Learn about the 9 essential taxes that entrepreneurs need to understand and how to file them correctly.
As the saying goes, there are two things in life that are unavoidable: "death" and "taxes." No matter what type of business you run, whether small or large, understanding the taxes relevant to your business is crucial. It helps you plan your finances effectively and avoid legal issues with government agencies.
This article will introduce you to 9 types of taxes that entrepreneurs should be aware of and how each tax affects your business.
1. Income Tax
Income tax is a fundamental obligation for anyone who earns income—whether as an individual or a legal entity. It is calculated based on net income after deducting allowable expenses and exemptions. There are two main types of income tax:
● Personal Income Tax
For entrepreneurs operating as individuals (sole proprietors), income is taxed under the personal income tax system. Tax must be filed twice a year:
- Mid-Year Tax Filing (Form PND 94): Filed in September and required only if you earn income under Sections 40(5)–(8) of the Revenue Code.
- Annual Tax Filing (Form PND 91): Filed in March of the following year and applies if your income comes only from salary (e.g., if you receive income solely as an employee of your company).
The personal income tax rate is progressive, ranging from 0% to 35%, depending on your net taxable income.
● Corporate Income Tax
Businesses registered as legal entities, such as limited companies or limited partnerships, are subject to corporate income tax based on net profit and must file twice a year:
- Mid-Year Filing (Form PND 51): Due within 2 months after the first 6 months of the accounting period.
- Annual Filing (Form PND 50): Due within 150 days after the end of the fiscal year.
The standard corporate income tax rate is 20% of net profit. However, SMEs with paid-up capital not exceeding 5 million THB and annual income not exceeding 30 million THB may be eligible for reduced tax rates on the first 3 million THB of net profit. Any profit exceeding that amount is taxed at the regular 20% rate.
2. Withholding Tax
Withholding tax is not a separate tax, but rather a method for collecting income tax in advance. It helps distribute tax liabilities throughout the year and improves government tax collection efficiency.
Withholding tax occurs when payment is made under certain legal conditions—such as service fees, rent, salaries, or other types of compensation. The payer is responsible for deducting tax at the source and remitting it to the Revenue Department.
Once withholding tax is deducted, the payer must issue a Withholding Tax Certificate to the recipient, which serves as proof for annual tax filing or tax refund claims.
Withholding tax rates vary depending on the type of income, for example:
- Service fees (individuals): 3%
- Service fees (companies): 3%
- Rent: 5%
- Salary: Taxed according to the personal income tax rates
Taxpayers who have had tax withheld at source can use that amount as a credit against their total annual income tax liability.
3.Value Added Tax (VAT)
Value-added tax (VAT) is an indirect tax levied on the sale of goods and services within the country, including imported goods. It is also known as VAT (Value Added Tax).
Businesses generating annual revenue exceeding 1.8 million baht must register for VAT and collect 7% VAT (currently reduced from the standard 10% as a temporary measure) from customers on top of the product or service price.
The VAT system operates as follows:
- When selling goods or services, businesses collect VAT at 7% from customers (referred to as "Output Tax").
- When purchasing goods or services, businesses pay VAT at 7% to suppliers (referred to as "Input Tax").
- The VAT payable is calculated as Output Tax - Input Tax = VAT payable (or refundable).
VAT-registered businesses must file a VAT return monthly by the 15th of the following month (or within an additional 8 days if filed online) using two types of forms:
- Form P.P.30 for transactions within the country
- Form P.P.36 for services purchased from abroad (e.g., foreign server rental fees)
4.Specific Business Tax
Specific Business Tax (SBT) is levied on certain business activities that do not fall under the VAT system, such as financial institutions, real estate transactions, and banking services.
Businesses subject to SBT are exempt from VAT. The SBT rate ranges from 0.1% to 3.0%, depending on the business type, with an additional 10% of the SBT amount payable as a local maintenance tax.
Even if your business is not directly subject to SBT, be aware that if your company has "director loans," the interest earned from such loans may be subject to SBT, as it is considered a financial transaction.
Businesses subject to SBT must file Form P.T.40 by the 15th of the following month (or within an additional 8 days if filed online).
5.Excise Tax
Excise tax, often called "sin tax," is an additional tax imposed on specific goods and services that the government seeks to regulate or control consumption.
Products and services subject to excise tax generally fall into one of these categories:
- Products harmful to health or morality, such as cigarettes, alcohol, and liquor.
- Luxury goods and services, such as perfumes, yachts, and golf courses.
- Goods contributing to pollution, such as fuel and ozone-depleting substances.
- Services benefiting from state infrastructure, such as telecommunications.
Excise tax rates vary by product and service category, with some being significantly high, such as alcohol and tobacco.
Businesses dealing with excise-taxed goods or services must register with the Excise Department and file excise tax returns by the 15th of the following month.
6.Local Maintenance Tax
This tax is levied on landowners, whether individuals or corporations, based on the median land value assessed every four years.
Taxpayers must file Form P.B.T.5 in January of the first year of assessment and pay the tax by April each year at the local district office.
The tax rate varies depending on the median land value and may be either a flat or progressive rate.
Certain types of land, such as royal properties, government-owned land, educational institutions, and cemeteries, are exempt from this tax.
7.Building and Land Tax (formerly House and Land Tax)
Previously, this tax applied to rental buildings or properties used for business purposes at a rate of 12.5% of annual rental value.
Since 2020, it has been replaced by the "Land and Building Tax," which applies to all land and
buildings, with varying rates based on usage:
- Residential: 0.02-0.1%
- Agricultural: 0.01-0.1%
- Commercial or Industrial: 0.3-0.7%
- Vacant land: 0.3-0.7% (increasing by 0.3% every three years, up to a maximum of 3%)
Tax payments must be made by April each year at the local municipal or district administrative office.
8.Signboard Tax
Signboard tax applies to signs displaying a business name, brand, or trademark used for commercial purposes.
Tax rates depend on the size and language used on the sign, classified into three categories:
- Thai-only text
- Mixed Thai and foreign text or with images and symbols
- Non-Thai text or Thai text positioned lower than foreign text
Taxpayers must file Form P.P.1 by March each year at the local municipal or district office.
9. Stamp Duty
Stamp duty is an indirect tax levied on certain legal transactions or contracts. The liable party must affix the appropriate stamp duty to the instrument or document either before or immediately upon execution.
Examples of instruments subject to stamp duty include:
- Lease agreements for land, buildings, or structures (1 THB per 1,000 THB)
- Loan agreements (1 THB per 1,000 THB)
- Power of attorney (30 THB per document)
- Service contracts (1 THB per 1,000 THB)
- Bills of exchange (3 THB per 1,000 THB)
- Deposit receipts (5 THB per document)
Stamp duty can be paid through various methods, such as:
- Purchasing and affixing a physical stamp duty to the instrument
- Paying in cash by submitting the instrument to the Revenue Department (for certain types of documents)
- Using an electronic stamp duty system instead of affixing physical stamps
Failure to affix the required stamp duty may result in a fine of up to five times the amount due and could render the instrument inadmissible as evidence in court.
Conclusion
Understanding taxes may seem complex, but it is essential for every entrepreneur, whether running a small or large business. Knowing your tax obligations helps you plan finances and manage cash flow efficiently.
It is crucial to identify which taxes apply to your business and to stay updated on tax law changes. If you have any doubts, consulting a tax expert or a professional accountant ensures compliance with the law and helps you take advantage of legal tax-saving opportunities.
Related Search Terms
- Stamp Duty
- VAT
- Withholding Tax
- What is Value-Added Tax?
- Corporate Tax
