Taxes typically connote a sum of money owed to the government. However, the corporation does more than just pay the government each time. Government programs known as corporate tax in Thailand are intended to encourage individuals and corporations to spend or save money by reducing the tax companies must pay.

Corporate tax in Thailand helps business owners save money, encourage investment, increase competition, and even increase corporate social responsibility. Through employing these incentives offered by the government, businesses can meet their financial goals and contribute to the overall economic chart of the country.

Advantages of Corporate Tax Incentives in Thailand

Corporate tax in Thailand is imposed on all companies operating within the country, including domestic and foreign entities. The current corporate income tax rate in Thailand is 20%, which applies to the net profit earned by a company. Thailand's tax incentives allow businesses to save money and grow their operations. Companies looking to take advantage of these incentives should see and consult with a tax professional or legal advisor to ensure they are eligible and fully comply with all applicable regulations.

However, businesses can use several corporate taxes in Thailand to save money and grow their operations. Some of these incentives include:

Board of Investment (BOI) incentives

The BOI is a government agency that offers a wide range of incentives to businesses that invest in specific priority industries or activities in Thailand. These incentives include tax holidays, reduced corporate tax rates, and import duties exemptions on machinery and raw materials.

Regional Investment Zones (RIZ) incentives

The Thai government has identified certain regions within the country as Regional Investment Zones, which offer special incentives to businesses that invest in these areas. These incentives include reduced corporate tax rates, exemptions on import duties, and other benefits.

Special Economic Zones (SEZ) incentives

Thailand has established several Special Economic Zones that offer various incentives to businesses operating within these zones. These incentives include reduced corporate tax rates, exemptions on import duties, and other benefits.

Research and Development (R&D) incentives

The Thai government offers tax incentives for businesses that invest in research and development activities within the country. These incentives include tax deductions on R&D expenses and tax holidays for companies engaged in certain R&D activities.

Corporate Income Tax in Thailand

In Thailand, corporate income tax is essentially levied on the net earnings of businesses operating there, whether native or foreign. Thailand's corporate income tax rate is now 20% of net profit, which is determined by subtracting allowable expenses and deductions from gross revenue.

The following table shows the CIT rates for enterprises categorized as small or medium-sized (SMEs).
Net ProfitTax rates (%)
0-300,000 baht (US$9,106)Nil
300,001 baht (US$9,107) – 3,000,000 baht (US$91,021)15
Over 3,000,000 baht (US$91,021)

For qualified businesses, Thailand offers several tax breaks and incentives in addition to the ordinary corporate income tax rate. Tax holidays, lower tax rates, and exemptions from import tariffs for machinery and raw materials are some of these incentives and exemptions.

Therefore, companies must fulfill specified requirements and criteria, which change depending on the incentive or exemption, to be eligible for these incentives and exemptions. For instance, a business must invest in specific priority industries or activities specified by the Board of Investment (BOI) to qualify for a tax holiday.

To avoid penalties and fines, it is crucial for businesses operating in Thailand to adhere to all tax laws and procedures. Companies should consult a tax expert or lawyer to ensure that all Thai tax laws and regulations are followed.

How important is a tax incentive to the business?

Corporate Tax in Thailand can be vital to a company's success, as it helps lower overall taxes and boost revenue. We've summarized the key benefits of utilizing tax incentives for businesses below:

1. Savings and Reinvestment:

  • Businesses can save money through tax incentives and reinvest those savings into their operations, enhancing growth and expansion.

2. Access to New Markets, Technology, and Resources:

  • Tax incentives can offer additional advantages, such as access to new markets, technology, and resources.
  • For example, Thailand's Board of Investment (BOI) provides tax breaks to corporations investing in priority enterprises or activities, opening up new business prospects and markets.

3. Maintaining Competitiveness:

  • Tax credits help businesses maintain competitiveness, especially in areas with high tax rates or intense competition.
  • Businesses can offer lower pricing, invest in new products or services, or reduce operating costs by paying less taxes through incentives.
In conclusion, tax incentives undeniably benefit businesses, particularly those competing in challenging markets or facing high tax rates. By leveraging tax advantages, companies can increase their earnings, gain access to new markets and resources, and maintain competitiveness.

What is the negative effect of the corporate tax rate?

A high corporate tax rate can discourage investment and economic growth, lead to tax avoidance and evasion, reduce the competitiveness of businesses in the global market, and hurt consumers. Governments must balance raising revenue and creating a business-friendly environment to avoid these adverse effects.

The following are specified possible adverse effects of corporate tax rate:
  1. One of the adverse effects of the corporate tax rate is that a high corporation tax rate can hinder economic growth and discourage investment. Because the after-tax return on investment is lower when corporation tax rates are high, businesses might be less likely to engage in new endeavors or grow existing operations. Consequently, there may be a slower rate of economic expansion, fewer job openings, and less innovation.
  2. A high corporation tax rate can also result in tax evasion and avoidance, which is a drawback. When corporate tax rates are high, corporations may try to reduce their tax obligations by moving substantial profits to countries with lower tax rates, using tax-planning techniques, or even committing criminal tax evasion. This may cause the government to lose tax income and diminish the overall fairness of the tax system.
  3. Another disadvantage is that a high corporate tax rate may make it easier for businesses to compete in the global market. When corporate tax rates are high, firms in a particular country may be disadvantaged compared to those in another with a low corporate tax rate. Consequently, this might make it more difficult for companies to compete for globally, lower exports, and lead to a loss of market share.
  4. Consumers might suffer from high corporation tax rates as well. When businesses are subject to high tax rates, some expenses may be transferred to customers through higher pricing for goods and services. Inflationary pressures and decreased consumer purchasing power may come from this.

What happens if you don't pay taxes in Thailand?

Failure to pay taxes in Thailand can result in severe consequences for businesses, including penalties, fines, and even imprisonment in some cases. To help you understand the specific corrections and effects for failing to pay taxes in Thailand, we've listed some key points below:

Corporate Income Tax Penalties:

  • Failure to pay the required amount owed can result in a penalty of up to 1.5% per month of the unpaid amount, with a maximum sentence of 36% of the outstanding amount.
  • In addition to the penalty, the company may be required to pay interest on the unpaid amount.

Late Tax Return Filing Penalties:

  • Failure to file a tax return on or before the deadline may result in a penalty of up to 2% of the total tax payable.
  • The minimum charge is 1,000 baht, with a maximum fine of 200,000.

Tax Fraud or Evasion Consequences:

  • Engaging in tax fraud or evasion can lead to very harsh repercussions.
  • Offenders may face fines, penalties, and up to 10 years in prison in certain situations.
In conclusion, failure to pay taxes in Thailand can result in significant penalties and consequences, including fines, interest, and, in the worst case, imprisonment. Companies need to comply with all tax laws and regulations in Thailand to avoid these dilemmas and ensure the long-term success of their business.

Final Thoughts!

Businesses can save a lot of money as the government policy lowers the tax a person or corporation must pay. Through the advantages of corporation taxes incentives, businesses actually have the chance to expand and save money. The existence of these incentives definitely aids companies in achieving their financial objectives and thus promotes the general growth of the economy of the country.

Further, with these benefits, there is a higher chance that businesses would immediately begin to invest in new opportunities, boosting competitiveness, reducing corporate taxes, and improving cash flow management. This not only helps business owners, but it also significantly affects a country's economic development as it ultimately boosts employment.

To know more about corporate tax incentives or legal concerns, you may immediately visit Kudun & Partners, which can provide you with the appropriate and accurate service you need. It can offer you talents with significant expertise in any legal matter.