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How can you reduce your income tax in Thailand?
How much tax you can save as an expat in Thailand will depend on your family & income circumstances. Typically, long-term residents and locals with families will be likely able to deduct more, but more on that in a moment.
As a refresher, this is the formula for calculating your income tax in Thailand:
Taxable income = Assessable income - Deductions - Allowances - Tax creditsAs you can see, a lot can be deducted from your income before it gets taxed, so knowing the ins and outs of tax deductions, allowances, incentives, tax credits & exempt income can help you save a lot of money down the road.
Benefits of knowing your way around Thai tax
There are two main advantages of being able to navigate the Thai tax system:
- You can pay less in tax
- You can avoid overpaying tax
When you anticipate your earnings and tax savings for the year ahead, you can coordinate with your HR or accountant to deduct the exact amount each month. As a result, you don’t need to wait for a tax refund at the end of the tax year and give the Thai government an interest-free loan.
Complete list of tax deductions & allowances in Thailand
Let’s dive into the full list of deductions and allowances. Both are typically listed as either a percentage of assessable income or the actual expense incurred.
Deductions
Depending on the type of income you are earning, you can deduct the following amounts from your assessable income:
| Type of income | Deduction |
|---|---|
| Type 1: Employment income Salary/wages, pension income | 50% of assessable income but not more than 100,000 THB. Business deductions are not available against employment income. |
| Type 2: Income from the hiring of services Remuneration benefits, commissions, freelancer service fees, agent fees, meeting fees, director fees… | |
| Type 3: Royalty income Goodwill, copyright and other rights income, income from annuities, wills, juristic acts, judgments, etc. | 50% of assessable income but not more than 100,000 THB |
| Type 4: Interest, dividends, capital gain | Any taxpayer who domiciles in Thailand and receives dividends from a juristic company or partnership incorporated in Thailand is entitled to a tax credit of 3/7 of the amount of dividends received. In computing assessable income, the taxpayer shall gross up his dividends by the amount of the tax credit received. The amount of tax credit is creditable against his tax liability. |
| Type 5: Rental income | 30% for houses, buildings vehicles 20% for agricultural land 15% for other lands 10% for other |
| Type 6: Professional/liberal services income | 60% for medical professions 30% for other professions |
| Type 7: Contractor / Construction services income | 60% of assessable income |
| Type 8: Other income (business, agricultural, commercial, industrial, transport, other activities) | All expenses incurred for the purpose or the business OR 10-60% of assessable income (subject to the various rules prescribed in the Revenue Code) |
| Foreign Income brought into Thailand | No expense allowed |
Rules on foreign income
As mentioned before, resident taxpayers are taxed on incomes derived from sources inside and outside Thailand. But there’s a caveat – you will only have to pay tax on the foreign-sourced income you bring into Thailand in the same year you earned it. Foreign income can be from a post/office held abroad, a business carried abroad or property situated abroad.
Non-residents can bring in such foreign income without triggering any Thai tax.
Allowances
Personal allowance
| Type | Allowance | Notes |
|---|---|---|
| Single taxpayer | 60,000 THB | |
| Dependent spouse allowance | 60,000 THB | You can take a family allowance deduction for your dependent spouse if you’re a Thai resident. A dependent is a person who does not earn income in a tax year. Spouses and children living abroad can also qualify as dependents. If you are not a Thai resident, you can still take these deductions if your dependents are Thai residents. |
| Child allowance For parental care of dependent minor children or children not over 25 years of age and studying at an educational institution | 30,000 THB for biological children. 60,000 THB for biological children born in or after 2018 (from second child onwards). 30,000 THB for adopted children, and if claiming for any adopted child, the care of children allowance is limited to three dependent children in total | Each spouse is entitled to 15,000 THB (17,000 THB if the child is studying at the qualified level) and three dependent children. |
| Parental care For care of dependent parents of taxpayer or spouse in Thailand, over 60 years of age and having income not more than 30,000 THB per year. Only one taxpayer can claim it. | 30,000 THB for each parent | A non-resident is allowed deductions for spouse, children, and parents only if they are residents in Thailand. |
| Disabled or incompetent person support (family) | 60,000 THB for each family member | |
| Disabled or incompetent person support (other than family)
| 60,000 THB (one person per year) |
Specific allowances
| Type | Allowance | Notes |
|---|---|---|
| Health insurance premiums | Up to 25,000 THB (own health) is allowed as a deduction | The deduction for this premium, together with the above life insurance premiums paid, can’t exceed 100,000 THB in total. |
| Health insurance premiums for parents For the parents of the taxpayer or spouse in Thailand over 60 years of age and have income not more than 30,000 THB. | Amount Actual expense but not more than 15,000 THB for each. | |
| Life insurance premium (Paid by taxpayer or spouse) | Amount paid but not exceeding 100,000 THB each | |
| Life insurance premium for spouse | Up to 10,000 THB | |
| Retirement / pension life insurance | 15%, maximum of 200,000 THB | All combined, they can’t exceed 500,000 THB |
| Provident fund contribution | Amount paid with a limit of 15% of assessable income, maximum 500,000 THB | |
| Thailand National Savings Fund contribution | Amount invested with a limit of 15% of assessable income, maximum 500,000 THB | |
| Retirement mutual fund (RMF) contribution | Amount invested with a limit of 30% of assessable income, maximum 500,000 THB | |
| Super savings fund SSF investment Invested between 2020-2024, must hold for at least ten years | Amount invested with a limit of 30% of assessable income, maximum 200,000 THB | |
| Home mortgage interest | Amount paid but maximum 100,000 THB | |
| Social Security Fund contribution | Amount contributed | |
| Antenatal care and child delivery | A deduction of up to 60,000 THB for each pregnancy is allowed for expenses paid by the taxpayer or spouse for antenatal care and child delivery. If the expenses for each pregnancy are not paid in the same tax year, the amount paid in each tax year is allowed, but no more than 60,000 THB. | |
| Charitable contributions / donations | Amount donated but not exceeding 10% of the income after standard deductions and the above allowances | |
| Domestic purchase of goods or services expense (Shop Dee Mee Kuen) | Up to 30,000 THB under the conditions that it was purchased from a VAT-registered vendor (in Thailand). It doesn’t include liquor, beer and wine; cigarettes; gasoline and gas for vehicles; cars, bicycles and boats; newspapers and magazines; e-newspapers and e-magazines. | Applies to purchases made between Jan 1 – Feb 15, 2022. Tax invoice required. |
| Social Enterprise Investment Allowance | Amount invested but not more than 100,000 THB for each tax year 2021 to 2023 |
*Note that tax reduction entitlements on your Thai tax return cover only Thai plans. Foreign pensions, social security plans, life insurance plans, home mortgages and charitable donations are not deductible on your Thai tax return.
