenue Department. Effectively, the clients of the construction company pay its Corporate Income Tax on the firm’s behalf. The company/payer is also required to issue the legal firm a tax certificate as a proof of the deduction.
In essence, the whole point of withholding tax is for the Revenue Depart to able to collect the tax from liable entities in advance instead of having to wait until the end of financial the year.
|SERVICE||NET||VAT (7%)||GROSS||WITHHOLDING TAX (3%)||TO BE PAID|
|Service||100,000 THB||7,000 THB||107,000 THB||3,000 THB||104,000 THB|
Companies withholding taxes for other firms, employees or other entities have a duty to submit the money to the Revenue Department within first seven days of the following month in which the payment is made. If the above-mentioned company paid the legal firm in June, it would have to file a Withholding Tax Return and submit the withheld tax by the 7th of July.
Late submissions are penalized as follows:
- Advantages realized in Thailand, in cash or in kind (paid in or outside Thailand)
- Income from a foreign source that is brought into Thailand within the year
+ 1.5% interest on the amount of the taxes owed per for that month.