Withholding tax on salary is a significant part of the taxation system in Thailand, and understanding how it works is essential for both employers and employees. As an employee in Thailand, a portion of your salary is automatically deducted by your employer and paid to the Thai Revenue Department. This deduction, known as withholding tax, is part of the broader income tax system and is crucial for ensuring that individuals comply with tax obligations in the country. Here’s what you need to know about withholding tax on your salary in Thailand:
1. What is Withholding Tax?
Withholding tax is a tax deducted at source by the employer from an employee’s salary or wages before it is paid to the employee. The employer is responsible for calculating the amount of tax to be deducted and remitting it to the Thai Revenue Department. The amount deducted depends on the employee’s income level and tax rate.
2. How is Withholding Tax Calculated in Thailand?
The withholding tax rate in Thailand is progressive, meaning the more you earn, the higher the rate of tax deducted from your salary. The rates are based on a sliding scale, and different income bands have different tax rates. For employees, the tax brackets range from 5% to 35%, depending on your annual income.
The tax brackets for individuals in 2025 are as follows:
- Up to 150,000 THB: 0% (tax-exempt)
- 150,001 to 300,000 THB: 5%
- 300,001 to 500,000 THB: 10%
- 500,001 to 750,000 THB: 15%
- 750,001 to 1,000,000 THB: 20%
- 1,000,001 to 2,000,000 THB: 25%
- 2,000,001 to 4,000,000 THB: 30%
- Over 4,000,000 THB: 35%
These rates are applied to annual income, but withholding tax is deducted from your monthly salary. Employers use a monthly tax table to calculate the withholding tax based on your salary for each month, taking into account any deductions or allowances.
3. Tax Deductions and Allowances
Thailand’s tax system provides for certain deductions and allowances that reduce the amount of taxable income. These can significantly lower the amount of withholding tax deducted from your salary. Some common deductions include:
- Personal allowance: Employees are entitled to a basic personal tax allowance.
- Spouse and children allowances: Additional allowances can be claimed if you have dependents.
- Social security contributions: Social security contributions are deductible from taxable income.
- Life insurance premiums and donations: These are also allowed as deductions under certain conditions.
Employers will take these into account when calculating the amount of withholding tax to deduct from your salary.
4. Employer’s Responsibility
Your employer is responsible for the following:
- Calculating and withholding tax: Employers calculate the correct amount of tax based on your income and allowances.
- Paying the tax to the Revenue Department: The employer remits the withheld tax to the Thai Revenue Department on your behalf.
- Issuing a withholding tax certificate: At the end of the year or upon request, your employer should issue a certificate (Form PND 1) showing the amount of tax withheld from your salary.
5. Filing and Paying Taxes
Although the withholding tax is deducted by the employer, it’s important to understand that it is still your responsibility to ensure that you are paying the correct amount of tax. At the end of the year, you may need to file an annual tax return (Form PND 90 or 91) to reconcile the tax withheld with your actual tax liability. If the withholding tax deducted by your employer exceeds your actual tax liability, you may be entitled to a refund. On the other hand, if the withholding tax is less than your actual tax liability, you will need to pay the difference.
6. Foreign Employees and Withholding Tax
If you are a foreign employee working in Thailand, withholding tax will still apply to your salary. However, there are certain rules and exemptions that might apply to your situation:
- Tax Residency: A foreigner who stays in Thailand for more than 180 days within a calendar year is considered a tax resident and is subject to Thai tax on worldwide income.
- Double Taxation Agreements (DTA): Thailand has signed DTAs with many countries to prevent double taxation. If you are a tax resident of a country that has a DTA with Thailand, you may be eligible for reduced tax rates or exemptions on certain income.
7. Penalties for Non-Compliance
Both employees and employers must adhere to Thailand’s withholding tax regulations. If an employer fails to withhold or remit the tax properly, they could face penalties, including fines and interest charges. Employees may also be penalized for failing to file their annual tax returns or paying the correct amount of tax.
8. Tax Filing and Refunds
At the end of the year, employees are required to file a personal income tax return if they meet the filing requirements. The return will allow you to calculate whether you've paid too much or too little tax throughout the year. If too much tax was withheld, you may be eligible for a tax refund. On the other hand, if insufficient tax was withheld, you’ll need to pay the balance.
Conclusion
Understanding withholding tax on your salary in Thailand is crucial for managing your personal finances and ensuring compliance with the country's tax laws. It’s important to be aware of the progressive tax rates, available deductions, and the role your employer plays in withholding and remitting taxes on your behalf. Foreign employees should also pay attention to their tax residency status and any relevant double taxation agreements. By staying informed about the tax system, you can avoid penalties and ensure you are paying the correct amount of tax while making the most of any deductions or exemptions available to you.
