Tax benefits for small business (SMEs)
1.Corporate Income Tax
Many foreign businesses understand that Thailand corporate income tax rate is at a flat rate of 30%, that is true for the past but from January 1st 2002; every Thai company with paid-up capital of 5 million Baht and below (classified as SMEs) is elligible for a special rate of corporate income tax as below:
Net profit( Bht.) Tax rate
Up to 1 mil 15%
>1 mil-3 mil. 25%
>3 mil 30%
If you find that you company's annual profit is more than Bht. 3 mil, being an SME, you will save tax at Bht.250,000.- a year but what can you do if you are a small company with a paid up capital of more than 5 mil Bht.?
The answer is you can reduce the paid up capital to below or up to 5 mil in order to enjoy this SMEs tax benefits. However, before you do that, please make sure to ascertain the reason why you registered a capital more than 5 mil Bht.
As in some cases, the Visa and work permit section have a regulation that a company needs to have capital register 2 mil per "farang" working with it. And when the company needs to employ three or more foreigners; it will automatically force you to have >5 mil registered capital.
If you want to reduce the registered capital, you have to apply to the Department of Business development for the reduction and can enjoy the reduced tax rate from that year.
As a small business, the following laws will allow you to deduct a special rate of depreciation in order to increase your expenses; which will automatically decrease profit and save more tax.
If you are a Thai company with durable assets (excluding land) worth less than 200 million Baht and hiring less than 200 employees, you can enjoy the special depreciation rate on assets as follows:
a) Computer hardware and peripheral
You can depreciate on the acquisition date at 40% of its total cost. The remaining will be depreciated at a regular rate for at least 3 accounting periods.
b) Durable building and plant
Can be depreciated on the acquisition date at 25% of its total cost. The remaining will be depreciated at a regular rate not exceeding 5% of the total cost per annum.
c) Machinery and equipment
You can depreciate on the acquisition date at 40% of its total cost. The remaining will be depreciated at a regular rate not exceeding 25% of the total cost per annum. (Effective for assets acquired on or after 31st January B.E.2545)