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Tax system in Thailand in a nutshell
If you’ve lived here for a while, you might have noticed that the Thai system works quite well and efficiently collects funds from its residents (but perhaps less so at returning them).
The bulk of all individual taxes in Thailand is under the governance of the Revenue Department of the Ministry of Finance. Exceptions are customs duties (Customs Department) and excise tax (Excise Department).
As far as the tax on income’s concerned, Thailand’s tax administration follows the concept of self-assessment. Taxpayers are legally obliged to declare what they earn, calculate & file a tax return and pay respective taxes to the authorities (the income declared and tax paid are assumed to be correct). The tax year is the calendar year.
But you will see that there are also several consumption and other taxes that are collected at the time of a transaction/event and don’t count towards your tax credit.
To avoid double taxation, the country has also entered into double tax treaties with 61 countries. In practice, it means when expats pay tax overseas, they can use it to offset their Thai income tax.
Five different categories of all individual taxes in Thailand
There are several ways to categorise individual taxes (e.g. direct vs indirect), but in this article, we will look at the taxes from the perspective of what they are imposed on. In Thailand, these are:
- Taxes on what you earn (Income taxes)
- Taxes on what you buy (Consumption taxes)
- Taxes on what you own
- Other miscellaneous taxes
- Unofficial/indirect taxes
1. Taxes on what you earn
Personal income tax
If you work in Thailand, you will pay personal income tax. It is a direct tax imposed on the income of individual taxpayers.
You don’t necessarily pay tax on all of your income, however. Taxable income (income that you pay tax on) is calculated as your total assessable income (all income that qualifies for taxation) minus allowances & deductions. Depending on your situation & type of income, your allowances & deductions may vary.
Thailand uses progressive tax rates instead of a flat rate. The first 150,000 THB you make is tax-free, and then the rates vary from 5% up to 35%.
Withholding tax
Instead of paying your tax bill once a year, the Thai government collects tax little by little throughout the year. As you get paid each month, your employer has to withhold a percentage of your income and send it to the government. This amount gets credited towards the final tax amount you owe.
Withholding tax applies to most types of income (employment, royalty, dividends etc.), and its amount is linked with the category (typically 3% to 15%).
If calculated well (by yourself or your HR), the amount withheld will precisely cover your tax bill. But if you have overpaid or underpaid, you will have to either pay the remainder or get a tax refund.
Social Security Fund (SSF) contributions
Even though it’s not your typical tax, paying to the Social Security Fund is still a mandatory contribution that’s deductible from your final tax bill. The monthly contribution equates to 5% of your salary but is capped at 750 THB a month (or 9,000 THB a year). Employers and the government must contribute an equal amount, matching your contribution.
Capital gains tax
Thailand doesn’t have a separate tax on capital gains. Instead, most gains are taxed as ordinary employment income. Still, some aren’t taxed at all, for example, from selling shares in a company listed on the Stock Exchange of Thailand (or units of mutual funds).
Luckily for expats with foreign investment portfolios, capital gains and investment income earned by a resident from sources outside Thailand aren’t taxable unless sent to Thailand in the year of receipt.
2. Taxes on what you buy
Value-added tax (VAT)
Value-added tax is an indirect tax imposed on the sale of most goods & services. It currently sits at 7% in Thailand, but the government’s planning to raise it to 10% (due in 2023 unless delayed further). Usually, you can’t claim it back as an individual, but you may be able to do so in specific scenarios, such as when the government announces special tax schemes or when you earn business income.
Customs duty & import tax
When importing things to Thailand, you are often faced with import tax and customs duty. The import tax is standard 7%, while the duty rate depends on the product category and can range anywhere from 0% to 35% of the cost of the product.
Both import tax & customs duty have a threshold of 1,500 THB, meaning they are only triggered for items with a value larger than that. Just note that the declared value of an item includes both the price of the product and shipping costs.
Not all product categories trigger customs duty, however. Examples of exempted categories are books, mobile devices or cameras. On the other hand, the most heavily taxed are dry food & supplements (35%) and clothes and accessories (30%). Ouch!
