Understanding Thailand Payroll Deduction and Employee Benefits Taxes

Thailand has specific rules which depends on whether the companies employ residents or non-residents. However, the main concerns for the Thai Companies that need to comply with tax laws are net taxable income, social security contribution (SSF), valued added tax (VAT) , corporate income tax, specific business tax (SBT), and property tax.

New Employees And First Employment In Thailand

All new employee and first time jobbers are required to register with the following departments within the 30 days of employment:

• Social Security registration with the Social Security Fund
• Revenue Department (only for an expat and never had a Thai TAX ID)
• Provident Fund Registration is required with the appointed Provident Fund Vendor for companies with a Provident Fund benefit.

 

Income Tax

All resident, means any person living in Thailand for a cumulative 180 days or more in the calendar year, will be required to pay and report income from Thailand. Personal income tax is computed on cash basis, so any amount of money is paid and brought into Thailand in the same year that is earned will be included.

• THB 150,000 or lower is exempt from tax (0%)
• THB 150,001 – 300,000 is charged 5%
• THB 300,001 – 500,000 is charged 10%
• THB 500,001 to THB 750,000 is charged 15%
• THB 750,001 – 1 million is charged 20% and 1,000,001 to 2 million is charged 25%.
• The income band for the 30% bracket is for 2,000,001 – 5,000,000 baht
• The top rate of 35% starts at income over 5 million.

Above mentioned percentages are done on a compounding scale and do not represent a total percentage per tier. Read More on Personal Income Tax Here

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Social Security

This is mandatory statutory contribution in Thailand for both of the employee and employer to contribute on a monthly basis to the Thai Government’s Social Security Fund. The contribution rate is usually 5% of an employee’s basic salary capped at THB 15,000 (a maximum of THB 750 per month). During special circumstances (For example – during the COVID-19 , the contribution reduced from 5% to 1% for the employee and 5% to 4% for the employer from March – May 2020).

Benefits: SSF is to guarantee benefits for insured persons to relief difficulties such as sickness, invalidity, unemployment, maternity, death, child allowance, and old-age pension.

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Provident Fund

Provident Fund is a fund set up voluntarily between the employer and their employees. Assets of the fund consist of money contributed by both employer and employees, which means, not only employees save for their retirement, employer also helps them adding to the fund by a matching percentage to be described by the individual employer and employee. Provident fund can be regarded as a benefit to motivate employees to work with the employer to keep lower employee turnover and average employee’s contribution rates range from 2 to 15% of the an employee’s basic salary .

Benefits: Provident Fund is: 1) to promote the saving of employees 2) to provide the members and their families the guarantee of future security in case of resignation, retirement, disability or death. 3) – Decrease taxation liabilities as an employee can claim up to 500,000 THB/year in Provident Fund deductions to lower their income taxes. (certain conditions apply)

Tax Benefits from the Provident Fund as below:

• If there are less than 5 years of service, it is not tax deductible. The amount received must be taxed as usual.
• If there is no retirement and the year of service are 5 or more than 5, it is tax deductible.
• If there is employment termination (55 years old or more) and 5 or more years of membership, then it is tax free and therefore there is no tax calculation.

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A Regulation for Employers in Thailand.

There is a regulation for employers in Thailand to deduct the withholding tax from their employee’s income every month.

Responsible person for withholding tax deduction

A Thai Company which pays taxable income to individuals is obligated to withhold income tax according to the Revenue Code of Thailand and submit PND.1 to the Revenue Department together with the tax remittance.

Income that is subject to withholding tax is from salary and wages. Including other monthly allowance and onetime payment such as commission and bonus.

 

Withholding tax computation

For those income will be calculated to annual amount which is calculate by income times total payment period in one year.

In case of start working in the middle of the year will be calculated by income times total payment period in that year. For example, if start date on April, income will be times by 9 (April to December). Annual income will be in sum of monthly income and onetime payout to be the input of computation.

After getting the total amount of annual income will be calculated same as personal income tax, including those tax deduction and allowance. Then what come out is the personal tax for the annual period. That amount will be divided by the total period of the current year.

In case of increasing income during year, the theory of annual income still applied. The income will be times by total payment period and tax will also divided by the total payment period.

For onetime payment will not be considered to spread annually. The total amount will be subjected to deduct only for that certain payment period.

Timeline for the submission and remittance

Employers are in charged of tax submission PND.1 for every month. The PND.1 must be submitted to the Revenue department by 7 days from the month end of the payment date. Exception for online submission will be extended to 15 days from the month end of the payment date.

Penalty for any delay of submission and remittance

• Filing late will result in a fine, surcharge, and penalty.
• Late submission within 7 days will be fine at THB 100, more than 7 days will be fine at THB 200.
• Penalty will be calculated by 1.5% of withholding tax amount, any fraction of the month will be considered to a month.

 

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