Thailand’s updated personal income tax (PIT) structure officially came into effect on January 1, 2017, with the aim to ease tax burdens and boost disposable income. The revision, Revenue Code Amendment Act (No. 44) BE 2560, was published on January 27, officially instituting the changes. The new rates apply to all income collected as of January 1, 2017, for filing returns in 2018. The Thai Royal Cabinet initially approved the revised income tax scheme on April 19, 2016.
The new structure revises the income tax bands or brackets subject to the 30% and 35% tax rates, increases deductibles, and doubles allowances. The lower income tax bands and their respective rates remain unchanged. The revision also raises the minimum thresholds for mandatory tax filing.
Updated Income Tax Bands
The PIT update changes the bands subject to the 30% tax rate from THB (baht) 2,000,001-4,000,000 to THB 2,000,001-5,000,000, and the 35% tax rate from over THB 4,000,000 to over THB 5,000,000. The changes result in a 5% reduction for those earning between THB 4,000,001 and THB 5,000,000. Thailand’s complete PIT brackets are shown in Table 1.
Deductible Expenses, Tax Allowances
The deductible amount for general expenses has been raised from 40% of taxable income with a maximum of THB 60,000 to 50% of taxable income with a THB 100,000 limit. Tax allowances have been doubled across the board. Personal allowances have been increased from THB 30,000 to THB 60,000, or a combined THB 120,000 for taxpayers with an earning spouse. Spousal allowances have also been raised from THB 30,000 to THB 60,000. Child allowances have increased from THB 15,000 per child with an eligible limit of three children to THB 30,000 per child with no limit, except for adopted children, where there is a three-child cap. However, the additional THB 2,000 educational support allowance for children has been eliminated with the update.
Tax Reporting Threshold
The revised PIT law raises the threshold for tax filing from THB 50,000 to THB 100,000 for a single taxpayer earning only employment-derived income, and from THB 100,000 to THB 2,000,000 if filing jointly with a spouse. For those with other sources of income, the threshold has been raised from THB 30,000 to THB 60,000, and THB 60,000 to THB 120,000 in a joint submission. Even if there is no tax that ultimately needs to be paid, those meeting the threshold have to file with tax authorities, while low-earners below the threshold do not have to file.
Observations
The updated PIT rates ease the tax burden for people in a relatively small portion of the population, giving them more disposable income and leading, it is hoped, to increased domestic spending. The new deductions and allowances affect a much broader swath of the Thai population, many of whom had argued that deductions were too low and out of sync with actual living expenses. However, the changes are fairly modest overall, and with ongoing competition and tax harmonization between ASEAN states, further reductions in PIT rates could be on the table going forward.
Original article posted by ASEAN Briefing. Since its establishment in 1992, Dezan Shira & Associates has been guiding American investors through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll, and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India, and emerging ASEAN, including liaison offices in Boston and Waltham specifically established to support our American clients, we are your reliable partner for business expansion in Asia and beyond. For inquiries, email us at [email protected]. For further information about our firm and how we can support American investors in Asia, visit our North American Desk.