Thailand corporate tax: an owner's overview

The headline rate and who pays it

Companies incorporated in Thailand pay corporate income tax (CIT) at 20 percent on net taxable profit, worldwide. Foreign companies pay on profits attributable to business carried on in Thailand, typically through a branch or deemed permanent establishment. Net profit follows the audited accounts, adjusted under the Revenue Code: certain provisions and unrealised items are disallowed, entertainment expenses are capped, and expenses must be genuinely for the business and properly documented. The documentation point is not a formality; tax invoices and withholding certificates are the currency of deductibility in a Thai audit.

Accounting profit and taxable profit therefore diverge, and the reconciliation schedule in the annual return is where the two meet. Owners reading management accounts should ask for the effective tax rate against the 20 percent headline; a large and persistent gap in either direction usually means a timing difference someone should be able to explain in one sentence.

SME rates

Companies with paid-up capital not exceeding five million baht and annual revenue not exceeding thirty million baht qualify for reduced progressive rates: the first band of profit (up to roughly three hundred thousand baht) is exempt, the next band up to three million baht is taxed at 15 percent, and profit above that at the standard 20 percent. Both conditions must hold; raising capital above the threshold, even for work permit arithmetic, forfeits the relief for the whole year. Owners weighing capital increases against foreign staffing requirements should run both numbers first. The bands also reward honesty about structure: splitting one business into several small companies to multiply the exempt band is a pattern the Revenue Department recognises and can collapse, taxing the group as the single enterprise it is.

The rhythm of payment

The half-year prepayment is the mechanism owners most often misjudge. It is a forecast with penalties attached: understate projected profit by more than 25 percent without reasonable cause and a surcharge of up to 20 percent applies to the shortfall. A strong second half is therefore a tax planning event in August, not a pleasant surprise in December. Withholding tax suffered on the company's own income through the year, covered in our separate briefing on Thai withholding tax, is credited against the final liability, and chronic overwithholding becomes a refund claim that invites audit; better to manage it than to reclaim it.

Deductions, depreciation and the paper behind them

The deduction rules reward orthodoxy. Depreciation runs at statutory maximum rates, buildings slowly, machinery and vehicles faster, with a cap on the depreciable cost of passenger cars that makes an expensive company car partly a shareholder indulgence rather than a tax asset. Entertainment is deductible only within a small fraction of revenue and with proper documentation. General provisions, unrealised losses and most reserves are disallowed until realised. Bad debts become deductible only after the prescribed collection efforts, which for larger debts means litigation, not a write-off memo.

Two further disciplines pay for themselves. Expenses need tax invoices or withholding certificates in the company's own name, and payments to individuals without documentation drift into the non-deductible pile at audit. Intercompany charges, management fees, royalties, interest on shareholder loans, must be priced as if between strangers and papered before year end; transfer pricing disclosure now applies to companies above the revenue threshold, and the Revenue Department's questions start from that form.

How audits arrive

Revenue Department attention is triggered, not random: refund claims, gross margins out of line with the industry, VAT and CIT returns that fail to reconcile, chronic losses alongside continued trading, and withholding trails that exceed declared revenue. An audit opens with an invitation to explain, proceeds through document requests, and settles in most cases through negotiated adjustments plus surcharge. The companies that fare best are those whose files answer the first letter completely; escalation feeds on gaps.

Getting profits out: dividends and withholding

CIT is only the first layer. Distributing profit as a dividend triggers withholding at 10 percent for individual shareholders, Thai or foreign, and for most foreign corporate shareholders, subject to treaty terms. Thai corporate shareholders are often exempt on dividends from holdings of 25 percent or more held for the required period, which is why holding structures matter. Branch profits remitted abroad bear a 10 percent remittance tax; interest and royalties paid offshore carry their own withholding at 15 percent, reduced by some treaties. The all-in cost of a baht of profit reaching a foreign individual owner is therefore roughly 28 percent, 20 percent CIT then 10 percent on the distribution, before home-country tax and credits. Timing is a lever too: dividends require distributable retained earnings, and a legal reserve must be topped up at 5 percent of each distribution until it reaches 10 percent of registered capital, so distribution capacity is a balance sheet fact rather than a preference.

For owners who are Thai tax residents, remittance and residence rules interact with dividends in ways the company-level analysis does not capture; our separate briefing on Thai personal tax residence covers that side.

BOI holidays and other reliefs

BOI promotion can exempt corporate income tax for 3 to 13 years depending on the activity, with import duty relief and, in some categories, subsequent reduced rates. The exemption attaches to promoted revenue, so companies with mixed activities account for promoted and non-promoted profit separately, and the discipline of that separation is a condition of keeping the privilege. Other reliefs worth knowing about exist for international business centres, for certain R&D and training spend at enhanced rates of deduction, and in the loss carry-forward of five accounting periods. There is no consolidated group taxation; each company stands alone, which shapes how groups place profit, losses and the intercompany charges between them.

What an owner should actually watch

• The August forecast. The PND 51 estimate is the one filing where judgement, not bookkeeping, drives the outcome.
• Documentation of related-party dealings. Management fees, loans and transfer pricing with offshore affiliates are the Revenue Department's favourite audit ground, and disclosure requirements for larger companies have tightened.
• Retained versus distributed profit. The 10 percent dividend layer is a real cost with real timing choices attached.
• Whether the structure still fits. SME thresholds, BOI conditions and treaty positions all drift as the business grows.
• The audit triggers above. A refund claim or an outlier margin is sometimes unavoidable; walking into one with an incomplete file is not.

Asia Global Partners does not replace a company's auditor; we sit above the process for principals, making sure the forecast, the distribution policy and the structure are decisions someone has actually taken rather than defaults nobody chose.

This briefing is general information, not legal, tax or investment advice. Thai rules change frequently and individual cases differ. Verify current requirements with the relevant authorities, including the Immigration Bureau, the Board of Investment, the Land Department, the Department of Business Development and the Revenue Department, and take advice on your own facts before acting.