Better understand Withholding Tax System & Calculation in Thailand
WHAT IS WITHHOLDING TAX IN THAILAND?
Withholding tax known as "WHT" refers to the deducting of tax from payments made by suppliers who provide services. The rates of withholding tax can be different depending on income, nature of the service and resident status. Withholding Tax also applies to interest and dividend payments in Thailand. Sending money to overseas suppliers could also result in a WHT deduction. Different rates apply to countries that have a double tax treaty in place with Thailand. However, no deduction is made for payments to non-taxpayers (e.g. the Government, BOI promoted company).
Dividends to a Thai company might be eligible for withholding taxes exemption if certain conditions are fulfilled under the Revenue Code, investment promotion law or investment code. Dividends to non-resident individuals and companies are subject to 10% tax. This tax may be reduced under a treaty. Interest paid to a nonresident company or individual will be subjected to 15% withholding tax, unless it is reduced by a tax treaty. Non-resident persons or companies pay royalties that are subject to a 15% final tax. These taxes can be reduced by a tax treaty.
The Withholding Tax deducted will be paid to Revenue Department within seven days after the month in the which the payment was made. For example, a payment to a supplier on the 28th of August 2018 will need the Withholding Tax deducted in order to be paid to the Revenue Department by September 7, 2018. The Revenue Department has announced that companies who have registered for efiling will be allowed an additional eight days in order to file their tax returns. This incentive will be available until 31 January 2024.
The fine for late submission is 100 baht within the first 7 days and 200 baht after 7 days. An additional penalty of 1.5% of the outstanding amount calculated monthly.
For more information please refer to the official website of the Revenue Department in Thailand: https://www.rd.go.th/english/index-eng.html
WITHHOLDING TAX CALCULATION IN THAILAND
Consider a company making a THB 107,000 net payment to a Law Firm for its services. Taxes are at 3%.
Withholding tax is calculated net from VAT, and the amount to be withheld would equal 3,000 THB (=3%) of Net. The final result is that the legal firm does not receive THB 107,000. Instead, it receives THB 114,000. Once the company submits its tax returns to the Revenue Department the withheld THB 3,00 will be added to the final tax liability.
Effectively, clients pay the firm's corporate income taxes on their behalf. As proof of the deduction, the paye/company must also issue a tax certification to the firm. The main purpose of withholding is for Revenue Department to be able to collect the tax earlier than having to wait until the end.
Common Withholding Tax deduction rates.
- Rent: 5%
- Rental service fee: 3%
- Parking: 3%
- Transportation: 1%
- Phone: 3%
- Advertising: 2%
- Non-life insurance: 1%
- Professional fees: 3% / 5%
- Royalties: 3%
- Interest: 1%
- Dividends: 10%
- Prizes: 5%
- Water and electricity: Not Applicable
- Public transportation / air tickets: Not Applicable
- Life insurance: Not Applicable
New measure about the e-Withholding Tax in 2021 and 2022
On January 12, 2021, a resolution was passed to approve tax measures to promote the use of the withholding tax system. The e-Withholding Tax by reducing the withholding tax rate of 5% and 3% to 2% for Payment of assessable income through the system e-Withholding Tax from 1 October 2020 – 31 December 2022 This will help return liquidity to people and entrepreneurs, resulting in cash flow in the economy by over 24,840 million baht The Revenue Department has approved Tax measures to promote investment in electronic tax systems by companies or juristic partnerships can Expenses from investments and using system services e-Withholding Tax or electronic tax invoice system and electronic receipts (e-Tax Invoice & e-Receipt) to be deducted as expenses 2 times from 1 January 2020 – December 31, 2022, which will help the private sector have costs and the burden of preparing and storing documents, including Decreased tax duties It also promotes the digital economy and digitization of both public and private sectors Support Thailand 4.0 policy and enhance competitiveness of the country and help prevent the spread of the coronavirus disease 2019 (COVID-19).
