What can be deducted under Thai tax law?
All companies operating in Thailand are subject to Thai corporate income tax (“CIT”), calculated on net profits.
Deductible Expenses under Thai Revenue Law
- All ordinary and necessary expenses are deductible. However, the deductible value of the following expenses are allowed at special rates:
- 200% deduction for Research and Development expenses,
- 200% deduction for job training expenses,
- 200% deduction for expenditure on the provision of equipment for disabled employees;
- Interest, except interest on capital reserves or funds of the company;
- Taxes, except for Corporate Income Tax and Value Added Tax paid to the Thai government;
- Net losses carried forward from the last five accounting periods;
- Bad debts;
- Wear and tear;
- Donations of up to 2% of net profits;
- Provident fund contributions;
- Entertainment expenses up to 0.3% of gross receipts but not exceeding 10 million Baht;
- Further tax deductions for donations made to public education institutions, and also for any expenses used for the maintenance of public parks, public playgrounds, and/or sports grounds;
- Depreciation: Provided that in no case shall the deduction exceed the percentage of cost as prescribed under the Thai Revenue Code. However, a company is allowed to adopt an accounting method in which depreciation rates vary from year to year, provided
that the number of years over which an asset is depreciated shall not be less than 100 divided by the percentage as prescribed in the law.
Do you know that you deduct up to 200% of certain expenses for the computation of tax?
Expenses for research and development
In addition to normal deductions, the Notification of the Ministry of Finance (No.3) dated 16 December B.E. 2539 (1996) allows for the 100% exemption from CIT of expenses for research and development. This means the Company can make a double deduction for research and development expenses.
What is the research and development?
The Notification provides that research and development can be defined as follows:
- Research of industrial fundamentals; and,
- Applied research which takes industrial fundamental research as a basis.
Please note that deductibility shall be subject to conditions as prescribed by this Notification.
Expenses for job training
Job training for skills development is important if the Company is to compete with other businesses in ASEAN. Royal Decree No.437 (“RD 437”) allows a 100% exception from CIT of the expenses for job training for skills development which may be grouped as follows:
- External training, for example, granting scholarships for employees or sending employees on courses held by officials; and,
- Internal training.
As regards internal training, internal training courses by the Company must comply with the conditions provided in the Notification of Director General which are made in accordance with RD 437.
RSM has legal and tax advisors who have extensive experience in advising clients on both local and international legal and tax matters, including tax and business advisory service to ensure that your Company complies with the applicable laws of Thailand.