The duties are lower for goods from countries with a free trade agreement in place with Thailand (at the moment, Australia and New Zealand, Chile, India, Japan, Peru, China, Hong Kong, India, Japan and South Korea).
Excise tax
Excise tax is a consumption tax on mainly luxury goods, such as petroleum products, tobacco, liquor, beer, soft drinks, crystal glasses, perfume and cosmetic products, air-conditioners and passenger cars with ten seats or fewer.
Even though you won’t be charged directly (unless you are a business), you will feel it in everyday life. The cost of imported alcohol, certain products and cars is considerably higher in Thailand than in many developed countries worldwide.
Specific business tax
Specific business tax is typically imposed on businesses not subject to VAT, but in a few instances, it also applies to individuals – specifically when selling immovable property (3.3%).
3. Taxes on things you own
Property tax
Homeowners in Thailand will be familiar with property tax consisting of two sub-taxes: house & land tax and local development tax. Both are collected annually.
The house & land tax amounts to 12.5% of the annual letting value of the property, which can be a house, building or land that’s rented and not occupied by the owner.
Local development tax is imposed on someone who owns land. This tax rate depends on the estimated land value and necessitates an appraisal. Those who use the land for living or, for example, for raising stock can get an allowance on the said tax.
If you buy a condo or other property in Thailand, it will trigger an additional tax – transfer fee of 2%, specific business tax at 3.3% and stamp duty at 0.5%.
Net wealth/worth taxes
Luckily there are no net wealth/worth taxes in Thailand.
Inheritance & gift tax
Thailand has an inheritance tax that’s triggered when the value of the inherited estate or legacy is greater than 100M THB. Its rate depends on your circumstances.
Spouses are entirely exempt from the tax, while descendants are taxed at 5%. In all other cases, the inheritance tax rate is 10%.
Inheritance tax is subject to the following properties: immovable property, securities according to the law, bank deposit accounts or other money of a similar nature that the testators have the right to call back or claim from financial institutions or persons who hold such money, registered vehicles, and financial assets to be prescribed in royal decrees.
4. Other miscellaneous taxes
Stamp duties
Stamp duty is a tax that the government places on legal documents, usually in the transfer of assets or property. In Thailand, it’s levied on 28 documents, each taxed at a different rate (ranging between 1 and 200 THB).
The documents liable to stamp duty include transfers of land, a lease, stock transfers, debentures, mortgages, life assurance policies, annuities, power of attorney, promissory notes, letters of credit, and travellers’ cheques.
5. Indirect or unofficial taxes
While the above taxes are quite common and relatively well known to most, Thailand also collects money in various lesser-known and often not very popular ways. The chances are you have been charged most of the below taxes during your stay in Thailand.
Arrival or “tourist” tax
Thailand is to impose a tourist tax on incoming international arrivals sometime in 2022. The government hasn’t settled on the final amount, but it could be 300 THB or 500 THB.
Departure tax
Leaving Thailand by air or even flying domestically comes with a hidden extra cost, the so-called departure tax. When leaving on an international flight, the tax is 700 THB, while domestic departures are taxed at 100 THB. This fee is included in your airfare.
Dual pricing
While not an official tax, double or dual pricing could be certainly looked at as such, especially by expats in the country. In many places in Thailand, you will find two sets of prices – one for the locals and one for everyone else. Examples where you can find it include:
- Temples
- National parks – this also includes many islands, hikes and waterfalls
- Certain tourist destinations or attractions (for example, Snake Farm in Bangkok)
The reason it’s unpopular among expats is because the fee can be up to 10x larger than the Thai price, and it doesn’t consider their long-term residence status.
Note that national parks don’t accept cash. So when you go for a hike, island hopping or see a waterfall, prepare change.
If you are passionate about this topic, you can follow #2PriceThailand on Twitter or learn more on this website.
Conclusion
That was a brief overview of all individual taxes in Thailand. They are here to stay in Thailand, and if anything, the country will keep raising them (looking at you, VAT) or introduce new ones, such as the arrival tax in 2022.
And while you won’t be able to avoid most of them as an expat living in Thailand, you can learn to manage and optimise for some of the most impactful ones. Especially personal income tax on your employment, investment income, or customs duty when buying products from abroad.