Tax credits & foreign tax relief
When your income gets withheld at a source, you can claim tax credits that count towards your tax liability for the given year. Examples are your employment income withheld at source or income from dividends from companies incorporated in Thailand.
If you also earn income in other countries where you also pay tax and these countries have a double tax agreement with Thailand, you can offset your tax in Thailand with your foreign taxes. Thailand has these agreements with the following countries:
| Countries | ||
|---|---|---|
| Armenia | India | Romania |
| Australia | Indonesia | Russia |
| Austria | Ireland | Seychelles |
| Bahrain | Israel | Singapore |
| Bangladesh | Italy | Slovenia |
| Belarus | Japan | South Africa |
| Belgium | Korea, Republic of | Spain |
| Bulgaria | Kuwait | Sri Lanka |
| Cambodia | Laos | Sweden |
| Canada | Luxembourg | Switzerland |
| Chile | Malaysia | Taiwan |
| China | Mauritius | Tajikistan |
| Cyprus | Myanmar | Turkey |
| Czech Republic | Nepal | Ukraine |
| Denmark | Netherlands | United Arab Emirates |
| Estonia | New Zealand | United Kingdom |
| Finland | Norway | United States |
| France | Oman | Uzbekistan |
| Germany | Pakistan | Vietnam |
| Hong Kong | Philippines | |
| Hungary | Poland | |
Non-deductible expenses & losses
As an individual taxpayer, you can’t carry forward or carry back your losses. Moreover, you can’t also deduct:
- Tax penalties, surcharges and criminal fines under the Revenue Code
- Any artificial or fictitious expense
- Any damage recoverable under an insurance contract or contract of indemnity
- Any disbursement if the payer can’t prove the identity of its recipient.
Tips for maximising deductions & allowances and lowering your tax
While I can’t tell you which deductions & allowances will work for you, I can share some quick tips from my personal experience. Besides the obvious deductions & allowances (taxpayer allowance and deduction from employment income), your best bets in terms of tax savings are:
Maxing out your life & health insurance (if applicable)
They must be purchased from Thai providers and are currently capped at 100,000 THB.
Maxing out your local investments (via SSF, RMF, provident fund etc.)
If you are an investor planning to stay in Thailand long-term (and Thai funds align with your investment strategy), you might want to look into SSF and RMF in particular. You can currently deduct up to 500,000 THB for contributing to these funds (and a few others) in aggregate!
Deducting business expenses incurred from deriving business income (Type 8)
You can deduct relevant business expenses from your side hustle, for example, equipment, tools etc.
Making use of special government tax schemes
You can take advantage of the government tax schemes for purchasing goods & services from VAT-registered sellers in Thailand. These schemes come and go but are great if you would buy those things anyway. The last two were at the end of 2020 and the beginning of 2022 (each offered a maximum deduction of 30,000THB).
Claiming back your bank interest (knowing what income is tax exempt)
If you’ve earned bank interest from your savings account of less than 20,000 THB per year, you can exclude it from your total assessable income (provided 15% was withheld by the bank) and claim the withholding tax back at the beginning of the following year before you file your tax return). OR you can include it and use the withholding tax as a tax credit, whatever works out better.
A similar principle applies to dividends from Thai assets.
The above strategies will only save you money if you genuinely need the end products or services (e.g. insurance). Otherwise, you will spend more money than you save.
But perhaps most importantly, let your employer / HR department knows about your deductions & allowances. Most aren’t proactive enough to ask, in which case you would be unnecessarily leaving money on the table.
Have I left something out, or do you know any other effective ways to reduce your Thai income tax? Please email me; I’d like to know!
Conclusion
As you can see, Thailand offers many deductions & allowances.
If you don’t have a family yet and are earning employment income, you should be able to figure out your tax savings quite quickly by yourself. But in more complex cases (e.g. you have multiple sources of income, have a family, and qualify for other deductions or allowances), you might benefit from speaking with an accountant, tax advisor, or employer. They will be able to help.
In any case, it’s worth your time looking into these. You can potentially save tens or hundreds of thousands of baht!
