Thailand Small and Medium Enterprise (SME) Tax
On 27 June 2017, the Government approved a drafted Royal Decree to be issued under the Revenue Code for entitling SMEs to a double (200%) corporate tax deduction allowance for expenditure paid out for purchasing or hiring computer software programs during the 2017-2019 financial years. This Tax Insight has been updated for this Government approval.
The SME Tax Structure
The structure of a Small and Medium Enterprise (SME) is a Thailand incorporated company with:
Irrespective of a Thailand company's capital being held by foreigners, if the company meets the above two conditions, it is entitled to being taxed as an SME, as follows:
Corporate Income Tax
Instead of being subject to the normal (standard) rate of corporate income tax for entities in Thailand, an SME is subject to reduced rates of corporate income tax as prescribed under Royal Decrees from time to time. The current rates are as follows:
(1) As prescribed in Royal Decree (No 564) issued on 29 April 2013.
(2) As prescribed in Royal Decree (No 603) issued on 18 April 2016.
Double deduction allowances
For the following types of expenditures, SMEs are entitled to claim a double corporate tax deduction allowance:
(3) As prescribed in Royal Decree (No 640) issued on 07 May 2017.
(4) As approved by the Government at its Cabinet Meeting held on 26 June 2017.
Domestic Payments Withholding Tax
Withholding tax on payments of income to recipients in Thailand at the normal rate of tax applying to domestic payments.
International Payments Withholding Tax
Withholding tax on payments of income to recipients in foreign countries at the normal rate of tax applying to international payments.
Personnel Payments Withholding Tax
Personal withholding tax on payments of income to employees at the normal rates of tax for payments to employees.
Profits Remittance Tax
Withholding tax on remittances of SME profits to the shareholders of the SME at the normal rate of profits remittance tax.
Specific Business Tax
Specific business tax (instead of value added tax) on specific types of income transactions at the normal rates of specific business tax in Thailand.
Stamp Duty Tax
Stamp duty tax on the execution of various instruments at the normal rates of stamp duty tax in Thailand.
Value Added Tax
Value added tax on sales of goods and services in Thailand and on imports of goods and services into Thailand at the normal (standard) rates of value added tax in Thailand (except for Micro SMEs with gross annual sales of goods or services income of not more than 1.8 million Baht, for whom VAT is exempted).
Whilst it is the express intention of the Government to provide SMEs with reduced rates of corporate tax, SMEs that are service providers should note that if the amount of tax payable under the reduced rates of corporate tax is not sufficient enough to cover the 3% withholding tax deductions from their services incomes, such SMEs can expect the tax audit officers to seek to adjust net profit so that sufficient tax is payable to cover the withholding tax credits.
This Tax Insight is general information only. It should not be used to determine any particular matter without consulting with an experienced Thailand tax advisor.