Thailand

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. Except as 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 received by a Thai company and a foreign company carrying on business in Thailand from the sale of fund units in a fixed income mutual fund are exempt from tax. This is subject to the condition that the cost of the investment and expenses in relation to the exempt income are not claimed as tax 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 this period but the 25% shareholding and cross-shareholding conditions are not met, only one-half of the dividend 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 above three-month period.

Dividends received from foreign investments 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 dividend was received and the dividend was 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 is exempt from tax:

• Profit sharing received from a fixed income mutual fund by both Thai and non-Thai corporate investors. 

• Profit sharing derived from an investment in other mutual funds established as juristic persons (excluding property funds) by a Thai company is exempt from tax (100% exemption for a listed company and 50% exemption for a non-listed company), provided that the Thai company has held the fund units for three months before and 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).