Thailand corporate income tax is similar to the systems in other countries. The corporate income tax in Thailand is payable on net profit, that is calculated by deducting allowable expenses from assessable income.
Assessable (Taxable) Income
For corporate entities, the Revenue Code prescribes the assessable income as:
All revenue arising from or in consequence of the business carried on.
The Revenue Code additionally prescribes:
Capital gains income is assessable income;
Dividend income is also assessable income, but that dividend income that meets certain conditions is exempt from corporate income tax;
The amount of assessable income shall be the market prices of the goods that are sold, services that are rendered, or monies that are lent; and
Output VAT collections are not assessable income.
Expenses
For expenses, the Revenue Code prescribes:
Specific rules for expenses; and
Specific expenses not allowed as deductions.
Specific Rules for Expenses
A summary of the specific rules for expenses is as follows:
Bad debts are allowed as tax expenses, but only after complying with the rules, procedures and conditions prescribed by Ministerial Regulation;
Charitable donations up to 2% of the sub-totaled net profit amount before deduction of the donation, are allowed as tax expenses;
Charitable donations for specific social, welfare and development needs of the country under Royal Decrees are allowable as expenses up to 10% of a sub-totaled net profit amount before deduction of the specific donation;
Depreciation expenses cannot exceed the maximum rates of depreciation prescribed in the tax law and cannot exceed the rates of depreciation that are adopted for accounting purposes;
Entertainment of customers and vendors are allowable as tax expenses up to 0.3% of gross income or 0.3% of paid-up capital, whichever is the higher, but not more than 10 million Baht;
Entertainment of employees are not allowable as tax expenses, except on traditional occasions such as New Year, Songkran, etc;
Expenses for damaged assets under insurance contracts are not allowed as tax expenses until the insurance proceeds are received;
Expenses in foreign currencies shall be converted into Baht on the date of the transaction; assets and liabilities in foreign currencies on the balance sheet date shall be converted into Baht on the balance sheet date; foreign currency gains and losses, both realized and unrealized, are assessable or allowable for corporate tax purposes;
Imported goods shall be priced according to the same price sold to other countries;
The amounts of expenses shall be the market prices for normal purchase transactions and not any valuations of purchase amounts;
Payments to directors and shareholders shall be reasonable amounts; and
Stock on hand shall be the cost or market price, whichever is the lower.
Specific Expenses Not Allowable as Tax Deductions
A summary of specific expenses not allowable as tax deductions is as follows:
Artificial or fictitious expenses;
Capital expenses for additions, alterations or improvements of assets;
Expenses that are contributions to funds (other than to provident funds established under the Provident Fund law);
Expenses not exclusively incurred for the purpose of acquiring profit or for the purpose of the business;
Expenses that are attributable to another year;
Expenses determined after the end of the financial year;
Expenses paid to recipients who cannot be identified and proven;
Input VAT (except Input VAT not allowed as deduction against Output VAT under the VAT laws);
Interest on capital funds and reserves;
Private expenses; and
Provision and reserve expenses.
Our Tax Insights and Updates are general information publications focusing on the laws for meeting tax compliance obligations, and tax rights and entitlements under the laws.