How Much Tax Does a Company Pay in Thailand? How Corporate Income Tax Is Calculated

Who Must Pay Corporate Income Tax

The persons liable to corporate income tax are principally companies and juristic partnerships registered under Thai law, whether a limited company, a public limited company, a limited partnership or a registered ordinary partnership. They also include companies and juristic partnerships incorporated under foreign law and carrying on business in Thailand, under Section 66 of the Revenue Code.¹ A foreign juristic person that does not carry on business in Thailand but receives assessable income under Section 40 (2) to (6) paid from or in Thailand is taxed through withholding by the payer under Section 70, as explained in Withholding tax on payments made abroad (Thai).

The key point is that once a business is registered as a juristic person, it becomes a taxpayer separate from its owners. The company’s profit is therefore taxed first at company level, and when that profit is paid out to shareholders as dividends, there is a further layer of tax at the individual level. An appropriate structure therefore affects the overall tax burden.

The Tax Base Is “Net Profit”, Not Revenue

Corporate income tax is calculated on net profit, which is the business’s income less the expenses the law allows to be deducted. Net profit must be computed on an accrual basis, meaning that income and expenses are recognized when the right or obligation arises, not when cash is actually received or paid. This follows Section 65 and the computation conditions in Section 65 bis.²

For this reason, a company with high sales but large deductible costs and expenses may have little net profit and little tax. Conversely, a company with substantial expenses that are “non-deductible expenses” may pay more tax than it expected. Proper documentation and correct classification of expenses are therefore very important.

The 20% Tax Rate and the Special SME Rates

The general corporate income tax rate is 20% of net profit. However, a company or juristic partnership that qualifies as a small and medium-sized enterprise (SME) receives lighter progressive (stepped) tax rates.³

Conditions for SME status to qualify for the reduced rates

• paid-up capital on the last day of the accounting period not exceeding 5 million baht; and
• income from the sale of goods and the provision of services in the accounting period not exceeding 30 million baht.

Where both conditions are met, the following stepped rates apply according to the band of net profit:

As the table shows, qualifying as an SME under these conditions can reduce the tax burden significantly, particularly for businesses whose profits are not yet high. Maintaining SME qualification and planning net profit appropriately should therefore be considered with a specialist from the start of the accounting period, not at year-end.

Non-Deductible Expenses (Prohibited Expenses)

Even where an expense was actually paid by the company, Section 65 ter lists certain types of expenses that may not be deducted in computing net profit.⁴ Understanding these items helps a company avoid additional tax assessments later. Common examples of non-deductible expenses include:

• personal expenses of the owners or directors, and expenses not directly related to the business;
• expenses for which the payer cannot prove who the recipient is, or for which there is no credible evidence of payment;
• expenses set up by the company itself without any actual payment;
• fines and tax surcharges, including penalties imposed by law;
• expenses of a capital nature (capital expenditure), which must instead be deducted gradually as depreciation; and
• reserves, and donations in excess of the limits set by law.

In practice, many tax disputes arise because a business deducts non-deductible expenses or has insufficient supporting documents. Organizing documentation and classifying expenses correctly from the outset is therefore the best protection. Which expenses are fully deductible, or qualify for an additional special deduction, is covered in the guide to deductible business expenses.

Does a Loss-Making Company Have to Pay Tax?

A frequent question from business owners is whether a company must pay tax if it makes a loss. The answer is that if there is no net profit for that accounting period, there is no corporate income tax to pay, but the company still must file the P.N.D. 50 return together with its financial statements on time. A loss does not exempt the company from the duty to file.

Moreover, a loss is not wasted, because the law allows a net loss to be carried forward against the profits of subsequent accounting periods for no more than 5 accounting periods.⁵ A company that makes losses in its early years and profits later can therefore use those accumulated losses to reduce the net profit subject to tax in the future. Keeping accurate accounts and filing every year is therefore important, because it preserves the right to use these losses.

How Many Times a Year Must a Company File? P.N.D. 51 and P.N.D. 50

Companies and juristic partnerships must file income tax returns twice a year for each accounting period.

P.N.D. 51 is filed under Section 67 bis, and P.N.D. 50 under Sections 68 and 69.⁶ For a standard accounting period running from 1 January to 31 December, the P.N.D. 50 deadline falls around the end of May of the following year. Tax paid at the half-year with P.N.D. 51 can be credited against the full-year tax, so it is not double taxation.

Underestimating Half-Year Profit: Beware the Surcharge

Where many companies go wrong is underestimating net profit for P.N.D. 51, because the law provides that if estimated net profit falls short by more than 25% of the actual net profit without reasonable cause, the company must pay a further surcharge of 20% of the tax underpaid for the half-year period, under Section 67 ter.⁷

In practice, the estimate should therefore be based carefully on actual results and business trends. A company should not set a low figure to defer payment, because the resulting surcharge may outweigh the benefit. If you are unsure what to estimate, consulting a specialist before the half-year deadline can greatly reduce this risk.

Overall, corporate income tax need not be daunting if you understand the principles and keep your documents well organized. Planning from the start of the accounting period, covering the SME rates, expense classification and the half-year estimate, is the key to a company paying tax correctly and as efficiently as the law permits.