Personal Income Taxes In Thailand

[cshort64]

Good Day All;

I have searched this forum and there is a great deal of information on Taxes already posted but some is not as clear as I'd like so if you don't mind I will post my question here. I am employed here in Thailand and I'm being paid rather well by Thai standards. We are a BOI company thus we get audited regularly and we use the proper accounting firm to handle our payroll and taxes. I am having some 47,000 baht per month taken from my paycheck in taxes, I have read on several blogs and posts here that I am eligible for deductions, I am married to a Thai citizen, have 4 children, take care of mother-inlaw and several other items that have been listed.

My question is, can I reduce the monthly tax bill or does the system work very similar to the US where by at the end of the tax year when you file, if you have overpaid you are eligible for a refund? Ideally, I can reduce my monthly bill and bring my refund/payment at the end of the year down to a few thousand baht, but not sure if that is possible.

I'm looking for advice and answers.

Thank you

CHS

[monty]

Taxes are calculated pretty much in the same way as in the West, so yes, if you overpay you get a refund, if you underpay you have to pay more.

Normally your accounting/human resources department should properly calculate your monthly withholding tax, as it is not difficult to calculate exactly as long as you furnish them with your exact family situation, along with all deductible expenses you incur.

However, the Thai personal income tax is geared towards favoring low income workers and hitting hard high income workers.

You can find all up to date allowed deductions and allowances over here.

In short you are allowed a deduction of 60,000 Baht, then an allowance of 30,000 Baht for yourself and 30,000 Baht foryour wife (if she isn't working), 15,000 Baht per child but limited to 3 (45,000 Baht), 2000 Baht per child in a Thai school, and 30,000 Baht for your mother in law if she is over 60.

SO that's a grand total 203,000 Baht to deduct.

On that you can add things like mortgages, life insurance, investment in LTE's etc. Depending on the size of your salary, those can really bring your taxable income down as they in general allow 15% of your salary for each of them (capped at 500,000 each).

Whatever is left is taxed according to the standard tax rates, i.e. the first 150,000 is free, between 150,001 and 500,000 you pay 10%, between 500,001 and 1,000,000 you pay 20%, between 1,000,001 and 4,000,000 you pay 30% and then 37% for everything over that...

Add up and divide by 12 is what you should roughly pay per month.

Get the LTE's and provident fund up to the max (if you are planning to stay here long term anyway), as the amount you can deduct sits in the highest tax scale you are paying!

[cshort64]

Hello Monty

Thank you for this information, I am very pleased to get it. I understand the deductions much better, now may I ask one more thing, are these deductions taken only at the end of the year? Is there a way to reduce the monthly tax bill, so that my take home pay each month increases?

Thank You

CHS

[monty]

Yes, should be no problem.

Talk with your human resource department. They either do your withholding tax themselves, or if it is a big company they may outsource this to an accountancy firm.

The minimum withholding tax is 5% for personal income.

As I said before, if you give all relevant information, the accountants (even yourself with above information) should be able to calculate your tax burden, and as such should be able to set a fairly accurate withholding tax level.

Do remember, if at the end of March, when you file your yearly income with the revenue department, and you then cannot prove all the allowances you used to calculate your taxable income (i.e. you ended up not investing in LTE's or didn't take out that life insurance) you will be hit with a with a big tax bill.

Probably why most accountants err on the pessimistic side, they do know your family situation, but they usually do not know in what vehicles you are investing allowing you to deduct from your income at filing time...

[fletchsmile]

Hello Monty

Thank you for this information, I am very pleased to get it. I understand the deductions much better, now may I ask one more thing, are these deductions taken only at the end of the year? Is there a way to reduce the monthly tax bill, so that my take home pay each month increases?

Thank You

CHS

Simply put - no - deductions are not usually taken only at the end of the year - although there is nothing to stop you doing that, it's just inefficient. For ease, companies usually spread the allowances throughout the year each month, reducing your monthly tax bill as you say. Generally your known allowances are spread based on the data you submit to HR/tax at the start of the year on a sort of "best estimate" basis if you like - but they can be adjusted at any point in the year before it ends, if your circumstances change or you become eligible for new allowances, eg subscription to LTF , RMF, life insurance, mortgage added etc.

Proactively manage your HR department or whoever submits your tax returns and you should be able to adjust your tax payments in November and December's salaries if you think you have overpaid tax.

[cshort64]

This information is very valuable and I thank you Gentleman, I do use an accounting firm and they have not been much assistance in this matter, I will push them harder to

address my situation.

Regards

CHS

[earlofwindermere]

I'm in the same situation as you (but with only two kids). I also use an accounting firm. They simply entered my salary and known deductions into a spreadsheet to determine the estimated tax to pay. They then divided by 12 and that is the amount that is deducted from my salary each month. It seemed quite simple to do.