Last updated on 7 de April de 2023
Thailand is one of the most popular destinations in Asia. We analyze the most important taxes in Thailand in an easy-to-understand manner: income taxes, corporate tax, VAT and real estate taxes.
- Taxes on Earned Income
- Capital Income Taxes
- Corporate Tax
- Real Estate Taxes
- Inheritance and Gift Tax
- Thailand Public Finances
With 70 million inhabitants, a growing economy, and an enviable climate, Thailand often appears as one of the most desirable destinations in the world. Both for travelers as well as expats and digital nomads.
Another one of its advantages is its low cost of living compared to Western countries. According to WorldData.info, the cost of living in Thailand is about 60% lower than in the United States, and 70% lower than in the United Kingdom. As a result, our money goes much further.
As for its currency, Thailand uses the Thai Baht (THB). Unlike most emerging market currencies, the Thai Baht is one of the strongest currencies in the world. In fact, it has appreciated against almost all developed market currencies over the past two decades, including the US Dollar, the Euro, the British Pound and the Japanese Yen.
A strong and stable currency is a very positive thing for both businesses and people. Throughout this post we will mention all tax amounts in both Thai Baht, as well as their equivalent in US Dollar. For that we will use an approximate exchange rate of $1 = THB 35.
Taxes on Earned Income
Let us start our analysis of taxes in Thailand by looking at how earned income is taxed.
Both employers and employees in Thailand must make contributions to the social security system. However, these are very moderate.
The Thai social security covers benefits and services such as public healthcare, retirement pension, maternity leave and unemployment insurance.
Both the worker and the employer must contribute 5% of the employee’s gross salary in social security payments. However, there is a minimum and a maximum.
The minimum contribution base is 19,800 Baht per year ($566), and the maximum 180,000 Baht ($5,143). Therefore, the minimum and maximum contributions will be 990 Baht ($28) and 9,000 Baht ($257).
As you can imagine, with such low contributions, it is likely for you to want to complement your future retirement with a private pension plan.
Workers in Thailand must also pay income tax. Income taxes in Thailand are progressive and have a total of 8 different brackets:
- From 0 to 150,000 BHT ($0 to $4,286): 0%
- From 150,000 to 300,000 BHT ($4,286 to $8,571): 5%
- From 300,000 to 500,000 BHT ($8,571 to $14,286): 10%
- From 500,000 to 750,000 BHT ($14,286 to $21,429): 15%
- From 750,000 to 1,000,000 BHT ($21,429 to $28,571): 20%
- From 1,000,000 to 2,000,000 BHT ($28,571 to $57,143): 25%
- From 2,000,000 to 5,000,000 BHT ($57,143 to $142,857): 30%
- More than 5,000,000 BHT (more than $142,857): 35%
As you can see, taxes in Thailand are moderate. After all, the cost of living there is much lower than in most developed countries.
Low-income earners pay virtually no taxes. Average incomes pay about 15-20% in tax. And high-income earners pay a third of their income to the tax authorities.
Capital Income Taxes
Let us now see how income from savings and investments is taxed:
Income in the form of interest from bank deposits or fixed income investments, such as bonds, is taxed at a flat rate of 15% in Thailand.
When it comes dividends received from our stock market investments or direct equity investments, the applicable tax rate will be only 10%.
Income from rental properties is subject to the same tax rates as earned income, which range from 0% to 35%.
However, taxes should not be paid on the gross income received. Taxes are calculated on 70% of the gross income, as the tax authorities assume about 30% of that income is spent on costs associated with the ownership and upkeep of the property.
Realized Capital Gains
Finally, realized capital gains will also be taxed. For people with little capital gains, the same progressive tax rates used for earned income will apply.
However, if we have enough capital gains so that the progressive tax rate would be above 20%, then a 20% capital gains tax would apply.
The general corporate tax rate in Thailand is 20% and applied on the profits of large and medium-sized companies operating in the country.
When it comes to smaller companies, they will be able to benefit from a corporate tax rate of 15% if their annual profits do not exceed 3 million Baht ($85,714). On the other hand, a company with profits of up to 300,000 Baht ($8,571) will not have to pay any corporate tax.
Finally, a special corporate tax rate applies to companies active in the oil exploration and extraction business. In this case, the profits obtained will be taxed at 50%.
The consumption of goods and services in Thailand is also subject to taxes. Specifically, Thailand charges a value-added tax.
The VAT rate in Thailand is 7% and applies to all goods and services. There are no reduced VAT rates.
Real Estate Taxes
Before getting into the specifics of real estate taxes in Thailand, it is important to mention that there are certain limitations regarding the type of real estate that foreigners residing in the country can acquire. Hence, it is worth consulting with a professional before going ahead with a real estate transaction.
The purchase of a property in Thailand is subject to the payment of the property transfer tax, which will be 2% of the value of the transaction.
Once the purchase is complete, no more taxes will apply. This is because Thailand does not have property taxes.
However, if we decide to put our property on the rental market, we will have to pay a tax to the municipal government. It will be the equivalent to 12.5% of the gross annual income obtained with the property.
Inheritance and Gift Tax
Both gifts and inheritances receive the same tax treatment in Thailand, which is quite attractive.
The applicable rate for gifts and inheritances between first-degree relatives, i.e. parents and children, is 5%. Under any other circumstances, including between people without family ties, the applicable rate increases to 10%.
Thailand Public Finances
Before we conclude this analysis of taxes in Thailand, we will look at the state of the public finances in Thailand. This will allow us to find out whether the current tax rates are sustainable or not.
For this purpose, we will analyze the level of public debt relative to the size of its economy. The graph below shows the ratio between public debt and GDP since the 1990s:
As we can see, public debt has been hovering around 50% of GDP for almost three decades. A very positive sign is that even in the late 1990s, when there was a very severe economic crisis in Southeast Asia, public finances remained under control.
We can confirm that Thailand has enough fiscal discipline and an interest in balancing its accounts. This is one of the key reasons why the Thai Baht has had such a strong performance.
Thailand is a country that has a lot to offer. Apart from great weather and cuisine, there is a very favorable economic outlook. This makes it such an attractive destination for expats and digital nomads.
The country has enjoyed several decades of strong economic growth. Taxes are very moderate, inflation under control, the currency stable and the country’s public debt manageable. As if this were not enough, the cost of living is still well below that of developed countries.
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And if you want to read about taxes in another emerging country in Asia, check out the following link:
Taxes in India – A Complete Guide