Tax In Thailand

[Andrew Mac]

Hi everyone

I'm sorry, but I have a few *really, really, really* stupid questions ... and I apologise in advance for being so utterly hopeless at money matters :-/

I have just been looking at the income tax information kindly provided by ThaiVisa (at http://www.thaivisa.com/thailand_income_tax.0.html ), and I would just like someone to confirm that I understand the system more-or-less correctly ... or quickly fix up my errors, because I want to be absolutely sure I don't get the system wrong!

I understand from the table at the TV page that it is a progressive system, and that the tax rate goes up around about 10% at each level.

Now, if this means what I think it means, then (to give an example) if you earn 500,000 baht in a year, you're in the 10% club, but you actually pay what's called the "accumulated tax" of 42,500 baht, and not 50,000 (which is a straight 10% of your 500,000 baht) ... is that right?

And if you get an increase, and earn (say) 600,000 you don't actually pay 120,000 baht (which is 20% of 600,000), but rather 62,500 (being the accumulated tax of 42,500 for the first 500,000 + 20% of the next 100,000) ... is that also right?

If I've got that wrong, could someone please correct my misunderstanding!

Next, the "withholding tax" mentioned on that same page indicates to me that employers take an appropriate amount of tax out of each pay. But what's not entirely clear to me is what amount they actually take out: I assume they take out the properly calculated amount based upon the progressive scale, but please correct me if I'm wrong in that assumption.

Oh, and one last thing: am I also right to assume that a yearly bonus is also taxable, and that (to continue with our example) if you earned your 600,000 baht, you'd end up paying the same amount of tax at the end of the year, irrespective of whether you got it in 12 monthly instalments of 50,000 baht, or whether you got it by being paid 500,000 in monthly salary plus a bonus of 100,000 at the end of the year? That is, your tax liability still works out to be the same, no matter which way you get there. Again, please correct me if I'm wrong in either of these assumptions.

Thanks in advance to anyone who can confirm or correct my (mis)understanding of the system! :-)

[naka]

This may be out of date, but you can see the methodology.

www.thailand-accounting.com/incometax.html

[Andrew Mac]

Hi Naka :-)

Thanks so much! The link you were kind enough to post confirms that my basic understanding of the system seems to be correct, which is very good to know!

If there is another kind person out there who might be able to quickly answer my other questions -- about bonuses, and about employers withholding tax for employees -- I would very much appreciate it.

Thanks again for your help! :-)

[thaihome]

Hi Naka :-)

Thanks so much! The link you were kind enough to post confirms that my basic understanding of the system seems to be correct, which is very good to know!

If there is another kind person out there who might be able to quickly answer my other questions -- about bonuses, and about employers withholding tax for employees -- I would very much appreciate it.

Thanks again for your help! :-)

<{POST_SNAPBACK}>

What my company does is estimate what my total salary for the year will be and withholds an amount each month so that at the end of the year when they do the tax return it comes out even. They do this each month through out the year. I did get a refund of 12k baht once when they missed.

TH

[Andrew Mac]

Thanks so much, ThaiHome :-)

Once again, it's really good to know that I seem to be understanding the system correctly. Thanks for taking the time to answer!

[Wekhin]

Yes, you've got them all correctly. except that the table of TV is out of date and tax rates apply to "taxable income", not actual income.

Taxable income = Actual income (salary + bonus) - deduction - allowance - social security

For example,

annual salary = 500,000

bonus = 100,000

annual income = 500,000+100,000 = 600,000

deduction = 30,000 (TV calls it allowance)

allowance = 60,000 (40% of annual income up to 60,000, TV calls it deduction)

social security = 5% of monthly salary up to 750/month or 9,000/year

Therefore, taxable income = 600,000-30,000-60,000-9,000 = 501,000

Tax calculations:

1-80,000 | exempt | tax = 0 | accumulated = 0

80,001-100,000 | 5% | tax = 1,000 | accumulated = 1,000

100,001-500,000 | 10% | tax = 40,000 | accumulated = 41,000

500,001-1,000,000 | 20% | tax = 100,000 | accumulated 141,000

As for the taxable income of 501,000 above, total annual tax will be 41,200.

As for "monthly" w/h tax calculation, 12 is used to multiply monthly salary, bunus is added if any, in order to derived a presumed annual income. Then, the above calculation method is used to get a presumed total tax which later on is devided by 12 to get monthly w/h tax.

In case that an employee works, say, only 6 months of the second half of the year and earns only 300,000 (bonus included), the same method still applies. This means his total annual tax will be approximately half of the example above but the same method of calculation still applies. Therefore, he will be overtaxed at the time of paychecks but he will get a refund after filing annual tax form. However, in this case, w/h tax of December can be omitted (or adjusted) if it is known for sure that previous w/h taxes already cover (or mostly cover) his annual tax.

[Andrew Mac]

Hi Wekhin

Thanks so much to you -- and everyone else -- for taking the time to answer my questions. I really appreciate the great help you've all been!

:-)

[Wekhin]

Hi Andrew,

Oops! Sample in the last paragraph has a mistake. Three hundred thousand annual income will pay only 12,000 baht tax. But total w/h tax deducted from his paychecks will be a lot more than that.

Edited November 9, 2005 by Wekhin

[Sunbelt Asia]

Tax rates of the Personal Income Tax is now lower as no tax is charged up to 100,000 Baht since 2004.

Taxable Income Tax Rate (%) Tax Amount Accumulated Tax

0 - 100,000 Exempt

100,001 - 500,000 ...... 10 %......... 40,000....... 40,000

500,001 - 1,000,000......20.............100,000......140,000

1,000,001 - 4,000,000.....30.............900,000.....1,040,000

4,000,001 and over..........37

www.lawyer.th.com

[Wekhin]

Sunbelt is right. Just checked with my tax accountant. The first 100,000 has been exempted since 2004.

Edited November 10, 2005 by Wekhin

[Andrew Mac]

Thanks people, you've all been such a great help! :-)

But now I guess we've got to suggest that someone update the tax rates on the ThaiVisa page at http://www.thaivisa.com/thailand_income_tax.0.html

Anyone happen to know who we should report that to?

[Neeranam]

I was wondereing why I don't get taxed on my 25,000 a month anymore.