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Taxation and Accounting in Thailand

New withholding tax regime

Finally, the Revenue Department has launched the extension of the withholding tax regime to cover a number of the local transactions. While the amendment to the existing Ministerial Regulation No. 144 is very broad, the more definite guidelines will be reflected in the amendment to the Departmental Instruction No. Taw Paw 4/2528, which is expected to be announced next week. Briefly the Instruction No. Taw Paw 4/2528 will be amended as follows:

"Clause 3/1 - A company, registered partnership or another type of a juridical entity paying income under Section 40(2) of the Revenue Code to a payee being:

(1) a company or a registered partnership carrying on the business in Thailand other than those in (2), shall withhold tax at the rate of 3%; and

(2) a foundation or an association other than those announced by the Announcement of the Cabinet pursuant to Section 47(7)(b) of the Revenue Code, shall withhold tax at the rate of 10%.

Clause 3/2 - A company, registered partnership or another type of a juridical entity paying income under Section 40(3) of the Revenue Code to a payee being:

(1) a company or a registered partnership carrying on the business in Thailand other than those in (2), (2) a foundation or an association other than those announced by the Announcement of the Cabinet pursuant to Section 47(7)(b) of the Revenue Code, shall withhold tax at the rate of 10%.

Clause 4 - The following payer of income under Section 40(4)(a) of the Revenue Code shall have obligations to withhold tax:

(1) a bank under the laws concerning a commercial banking business and a company under the laws concerning a finance and a credit foncier business paying income under Section 40(4)(a) of the Revenue Code to a payee being:

1.1 a company or a registered partnership carrying on the business in Thailand other than those in (1.2), shall withhold tax at the rate of 1%; and

1.2 a foundation or an association other than those announced by the Announcement of the Cabinet pursuant to Section 47(7)(b) of the Revenue Code, shall withhold tax at the rate of 10%.

(2) a company, registered partnership or another type of a juridical entity other than those in (1) paying income under Section 40(4)(a) of the Revenue Code in the form of interest on bonds or debentures to a payee being a bank under the laws concerning a commercial banking business and a company under the laws concerning a finance and a credit foncier business shall withhold tax at the rate of 1%.

(3) a company, registered partnership or another type of a juridical entity, other than those in (1), paying income under Section 40(4)(a) of the Revenue Code in the form of interest on bonds, debentures, bills and loan, net interest on loan after deduction of tax under the petroleum income tax, the difference between the redemption value and the sale price of bills or debt instruments issued by a company, a registered partnership or another type of a juridical entity and sold for the first time at a price below the redemption value; to a payee being:

3.1 a company or a registered partnership carrying on the business in Thailand other than those in (3.2) and a bank under the laws concerning a commercial banking business and a company under the laws concerning a finance and a credit foncier business, shall withhold tax at the rate of 1%; and

3.2 a foundation or an association other than those announced by the Announcement of the Cabinet pursuant to Section 47(7)(b) of the Revenue Code, shall withhold tax at the rate of 10%.

Clause 12/1 - A company, registered partnership or another type of a juridical entity paying income under Section 40(8) of the Revenue Code in the form of service fees, other than hire of work service fees, advertisement fees, compensation to actors, passenger fees for public transportation; fees for hotel and restaurants and premiums for life insurance and risk insurance, to a payee being:

(1) an individual, shall withhold tax at the rate of 3%; and

(2) a company or a registered partnership carrying on the business in Thailand other than a foundation or an association, shall withhold tax at the rate of 3%.

Clause 12/2 - A company, registered partnership or another type of a juridical entity paying reward, discount or any benefits in relation to the marketing promotion to a payee being:

(1) an individual, shall withhold tax at the rate of 3%; and

(2) a company or a registered partnership carrying on the business in Thailand other than a foundation or an association, shall withhold tax at the rate of 3%.

The above withholding tax is not applicable to the payer of income that is the buyer of the goods or services as the consumer without intention to resell the same.

Clause 12/3 - A company, registered partnership or another type of a juridical entity paying premiums for the risk insurance to a company or a registered partnership carrying on the risk insurance business under the relevant laws of Thailand shall withhold tax at the rate of 1%.

Clause 12/4 - The amount of payment that is subject to withholding tax must exceed 1,000 bahts per contract even though the payment would be divided in installments at lower than 1,000 bahts each."

The Cabinet finally abolished the withholding tax of 1% on the sales of the goods and reduced the withholding tax rate of commission fees from 15% to 3%.

It is expected that the scheme will raise more than 20 billion bahts to the Government. It will be effective as from 1 July 2001.

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