The Thai government has introduced a number of initiatives, including tax relief, to help businesses in the country manage the effects of the global pandemic and the lockdown measures subsequently introduced to manage it. In 2020, it announced reductions in withholding tax rates via Ministerial Regulation No. 361 and Ministerial Regulation No. 364, which were published in the Royal Thai Government Gazette.
The changes to withholding tax are as follows:
- With effect from 1 April to 30 September 2020, withholding tax on certain types of income (including services fees and commissions) is reduced from 3% to 1.5%.
- With effect from 1 October to 31 December 2020, withholding tax that is remitted electronically (also known as e-withholding) is reduced from 3% to 2%.
Paying withholding tax
Regulation No.364 states that banks act on behalf of companies to deduct and remit withholding tax to the Thai Revenue Department. Once a bank has received a withholding payment, it must issue an electronic confirmation receipt to both the taxpayer and the payee. The receipt must contain:
- The payer’s tax ID number and the recipient’s tax ID number
- The amount and type of assessable income (and applicable VAT) that is being remitted
- The amount of withholding tax that is being paid
- A unique bank reference number
Taxpayers must provide their contact details to their bank in order to receive their receipt confirmation. Banks can choose to send the receipt by SMS but must include (at a minimum) the tax identification numbers of taxpayer and recipient, and the details of the withholding tax paid. There is no requirement to issue withholding tax certificate once the bank sends the confirmation to the tax payer.
Banks must remit withholding tax to the Revenue Department no later than 4 days after receiving the payment from the taxpayer and by the deadline agreed with the Revenue Department. Once withholding tax remittance is complete, taxpayers can log-in to the Revenue Department's online portal and check their tax payment status.
Company withholding tax remittance: Companies that want to remit e-withholding tax to the Revenue Department themselves can do so, but must provide the same information required by banks, which includes at a minimum:
- Their tax ID number and the tax ID number of the payment recipient
- The amount and type of income (and applicable VAT) that is being remitted
- The amount of withholding tax that is being paid to the Revenue Department
e-Withholding reduction criteria
The reduced 2% withholding tax rate is only applicable to companies and legal partnerships, for certain types of payment and for certain payment recipients defined in the Thai Revenue Code.
Types of eligible payments involve assessable income from:
- Rendered services such as brokerage fees or commission - accessible under Section 40(2) of the Revenue Code
- Goodwill, copyrights, royalties, or other rights - assessable under Section 40(3) of the Revenue Code
- Liberal arts professions including law, engineering, and architecture - assessable under Section 40(6) of the Revenue Code
- Contracts of work involving essential materials provided by the contractor - assessable under Section 40(7) of the Revenue Code
- Hire work remuneration, prizes, discounts, and benefits from sales promotions and similar services, excluding:
- Public entertainer remuneration
- Non-life insurance premiums
- Transport charges
- Advertisements
Types of eligible recipients:
- Companies and legal partnerships in Thailand - except for:
- Any revenue producing foundations or associations and,
- Any foundations or associations covered by Section 47(7)(b) of the Revenue Code
- Persons liable for personal or corporate income tax that are residents of, or conducting business in, Thailand - except for:
- Any revenue producing foundations or associations and,
- Any foundations or associations covered by Section 47(7)(b) of the Revenue
In August 2020, only a small number of Thai banks were offering e-withholding tax remittance. Taxpayers should contact their bank to find out whether e-withholding is available to them.
For more information on Thailand’s labour laws, tax, and payroll landscape, browse activpayroll’s Thailand Global Insight Guide: find background on Thailand’s global economic profile, major industrial sectors and common business practices.
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