How To Calculate Income Tax For Sme

[tua2kee]

Greetings to one and all,

My wife is a Thai and she has built a 17 rooms apartment on her land and started a apartment rental business under her name. Recently, she went to pay her income tax and was charged a whopping 30,000 baht!!!

Some details of her business are as follows:

total rooms: 17

average occupancy: 10-14 rooms per month

rate per room: 2000 baht. water and electricity are paid for by clients.

My wife hires a helper and pays her 4000 baht per month.

Can I ask what are the tax reliefs she is entitled to? Will such as repair costs to the apartment such as repainting and erecting fences around the apartment and replacing defective water heaters and aircons?

For long term sustenance, where can I learn more about the taxation laws in Thailand?

Thanks in advance from a rookie in running business.

[monty]

There are actually 2 taxes to be paid.

One is the commercial building tax, to be paid to the local district. This tax is 12.5% of the actual revenue, or you can negotiate a fixed amount per year based on average occupancy/room rate.

This is a tax where some landlords are a bit creative by for example splitting the rent into room rental and furniture rental. The tax is only due on the room rental part.

It is the responsibility of the building owner to go pay this tax (before end February each year). Not paying this can be risky, if you want to sell the building the local district can demand back taxes before you are able to sell.

So on 12 rooms average @ 2000 Baht, makes for 288,000 Baht and the tax on that is 36,000 Baht.

The second tax is the personal income tax of the building owner.

For rental income, you are allowed to either deduct actual expenses (prove with invoices), or a fixed percentage of between 10 and 35 % depending on the type of building (negotiate with revenue department).

Then she has the allowances she can deduct (30,000 for herself, and more for children, elderly parents, life insurance etc. as applicable).

Then on what is left over after all the deductions she will pay personal income tax.

With the numbers you have supplied this tax should be very small or even zero, as the first 150,000 Baht (after expenses) is tax free, and then the part between 150,000 and 350,000 you pay 5%.

Example, if the income after deductions is 170,00 Baht you'll pay 5% on the part over 150,000 (20,000), so only 1000 Baht.

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[tua2kee]

Ah, very enlightening. Thanks for sharing. I think we will have to live with the 1st tax you've mentioned.

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[monty]

Ah, very enlightening. Thanks for sharing. I think we will have to live with the 1st tax you've mentioned.

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Yup, nothing much you can do to avoid that one, altough don't be shy (or at least your wife) to go and have a chat with the chaps at the local district. They are usually open.for negotiation.

Also make sure to file for the personal income tax, it'll be next to nothing anyway she'll have to pay, but her income will be officially recorded.

Quite some advantages, i.e. getting credit (cards or loans), even handy when applying for a tourist visa when wanting to travel to a Western country!

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[tua2kee]

Thanks Monty! You have been most helpful. Cheers

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[elliottm]

The second tax is the personal income tax of the building owner.

For rental income, you are allowed to either deduct actual expenses (prove with invoices), or a fixed percentage of between 10 and 35 % depending on the type of building (negotiate with revenue department).

Then she has the allowances she can deduct (30,000 for herself, and more for children, elderly parents, life insurance etc. as applicable).

Then on what is left over after all the deductions she will pay personal income tax.

With the numbers you have supplied this tax should be very small or even zero, as the first 150,000 Baht (after expenses) is tax free, and then the part between 150,000 and 350,000 you pay 5%.

Example, if the income after deductions is 170,00 Baht you'll pay 5% on the part over 150,000 (20,000), so only 1000 Baht.

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My wife will be leaving (taxed) salaried employment in Bangkok at the end of this month to run a small shoe shop near her hometown for which we will be moving into a shop-house rental.

She'll be paying some fees locally for the shop and signs but I stumbled upon the RD website while looking at withheld tax on my fixed deposits.

Could anyone with experience of a small cash business and filing tax returns point me in the right direction to speed up my navigation of the Revenue Code on the following please!

PIT - liability will be as an "individual" under 40(8) 'Income derived from business'

TIN or PIN - 'personal identification number (PIN) in accordance with the civilian registration law' - is the PIN linked to the ID card or should a TIN be obtained from her HR.

Assessable Income

- how is revenue completeness evidenced in a small shop that does not issue sales receipts

- if cash deposits at the bank are a proxy, will day to day expenses paid for from the float be excluded as immaterial

- I was considering routing my monthly cash withdrawals for living expenses through the business account to boost revenues for any future loan requirements but will not if these would be deemed as taxable revenues!

Deductions - 'actual expense or 65% - 85% depending on the types of income'

- for shop retail is this based on actual expense (Royal Decree No.11 Sections 8, 8 Bis - anyone have the source for this?)

- do all expenses have to evidenced by receipts ie shop improvements made by workmen paid in cash could not be included without this?

- can business expenses be paid for from a source other than where takings are banked (ie credit card, other bank)

- can start-up expenses paid in Dec 2012 (stock, shelving, shop improvements etc) be carried forward to Jan 2013 or will these be written off to the prior tax year

- can costs that overlap between the shop/house be split on a reasonable basis ie rent, fixtures & fittings or should they just be fully expensed to the shop if primarily for the business

Any pointers most welcome (esp on the Royal Decrees) - if the business is clearly below PIT tax threshold does a tax return still have to be filed and appropriate books & records kept in case RD did ever ask any questions? Thanks!

Edited December 9, 2013 by elliottm