The Revenue Department concluded that the e-Withholding Tax system It is one of the Tax From Home policies that the Revenue Department has introduced. process optimization digital work (Digital Transformation) is used to make operations and pay Electronic tax payment is easy and can be done anywhere, in line with the current situation that most entrepreneurs have changed their investments in more electronic so that businesses can operate can be operated continuously help drive the country's economy and help prevent the spread of COVID-19.
E-Withholding Tax is a new service of the Revenue Department. which is an electronic channel for taxpayers to remit withholding tax, whereby the payer with withholding duty is the one who notifies the receiving bank to withhold and remit the tax to the Revenue Department. instead In addition, the bank will also provide such tax evidence to the payee who is subject to withholding tax. The payee does not have to keep the withholding tax certificate in paper format as before. But you can check the withholding tax information on the website of the Revenue Department. or visit www.rd.go.th
New Normal & E-Withholding Tax
Under the new method called "New Normal" that all sectors have to change their lifestyles and business operations at the same time. Including the Revenue Department, which is one of the government agencies, has a tax measure that offers a new service in accordance with the way of life of taxpayers in the New Normal era. E-Withholding Tax is therefore one of the services in the form of electronic services that meet the needs of entrepreneurs in managing withholding tax during this period.
1. The payer (tax deductor) can retrieve withholding tax information from the Revenue Department website. Come to make a transaction filing via the E-Filing channel easily and quickly. Both the information is complete and correct.
2. Help reduce the process of issuing withholding tax documents, preparing a return for tax remittance. and taxpayer filing which the bank is the operator on behalf
3. Payees (taxpayers) who are subject to withholding tax through the system E-Withholding Tax Between October 1, 2020 and December 31, 2021, the withholding tax rate has been reduced from 3% to 2% on the basis of the Revenue Department's tax measures that help entrepreneurs affected by the crisis. COVID-19, which will help business operations become more liquid
4. Make it transparent Users can check evidence at the Revenue Department website. (www.rd.go.th) 24 hours a day without the need to store documents in paper form.
5. Reduce the cost of withholding tax certificate documents and the cost of document storage in paper format. from the foregoing Entrepreneurs would have seen that E-Withholding Tax benefits both in terms of reducing the cost of using paper. reduce work steps And more importantly, it can also be checked more easily.
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How will the payer and the payee know that the bank has made a deduction and remitted the tax payment and withholding tax information to the Revenue Department?
The payer and the payee can verify the withholding tax information on the Revenue Department’s website after 5 working days from the date the payer makes the payment. In addition, information can be downloaded by logging in to the e-filling system with a Username and Password. (This service will be available after you register with the Revenue Department.)
Is the payer required to issue and keep a withholding tax certificate?
Payers and payees are no longer required to issue or keep a withholding tax certificate. Withholding tax information will be kept at the Revenue Department’s website for 3 years.
What are the benefits of the e-Withholding Tax system for the Payer?
- An easier process as you can submit withholding tax and supporting information when you make transactions.
- No longer need to issue or keep a withholding tax certificate.
- No longer need to submit withholding tax and information to the Revenue Department manually.
- Less paper documents to keep.
- Additional withholding tax can be paid via the Bank’s channels.
What are the benefits of the e-Withholding Tax system for the Payee?
- No longer need to keep or request the withholding tax certificate from payers after receiving a payment.
- The e-withholding tax information can be verified and related documents can be downloaded from the Revenue Department’s website.
- The payee will receive more due to withholding tax privileges from the Revenue Department if payers use the e-Withholding Tax service.
If tax payers and payees have registered with the Revenue Department’s e-Filing system, do they have to register again to be able to verify information about the withholding tax that has been submitted by the Bank?
No, the payer and the payee can verify the withholding tax information on the Revenue Department’s website via the e-Filing system using their current Username and Password. If the taxpayers and payees have not registered with the e-filing system before, they can apply at the Revenue Department’s website by following the instruction on the website without any charge.