Tshering Dekar
2025年2月25日
Thailand´s tax advantages and strategic location makes it an optimal destination for global expansion.
Thailand´s Tax Advantages and Strategic Location for Global Expansion
Expanding a business into Thailand presents significant tax advantages and strategic access to the Asian market. Thailand offers a relatively low corporate income tax rate of 20%, which is lower than the ASEAN average of 23.64%. Additionally, the value-added tax (VAT) rate in Thailand is 7%, lower than the ASEAN average of 7.7%. There are also many government incentives such as tax breaks, subsidies and administrative fast-tracks for companies in certain industries wishing to invest in Thailand. Companies that are located in Special Economic Zones are also subject to several incentives that lower the overall operational costs.
Thailand is located at the center of ASEAN´s 673 million consumer bloc which enables the country to play a strong role in the logistics of the region. With Thailand´s 18 Free Trade Agreements which includes agreements with China, India, and the Regional Comprehensive Economic Partnership members, it has tariff-free or reduced tariff access to over 30% of the world's GDP. Thailand is also in the final stages of a comprehensive trade agreement with the European Union which would open access to a market with over 500 million consumers.
Understanding Local Accounting and Compliance Requirements
Foreign companies operating in Thailand must adhere to Thai Financial Reporting Standards (TFRS) and local tax laws. Financial statements must be prepared in Thai Baht and maintained in Thai. Non-compliance can lead to fines of up to THB 200,000 and company directors may face criminal charges.
While Thai accounting standards align largely with international accounting standards, foreign businesses must address local requirements such as mandatory external audits and strict filing deadlines.
Key compliance requirements include:
Withholding Tax on Payments: Companies must withhold tax on salaries, dividends, interest, royalties, and service fees. The withheld tax must be remitted to the Revenue Department by the 7th of the following month.
Monthly tax filings: VAT, withholding tax, and social security contributions must be filed on time to avoid penalties.
Corporate Income Tax (CIT) Filing and Payment: Companies must file both annual and semi-annual corporate income tax filings. The mid-year tax return (PND 51) is due within 60 days after the end of the first six months of the accounting period, while the annual tax return (PND 50) must be filed within 150 days after the fiscal year ends.
Annual financial statements: Must be audited and submitted to the Department of Business Development (DBD) within 150 days after the fiscal year ends.
Social Fund Contributions: Employers must register employees with the Social Security Office and make monthly contributions to the Social Security Fund. Payments are due by the 15th of the following month.
Foreign currency transactions: Must follow Bank of Thailand regulations on foreign exchange reporting.
Choosing the Right Business Structure in Thailand
Selecting an appropriate type of business structure affects tax obligations, ownership rights, and compliance requirements. Common business structures for foreign companies are:
Private Limited Company: This is the most common business structure in Thailand where foreign ownership is typically limited to 49%. The remaining 51% must be owned by Thai nationals. Requires a minimum of three shareholders and allows limited liability protection, but mandates annual general meetings and audited financial statements. Common for SMEs due to streamlined registration (completed in 1–2 months via the Department of Business Development).
Foreign Business License: This license permits 100% foreign ownership but the business must meet specific criteria that demonstrate tangible benefits to Thailand’s economy, such as technology transfer, skilled workforce training, or job creation for Thai nationals. The FBL applies to List 2 and List 3 activities under the Foreign Business Act, which restricts foreign involvement in 63 business categories, including media production, inland transportation, and agricultural processing. Notably, sectors like export-oriented manufacturing and international trading are exempt from FBL requirements, allowing unrestricted foreign ownership.
Board of Investment (BOI) Promotion: Offers incentives like 100% foreign ownership and corporate tax holidays (up to 13 years) for priority sectors such as renewable energy, electric vehicle manufacturing, and digital technology. BOI-approved firms bypass Foreign Business License requirements and can own land in industrial zones. Recent updates prioritize AI-driven projects and agro-industry automation.
Representative Office: Allows 100% foreign ownership for non-revenue activities, including market research, quality control, and sourcing Thai suppliers. Prohibited from signing sales contracts or invoicing clients. Must renew its Foreign Business Certificate every five years and maintain a minimum capital of THB 2 million.
Branch Office: A foreign-owned extension of a parent company, taxed at 20% on Thai-sourced profits. Requires a Foreign Business License (6–12 months processing) and must remit 5% of annual profits to the parent company as a “service fee”.
Registration under the Treaty of Amity (available only to U.S. citizens and companies): Permits 100% American ownership in most sectors (except land ownership, communications, and agriculture) under the 1966 US-Thai treaty.
For more details, check out our article on the Setting Up a Company in Thailand
Understanding Thai Taxation for Foreign Businesses
Businesses must comply with tax regulations to avoid penalties. The key taxes to keep in mind are:
Corporate Income Tax (CIT): 20% but SMEs with certain conditions may qualify for lower rates, such as 0%, 15%, or 20% based on their net taxable profits. Thailand has imposed a 15% Global Minimum Tax (GMT) on multinational corporations with yearly worldwide revenues exceeding €750 million Effective January 1, 2025.
Value Added Tax (VAT): Required if annual revenue exceeds 1.8 million THB. The rate is 7%.
Withholding Tax (WHT): 15% for non-resident companies on service fees, interest, and royalties. Dividends paid to foreign shareholders are subject to a 10% withholding tax unless reduced by a double taxation treaty.
Setting Up Your Company's Accounting System
Businesses must keep financial records for at least five years to comply with Thai legal laws. This includes all relevant documents such as invoices and receipts which is essential for audits and legal compliance. Some of the accounting software options that can accommodate Thai Tax specificities are:
PEAK is a Thai accounting software designed for SMEs. PEAK provides comprehensive Thai tax management tailored to local compliance requirements, including automated VAT filings, withholding tax calculations, and seamless integration with the Revenue Department’s e-filing systems. Its payroll module aligns with Thailand’s Social Security Fund regulations.
FlowAccount offers user-friendly cloud-based tools for basic invoicing, expense tracking, and Thai tax reporting, making it accessible for freelancers and micro-SMEs. While it supports core compliance tasks like VAT submissions, its limited payroll integration and absence of multi-currency support restrict scalability for growing businesses.
Xero is great in global accounting integration and multi-national reporting but lacks built-in functionality for Thailand’s unique tax frameworks, such as automated PP. 36 forms for cross-border payments or e-Tax Invoice generation. Manual adjustments are often required to meet local deadlines, creating manual complications.
At BizWings, we have dedicated teams of experts for our clients all along their journey from initial market research to incorporation, visa processes, accounting, and payroll. We aim to provide an integrated experience for our clients to simplify their operations in Thailand. With a proven track record of helping over 150 international companies, we help businesses stay fully compliant and operate smoothly.
Source:
-Quick Guide to Starting a Business in Thailand (2022)
-Foreign Business Act, BE 2542 (1999)