Severance Pay & Tax

[Steps]

Hi,

  I will have my full time contract terminated at the end of this month. I will be receiving severance pay for the years that i have worked at the company for. This severance pay will be paid at the end of the month with this months salary. I have been told by HR that i will be liable for tax on this payment and because it will be a large amount (by Thai standards), i will be responsible for a hefty tax bill on the lump sum. Can anybody enlighten me on any kind of tax payment for such lump sums. I am looking at about 400,000THB

[jackdd]

I think you just have to pay income tax on it, same as on any salary which you receive.

Google for a Thai income tax calculator, this will give you an estimate.

[blackcab]

Your HR department probably deducts a monthly tax amount that they have calculated based on your average monthly income and any deductions and allowances you can claim for. If your company uses the same amount it is possible that you will not pay enough tax at source, and when your complete your PND91 at the end of this year you will owe the Revenue Department money. This is especially true if your severance pay pushes you from one tax band into a higher tax band.

 

The best thing to do after severance is to input your full financial details into the government's online PND91 website as if you were going to complete your tax return for this year. It will calculate the exact amount of tax you owe, from which you can then deduct all personal income tax payments you have made this year. In this way you will know your tax liability (if any).

 

Note: Do you pay social fund contributions? If you are staying in Thailand you can volunteer to pay a monthly contribution of 432 baht (automatically deducted from your Thai bank account) and your social fund benefits continue. The most obvious benefit, as you can imagine, is continued health care under the social fund scheme. If you intend to retire in Thailand the thing to consider is that the coverage offered by the social fund is essentially uncapped, and the premium doesn't increase as you get older as with conventional health insurance policies.

 

You have 6 months after termination to sign up for continued social fund payments at your local Social Fund office. After this period you will not be eligible. You might want to ask your HR department which Social Fund Office they fall under as this might be your first port of call if you wish to avail yourself of this scheme.

[Mattd]

@StepsOn the relatively small amount that you say, you should pay almost nothing in tax.

The calculation for severance is complicated, however, it is something like this:

 

The first 300,000 THB is the tax free allowance for severance pay.

There is a further allowance of 7,000 THB for every year of service

What ever remains is divided in to two (50%)

Tax is then liable based on the sliding scale. (first 150,000 THB is taxed at 5%)

 

So if you said 400,000 THB and had lets say 2 years service, (400,000 - 300,000 = 100,000 - 14,000 = 86,000 / 50% = 43,000 )

Worst case you would pay 2,150 THB in tax, although my calculation is nil.

Edited October 11, 2020 by Mattd
False info in first post!

[Mattd]

Note that severance pay is one time payment for tax purposes, so income earned in this tax year prior does NOT come in to the calculation, TRD allow one times one time payment per year for severance or provident fund.

[Jenkins9039]

Hardly worth worrying about, small figure on 400k and you can claim tax back if you are owed any easily enough.

[Steps]

On 10/11/2020 at 12:29 PM, Jenkins9039 said:

Hardly worth worrying about, small figure on 400k and you can claim tax back if you are owed any easily enough.

How would you go about doing that? Can you point me in the right direction. Thanks

[Steps]

On 10/11/2020 at 11:17 AM, Mattd said:

@StepsOn the relatively small amount that you say, you should pay almost nothing in tax.

The calculation for severance is complicated, however, it is something like this:

 

The first 300,000 THB is the tax free allowance for severance pay.

There is a further allowance of 7,000 THB for every year of service

What ever remains is divided in to two (50%)

Tax is then liable based on the sliding scale. (first 150,000 THB is taxed at 5%)

 

So if you said 400,000 THB and had lets say 2 years service, (400,000 - 300,000 = 100,000 - 14,000 = 86,000 / 50% = 43,000 )

Worst case you would pay 2,150 THB in tax, although my calculation is nil.

HI Mattd, thank you for the feedback. This is really helpful. Do you have an official lik for this information? That would also be helpful. 

 

I almost feel like i am being primed for a hefty tax deduction because both HR colleges mentioned it together and then the big boss mentioned it a few days later. Basically saying that i would pay a lot of tax on this amount of money