When individuals earn income, the law imposes an obligation to pay taxes, contributing a portion of that income to national development. This raises critical questions: who is responsible for paying personal income tax, and what strategies can be employed to reduce tax liabilities effectively? In this article, Ravenwing elaborates on the various personal income tax deductions available in Thailand, empowering readers to apply these deductions appropriately to their specific circumstances.
Who is Obligated to Pay Personal Income Tax?
Individuals or entities required to pay personal income tax are those who earned income during the preceding calendar year and meet one of the following classifications:
Individuals: Any natural person earning income.
Ordinary Partnerships or Non-Juristic Associations: Unincorporated groups of individuals conducting business together.
Deceased Persons: Individuals who passed away during the tax year.
Undivided Estates: Estates of deceased individuals that have not yet been distributed.
Community Enterprises: Enterprises recognized under the Community Enterprise Promotion Act, specifically those registered as ordinary partnerships or non-juristic associations.
Responsibilities for Taxpayers Upon Earning Income
1. Obtaining a Taxpayer Identification Number
Taxpayers without a Thai National ID must apply for a Taxpayer Identification Number (TIN) within 60 days of earning income.
• Thai Nationals may use their National ID number as a TIN without requiring additional registration.
• Non-Residents or Undivided Estates must apply separately at the designated revenue offices.
Where to Apply:
• In Bangkok: Applications can be submitted at any of the 30 Area Revenue Offices or their district branches.
• In other provinces: Visit the Provincial Revenue Office or its branches.
2. Filing Tax Returns Annually
Taxpayers must file a tax return annually for income earned between January 1 and December 31 of the preceding year. Returns are typically due by March 31 of the following year.
For certain income types, such as rental income, freelance income, contractor income, or commercial business income, mid-year returns are also required. For income earned in the first six months of the year, these returns must be filed by the end of September.
What Types of Income Are Subject to Tax?
The law defines taxable income as "assessable income," which includes any earnings or benefits derived between January 1 and December 31 of a given year. Taxable income includes:
Cash Income: Actual monetary payments received.
Asset-Based Income: Tangible assets convertible into cash value received.
Benefit Income: Non-cash benefits convertible into monetary value received.
Taxes Paid by Others: Taxes paid on behalf of the taxpayer by the payer or other parties.
Tax Credits: Tax credits allowable under specific legal provisions.
How to Reduce Your Tax Burden Effectively
Once assessable income is calculated, expenses and allowable deductions can be applied to reduce the tax base. These deductions are not directly tied to the amount of assessable income but rather depend on the taxpayer’s status or financial behavior.
Thailand’s Revenue Department offers numerous allowances and deductions designed to reflect various circumstances, such as family obligations, investments, or other qualifying activities. After deducting standard expenses, these allowances provide additional reductions to the taxable income.
What Tax Deductions Are Available for Income Earners?
Deductions and exemptions are important components in the calculation of taxes, allowing taxpayers to deduct certain amounts from their income after expenses have been deducted. These deductions and exemptions vary depending on the circumstances. Here is a summary of the key deductions:
1. For Individuals or Those Who Pass Away During the Tax Year
1. Taxpayer: THB 60,000
2. Spouse (No income): THB 60,000
3. Combined Deduction for Both Taxpayer and Spouse: Up to THB 120,000
4. Children (Legitimate and Adopted): THB 30,000 per child, with a maximum of 3 children
5. Support for Parents Over 60 Years of Age:
• A deduction of THB 30,000 for each parent who is under the taxpayer’s care, provided the parents' income in the tax year does not exceed THB 30,000.
• The taxpayer can also claim this for the parents of their spouse.
6. Support for Disabled or Infirm Individuals: THB 60,000 per person
7. Life Insurance Premiums (for Policies of 10+ Years):
• Premiums are deductible up to THB 100,000 based on actual payment.
• If the spouse has a life insurance policy and there is a continuous marriage throughout the tax year, the taxpayer can deduct up to THB 10,000 for their spouse’s premiums.
• If both spouses have income:
o If the marriage did not exist throughout the year, each spouse can deduct actual premiums up to THB 10,000, but the total amount cannot exceed THB 90,000, subject to each person's assessable income after deducting expenses.
o If the marriage existed throughout the year, and the spouse does not file separately, the deduction is available for both spouses for amounts over THB 10,000 but not exceeding THB 90,000.
o If the marriage existed throughout the year and the spouse files separately, each spouse may deduct premiums over THB 10,000 but not exceeding THB 90,000.
8. Health Insurance for Parents of the Taxpayer or Spouse: Up to THB 15,000, provided the parents’ income does not exceed THB 30,000.
9. Contributions to Provident Funds:
• Deductible up to THB 10,000 for actual payments.
• Additional deductions up to THB 490,000 and no more than 15% of the taxpayer's income.
10. Investments in Retirement Mutual Funds (RMF):
• Deductible up to 30% of assessable income, subject to a cap of THB 500,000 when combined with other retirement fund contributions.
11. Pension Life Insurance Premiums:
• Premiums are deductible up to 15% of taxable income, not exceeding THB 200,000.
• This must be for a pension plan providing coverage for at least 10 years and offering pension benefits from ages 55 to 85 or beyond.
12. National Savings Fund Contributions: Deductible up to THB 500,000, when combined with other retirement-related deductions, the total must not exceed THB 500,000.
13. Super Savings Fund (SSF) Contributions:
• Deductible up to 30% of income, capped at THB 200,000.
2. Mortgage and Housing-Related Deductions
14. Mortgage Interest Payments:
• Deductible up to THB 100,000 for loans used to purchase, rent, or construct a house, where the house is mortgaged as collateral for the loan.
3. Social Contributions
15. Social Security Contributions: Fully deductible based on actual contributions made.
16. Investment in Social Enterprises:
• Contributions are deductible up to THB 100,000.
4. Specific Deductions for Shopping Campaigns
17. Purchases Under the “Shop Dee Mee Kuen” Campaign (January 1 - February 15, 2023):
• Purchases are deductible up to THB 40,000.
5. Donations
18. Political Party Donations: Deductible up to THB 10,000 for donations made to political parties, including contributions for fundraising activities.
19. Investments in Sustainable Thai ESG Funds:
• Deductible up to 30% of income, capped at THB 100,000.
• The investment must be held for a minimum of 8 years from the purchase date.
20. General Donations:
• Donations made to support education, sports, and public hospitals through the electronic donation system (e-Donation) are deductible at twice the amount paid, up to 10% of income after expenses and other deductions.
• Other donations are deductible at the actual amount paid, but capped at 10% of income after deductions.
6. For Ordinary Partnerships or Non-Juristic Associations
Individuals in these types of associations can claim a deduction of THB 60,000 each, with a combined maximum of THB 120,000.
7. For Undivided Estates
An undivided estate may claim a deduction of THB 60,000.
These deductions provide opportunities for taxpayers to reduce their taxable income and lower their tax burden while adhering to Thai tax law. For more detailed advice or to ensure compliance with tax regulations, it is advisable to consult with Ravenwing for personalized tax planning that suits your situation.
Disclaimer: Informational Article, Not Legal Advice
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