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Thailand: Tax rates cut in preparation for AEC 2015

Monday, 14 July 2014   (0 Comments)
Posted by: Author: Paul Ashburn
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Author: Paul Ashburn

With the proposed creation of the ASEAN Economic Community (AEC) in 2015, the number of businesses
 in ASEAN (Association of Southeast Asian Nations) engaged in cross border trade and investment is  expected to increase significantly.

Whilst one of the core elements underpinning the AEC is the free flow of investment and the lifting of restrictions on ASEAN businesses trading in the region, the AEC blueprint does not contain action points to harmonise national tax policies. Member nations are therefore free to use tax policies to compete for investment and trade within ASEAN.

This is demonstrated by Thailand cutting its corporate and personal tax rates, as part of its efforts to improve the kingdom’s competitiveness.

Corporate Income Tax

The corporate income tax rate has been reduced from 23% to 20% for accounting periods commencing on or after 1 January 2013 and by 31 December 2014, and is expected to be extended to later years.

For small and medium enterprises (SMEs), the first THB 300,000 of net profit is exempt from income tax, and the next THB 700,000 is subject to 15% tax. Net profits exceeding THB 1 million are subject to 20% tax.

To be eligible for the SME rates, the following conditions must be met:

  1. The company’s paid-up share capital must not exceed THB 5 million on the last day of the accounting period; and
  2. The income derived from the sale of goods or provision of services during the accounting period must not exceed THB 30 million
  3. The rate reduction means that Thailand moves from being a nation with one of the highest
    corporate tax rates in ASEAN to the lowest, apart from Singapore’s 17% rate.

Personal Tax
Thailand also recently reduced its personal tax rates, which have effect retrospectively from 1 January 2013.

The highest personal tax rate has been cut from 37% to 35% and the number of tax bands has been  increased. For example, net income from THB 1 million to THB 4 million was previously taxed at 30%,  whilst the new scales tax net income from THB 1 million to THB 2 million at only 25% and then tax net income from THB 2 million to THB 4 million at 30%.

The new personal tax rate scales are as follows:

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