Doing Business in Thailand – Corporate Income Tax

Under the Revenue Code of Thailand (“RC”), the standard corporate income tax rate (“CITR”) on profit for Thai companies is 30%. However, under Title I, Section 3(1) of the RC, this rate may be reduced for some or all companies if the Prime Minister’s Cabinet issues a Royal Decree (“RD”) to that effect.

On 14 December 2011, the Cabinet issued RD 530. As a result, the CITR for “small to medium enterprise companies” (“SMEs” — currently defined as any company with capitalization of no more than THB 5,000,000 on the final day of the tax year, and income not exceeding THB 30,000,000 in that same tax year) is now structured as follows:

1. Exempt on net profit up to THB 150,000, for all tax years beginning on or after 1 January 2012;
2. 15% on net profit from THB 150,001 up to THB 1,000,000, for all tax years beginning on or after 1 January 2012;
3. 23% on net profit of THB 1,000,001 or more, for the tax year beginning on or after 1 January 2012; and
4. 20% on net profit of THB 1,000,001 or more, for all tax years beginning on or after 1 January 2013.

A further CITR reduction was later introduced by RD 564, exempting net profits up to THB 300,000, applicable to all tax years beginning on or after 1 January 2013.

RD 530 also set the CITR for all companies — including those listed on the Stock Exchange of Thailand (“SET”), but excluding those listed on the SET’s Market for Alternative Investment (“MAI”) — for three consecutive accounting periods, as follows:

1. 23% on net profit for the tax year beginning on or after 1 January 2012; and
2. 20% on net profit for the following two tax years, beginning on or after 1 January 2013.

(Note: the CITR for companies listed on the MAI remains 20%, per the earlier RD 467.)

These CITR reductions have understandably been welcomed by those investing and doing business in Thailand. However, it’s worth noting that while the CITR reductions for SMEs are permanent, this is not the case for other (non-MAI-listed) companies. It remains unclear whether there are plans to extend, or even increase, these reductions once they expire after the 2014 fiscal tax year.