Progressive Tax - explanation

[Flapjack22]

Hi, 

I have been working in Thailand for a couple of years already and have recently encountered an issue about my tax deduction from the salary. The issue is about how the progressive tax works, here is the famous table. 

 

So in the past to my understanding the progressive tax worked in a way that it increases while one accumulates income over time, so lets say with 60k net salary monthly first two months in tax calendar year (starting Jan 01) were tax free. 

After reaching 150k my tax increases to 5% and so on. Now I am almost certain it worked that way, and my tax refund always oscillated around +- few thousand bath, so I can deduct that  it was done more less correctly. 

 

Now new accountant stated, that this table takes into consideration total money I will earn throughout the year (as opposed to progressively counting the actual money earned), and thus I am being charged 15% tax starting January. 

 

I tried to get some more info, but cannot find a definite answer to how the progressive tax works in Thailand. Do any of you have experience with that and could point me to the actual way it works?

 

Thanks in advance 

 

[allane]

Your accountant is right. When you began to work, you were likely asked to sign a form estimating your total income for that calendar year (including from any job prior to your current one), and listing any of the common deductions applicable to yourself (such as a dependent spouse or dependent children). Income tax would, or should, have been deducted as per your declaration. You then do an annual version of this form every January, for the calendar year which has just begun.

Your proposal is nonsensical, leaving the vast majority of the tax due to the Revenue Dept. not remitted until the latter part of the calendar year.  In the case of an employee who quit early in the year, the employer would not have deducted enough to pay the income tax owed.

From someone with about 18 years experience working in Thailand, and more than that working in Canada. The two countries' income tax deduction systems are identical in this respect.

Edited February 15, 2018 by allane
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[fletchsmile]

To OP

 

Agree with allane. Your accountant is doing it right. Your understanding wasn't correct. I qualified as an accountant in UK, and did a decade there plus about 20 years in Asia - mainly Thailand - to add to that.

 

This is the way it is done in most countries I've ever worked in. They estimate what your tax will be in the year, take off your allowances and calculate tax on that and deduct as you go along and get paid. Not sure what country you're from but in UK for example they used to call it PAYE = pay as you earn. 

 

When it gets to year end and you file your tax return, there may be a few adjustments for various things which need taking into account.

 

Cheers

Fletch :)

[Jack Mountain]

Guess I am a bit slow so I put this example. How much do I have to pay?

 

720K A year the tax you have to pay is 15% of 720K = 108K?

or

0 -        150K a   0% = 0

150K - 300K a   5% = 7500

300K - 500K a 10% = 20000

500K - 720K a 15% = 33000

                        Total = 60500

?

TIA

 

[fletchsmile]

Not slow at all :) Assuming your 720k is after allowances then your calc looks right.

 

e.g you earned 840k but had 120k of allowances to deduct, so pay tax on 720k

 

So if you were earning 70k a month (=840k a year) and had 120k of annual allowances, you would pay tax of 60,500/12 or about 5k a month.

 

OPs question was about how this 60,500 for the year gets deducted from his salary.

 

In your example, What OP was expecting is he pays nothing in the first month because he hasn't yet earned 150k in the year, nothing in the second month as he is still cumulatively 140k and less than the 150k. But in the 3rd month as he now has cumulatively over 150k he starts paying tax. This method is wrong.

 

What happens in most cases is his accountant (or his system :) )works out what his expected income for the year will be then deducts expected allowances.

 

So the accountant will deduct approx 5k a month every month for 12 months. Not zero, zero, something, higher, higher still etc. If there are any changes in expected income or allowances for the year the accountant can make adjustments though :)

[allane]

From the Revenue Dept's. website:  www.rd.go.th  , using Jack Mountain's example:

 

    Gross Income:                        720,000

   less Deduction (Sec. 2.2)       (60,000)

   less Personal Allow. (2.2)      (30,000)

                                                      630,000

 

On 630,000:   0 -150,000 x 0% =           0

          150,000 - 300,000x 5% =      7500

          300,000 - 500,000x10%=   20,000

          500,000 - 630,000x 15%=  19,500

 

     Income Tax Payable:              47,000

 

The above is assuming no personal deductions beyond the universal ones.  

 

 

[Jack Mountain]

Thanks guys, feeling a lot better now ... probably misread something.