Thailand

Corporate - Income determination

Last reviewed - 14 January 2020

Inventory valuation

Inventory is valued at the lower of cost or market price. Any recognised method of ascertaining the cost price may be used, but a change in the method may only be made with the prior approval of the Director-General of the Revenue Department.

Capital gains

There is no specific legislation governing capital gains. With one exception noted below, all capital gains earned by a Thai company are treated as ordinary revenue for tax purposes. Capital gains on the sale of investments derived from or in Thailand by a foreign company not carrying on business in Thailand are subject to a tax of 15%, withheld at source by the purchaser, unless otherwise exempt under a DTT.

The following gains earned by a foreign company not carrying on business in Thailand are also subject to 15% WHT:

  • Difference between the redemption price and the initial sale price of bonds issued by the government, state enterprises, and specified institutions.
  • Gains on the transfer of bonds issued by the government, state enterprises, and specified institutions.

Capital gains derived from the sale of fund units in a fixed income mutual fund are exempt from tax in the case where the seller is a Thai corporate investor or an overseas corporate investor carrying on business in Thailand (subject to the condition that the cost of investment and any expenses in relation to the exempt income are non-deductible expenses).

Dividend income

Dividends received by a company listed on the Stock Exchange of Thailand from another Thai company are exempt from tax provided that the shares are held for at least three months before and three months after the dividend was received.   

Dividends received by a non-listed company from another Thai company are also exempt from tax provided that the company receiving the dividend holds at least 25% of the total shares with voting rights, without any direct or indirect cross-shareholding, and has held the shares for at least three months before and three months after the dividend was received. However, if the shares are held for at least three months before and three months after the dividend was received but the 25% shareholding and cross-shareholding conditions are not met, only one-half of the dividends is exempt from tax.  

In the case of an amalgamation (merger) or an entire business transfer (EBT), the new or surviving company can include the period of ownership of any predecessor company that was part of the amalgamation or EBT when counting the three-month period.

Dividends received from a company incorporated abroad are exempt from tax if the Thai company receiving the dividends holds at least 25% of the shares with voting rights of the company paying the dividends for a period of not less than six months before the date on which the dividends are received and the dividends are derived from the net profit in the foreign country taxed at a rate of not less than 15%. In the event that a ‘special law’ in a particular foreign country provides a reduced tax rate or exemption for the net profit, the limited company that receives the dividends is still eligible for the tax exemption.

The share of profits received by a Thai company or a foreign company carrying on business in Thailand from an unincorporated joint venture carrying on business in Thailand is exempt from tax.

In addition, the following profit sharing from mutual funds are exempt from tax:

  • Profit sharing distributed by a fixed income mutual fund to both individual and corporate investors.
  • Profit sharing derived from an investment in a mutual fund established as a corporate entity under Thai law (apart from certain property funds) by a Thai listed company while a 50% exemption is available for a non-listed company, subject to the condition that the Thai company holds the fund units for three months before and three months after the distribution of the profit sharing.

Stock dividends

Stock dividends are taxable to the recipient as ordinary income.

Interest income

Interest is taxable as income on the accrual basis.

Royalty income

Royalties are taxable as income on the accrual basis.

Foreign income

Companies incorporated in Thailand are taxed on worldwide income. The foreign income received by a company incorporated in Thailand is taxable on the accrual basis. Double taxation is relieved by way of a credit against the tax chargeable in Thailand (see Foreign tax credit in the Tax credits and incentives section).