[Update] Withholding Tax in Thailand | pnd3 – NATAVIGUIDES

Thailand, like the other developing countries in the world, has their own taxation laws. It has an extensive withholding tax system applicable to both domestic and international payments. In this system, a payer of income is mandated by law to deduct tax from the types of payments described under the system and remit the amount of tax deducted to the Thailand Revenue Department within seven days of the end of the month of payment.

Thailand has many categories of payments which are subjected to withholding taxes. Non-payment of withholding tax to the Revenue Department can be very costly as the payer is responsible for such payment. Failing to collect the withholding tax when you make payment to a supplier will end up with you absorbing the withholding tax which was supposed to be deducted from the payment made to the supplier.

Some of the 20 main categories of income which are subject to withholding tax with rates varying between 0.75% and 10% for the withholding tax applied on dividends, are:

• Services invoices are subject to 3% withholding tax. PND53 withholding tax returns form will be used for this category.
• Rental invoice where the payee is a juristic person is subject to 5% withholding tax. PND3 withholding tax returns form will be used for this category.
• Rental invoice where the payee is a taxable foundation is subject to 10% withholding tax. PND3 withholding tax returns form will be used for this category.

All withholding tax deducted from payments for above income type will be remitted to the Revenue Department on specific schedule and such amount will become a credit against the corporate income tax of the payment recipient.

The company that withholds tax on the payment of salaries will use the PND1 withholding tax returns form. The PND1 kor is the annual withholding tax return for individuals containing the summary of tax withheld on employee’s salary income for the year. PND1 kor will have to be filed before end of February of the following year.

Withholding Tax on Domestic Payments

The following types of payments under the domestic payment category are subject to corresponding withholding tax (WHT):

Category
Rate

Advertising fees
Dividends and shares of profits
Salaries and wages of labor/worker
Hire of labor (Service Fees)
Interest
Non-life insurance premiums
Prizes (competitions, lucky draws, etc.)
Professional fees
Rental of property
Rental of ships
Royalties
Sales promotion rebates and benefits
Transportation charges
2% WHT rate
10% WHT rate
based on Personal Tax rates
3% / 5% WHT rate
1% WHT rate
1% WHT rate
5% WHT rate
3% WHT rate
5% WHT rate
1% WHT rate
3% WHT rate
3% WHT rate
1%WHT rate

A recipient or receiver of income under the domestic payment will receive a withholding tax deduction certificate from the payer of income.

Withholding Tax on International Payments

The following types of payments under the international payment category are subject to corresponding withholding tax (WHT):

Category
Rate

Capital gains income
Dividends and shares of profits
Hire of work (service fees)
Interest
Professional Fees
Rental of property
Royalties
15% WHT rate
10% WHT rate
15% WHT rate
15% WHT rate
15% WHT rate
15% WHT rate
15% WHT rate

The prescribed withholding tax rates under the Thai tax law are subject to reduction or exemption pursuant to provisions in a Double Tax Treaty with Thailand. Further tax planning and advisory from professionals is needed to be sure that the correct tax amount  is withheld to every individual. Trusted local firms who have expertise in the field can be consulted to avoid inconvenience.

Companies (and some other forms of businesses) in Thailand have the duty to withhold taxes from their employees when paying for their compensation and from their vendors when making payments for most kinds of services.

Here we want to talk more on vendors withholding tax.

There are many rates of withholding taxes, 1% for transportation, 2% for advertising, 5% for rent, 3% for most other services (including legal, accounting, repairs, cleaning, construction, making things to order), etc. Even when you make payment to overseas vendors, you need to submit withholding taxes if the transactions meet the criteria.

For example, you have to withhold 3% from a legal service fee. If the invoice is THB 100 plus VAT of THB 7 = 107, when you pay this invoice, you will pay only (100 – 3 + 7) = 104 and you also give the vendor the withholding tax certificate showing that you withhold the tax from him. So basically the vendor does not get THB 107. He gets only THB 104 and a tax certificate showing that he has paid a tax of THB 3 through you withholding from him. This way, the Thai Revenue Department gets the tax from the vendor in advance instead of having to wait till year-end for the vendor to file his tax return.

Note that because the law makes it your duty to withhold the tax and submit it to the Revenue Department within the 7th of the following month, if you pay any vendors and fail to withhold the tax, you will have to submit the tax anyway using the money from your own pocket.

When your company is new to Thailand, you should always check with your Thai accountant every time you are paying for anything. Knowledgeable Thai accountants know most types of services and rent require the payer to withhold taxes from the payee.

Towards the end of each month, your Thai accountant will prepare Employee Withholding Tax Return (Form PND 1, for taxes withheld from employees), Withholding Tax Return – Companies (Form PND 53, for taxes withheld from vendors who are juristic persons), Withholding Tax Return – Individual (Form PND 3, for taxes withheld from vendors who are not juristic persons).

The fine for late submission (or not filing at all) of each form for the month is THB 200 per form plus 1.5% interest per month on the amount of the taxes owed.

After your Thai accountant files the withholding tax forms for you, good accountants know to fill out the detail of the taxes and the forms that they filed and the detail of the receipts from the Revenue Department into a report called “Special Tax Records for the withholding taxes and the tax submission”.

Contact MSNA for Thailand accounting and tax advice.