1. Extension of the Progressive Tax Rate for 2016

The Royal Decree No. 600, gazetted on 24 February 2016, extends the reduction of the progressive PIT rate applying for the tax years 2013-2015 for the tax year 2016:

Progressive Tax Rate
for the Tax Years 2013 to 2016
**

Income (THB)

Tax Rate

Income
(EUR - approx.)

0-150,000

Exempt*

0-3,750

150,001-300,000

5%

3,750-7,500

300,001-500,000

10%

7,500-12,500

500,001-750,000

15%

12,500-18,750

750,001-1,000,000

20%

18,750-25,000

1,000,001-2,000,000

25%

25,000-50,000

2,000,001-4,000,000

30%

50,000-125,000

4,000,001 or more

35%

125,000 ore more

*  According to Royal Decree (No. 470) issued on 28 March 2008.

** According to Royal Decree (No. 575) issued on 8 December 2013, Royal Decree (No. 576) issued on 3 November 2014 and Royal Decree (No. 600) issued on 12 February 2016.

  1. Cabinet Plan to Reform the Personal Income Tax Law

On 19 April 2016, the Cabinet agreed to the Ministry of Finance’s proposal to revise the PIT law. The proposals shall apply to the tax year 2017 onwards and concern the following areas:

  • Increasing the minimum income threshold for tax return filing:

In general, every taxpayer has to submit a tax return form to the RD if the income reaches the minimum threshold, regardless of whether any tax has to be paid or not. The government approved to increase these thresholds, allowing income earners with low income (which is not subject to tax payment) not to submit tax returns.

The thresholds shall be increased as follows:

 

Scheme

Single

Married
(only if joint submission)

Only Salary Income (Sec. 40(1) Revenue Code)

Old

THB 50,000

THB 100,000

New

THB 100,000

THB 200,000

Other Income

Old

THB 30,000

THB 60,000

New

THB 60,000

THB 120,000

 

  • Increasing the deductible expenses for some types of income:

The ongoing criticism in the past years has been that the deductible expenses for the PIT calculation were unrealistic and too low. Therefore, the Cabinet approved to increase the deductible expenses for the following types of income:

  • Income under Section 40(1) and (2) Revenue Code:

Income derived from employment and hire of service; and

  • Income under Section 40(3) Revenue Code:

Income derived from copyrights, goodwill, patents, or other IP rights.

The expense deduction rate for the types above of income shall be increased from a maximum 40% or THB 60,000 to a maximum 50% or max. THB 100,000  (whatever is lower).

  • Increasing the allowances:

The Cabinet also approved to increase the deductible allowances for taxpayers:

 

Tax Payer Allowance

Spouse Allowance

Child Allowance

Old Scheme

THB 30,000

THB 30,000

THB 15,000
per child*

New Scheme

THB 60,000

THB 60,000

THB 30,000 per child**

*  Max. three children + THB 2,000 education support per child.

** No limitation regarding the number of children, but the THB 2,000 education support per child has been revoked.

  • Increase of the last progression level:

The Cabinet has also approved to change the PIT rate by increasing the minimum income for the last progression level (35% PIT rate) from THB 4,000,001 to THB 5,000,001. Together with the tax exemption of the first THB 150,000 (Royal Decree No. 470), the tax rates will be as follows:

Progressive Tax Rate
for the Tax Years 2017 onwards
**

Income (THB)

Tax Rate

Income
(EUR - approx.)

0-150,000

Exempt*

0-3,750

150,001-300,000

5%

3,750-7,500

300,001-500,000

10%

7,500-12,500

500,001-750,000

15%

12,500-18,750

750,001-1,000,000

20%

18,750-25,000

1,000,001-2,000,000

25%

25,000-50,000

2,000,001-5,000,000

30%

50,000-125,000

5,000,001 or more

35%

125,000 ore more

*  According to Royal Decree (No. 470) issued on 28 March 2008.

** According to the Cabinet Resolution dated 19 April 2016.

The increase of the last tier minimum income will only apply to approx. 30,000 high-income taxpayers.

  1. Conclusion
  • Even though this PIT reform is long overdue, as the current allowances and deductible expenses do not properly reflect Thai taxpayers’ living expenses, it is a step right direction.
  • However, bearing in mind the greater fiscal competition among the ASEAN member countries, the Thai government may need to consider further reductions in the PIT rates and increases in allowances and deductible expenses to enhance the country’s competitive advantages in the AEC.
  • Once officially announced by the Revenue Department, the new rules will be effective from 2017 onwards.