Is severance payment due to labor court ruling subject to income tax ?

[amirravon]

Is severance payment due to labor court ruling subject to income tax ? Advice needed

[geriatrickid]

Yes. The pay component of severance is taxable (min. 5%  on severance up to 300K, 4million baht+ is @ 35%.) Severance can include multiple forms of compensation and some of it is not taxable. It all depends on what was included in the severance settlement. This would be explained in the   separation settlement document.  If you have a large enough income you will need some tax guidance.  Note too the . severance  tax payable is collected at source by the employer.

Here is a summary of the taxable rates on the pay component and an explanation of the tax treatment. https://www.mazars.co.th/Home/Doing-Business-in-Thailand/Tax/Tax-Treatment-on-Employee-Termination-Payments

  

Edited April 3, 2018 by ubonjoe
moved reply from quote

[Mattd]

The tax authorities here do have some leeway regarding tax, especially on severance payments, the labour court can order a severance payment to be tax free to the recipient as well, I know of a couple of cases where this has happened.

The first 300,000 of a severance payment in free of tax.

The calculation of the tax payable is nothing like the normal taxation on accessible income.

The tax liability is calculated something close to this example.

Total Severance pay = 3,000,000

Minus 300,000 tax free = 2,700,000

This is now divided into 2 (50%) = 1,350,000

Allowance of 7,000 Baht per year of service, lets say 10 years = 70,000

Add this to 1,350,000 = 1,420,000 this is now the total expense.

Tax would therefore be payable on the balance, so on 2,700,000 minus expense of 1,420,000 = 1,280,000

Normally employers will take withholding tax before the payment is made.

Note that in 2017 the 35% threshold was raised to 5,000,000 from 4,000,000

Edited April 4, 2018 by Mattd

[amirravon]

Thanks for the information .