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5.4. Tax Base for Non-Resident Entities

A non-resident company with a branch or permanent establishment (PE) in Thailand is liable to tax on income attributable to the branch/PE. Under domestic law, a limited force of attraction rule determines that attributable income is not only the income derived by the branch/PE, but also income otherwise derived in Thailand by the non-resident company to the extent the income is derived from transactions similar to those carried out by branch/PE.

The income of a branch/PE is determined in much the same way as for resident companies. However, charges from head office to PE are allowable only if they meet the following conditions:

  • The expenses directly relate to specific services provided for the benefit of the specific business of the branch/PE in Thailand;
  • R&D expenses are incurred for the benefit of the Thai branch/PE or the results of the R&D are effectively used for the benefit of the business of the Thai branch/PE;
  • The expenses charged to the Thai branch/PE were not deducted in the determination of the taxable income of the head office or another branch/PE;
  • The allocation of charges to the Thai branch/PE is consistent with the allocation of the same to branches/PEs located elsewhere; and
  • The expenses do not relate to those  necessarily linked to the activity of the head office or other branches (such as office rental, utilities, appliances, etc.).

More specifically, general management and administrative expenses charged to a Thai branch/PE are expected to be charged at cost without a profit mark-up. Funding costs other than for a financial branch are usually disallowed, unless they can be specifically traced to a third-party financing specifically concluded for the benefit of the branch.

Charges to a Thai branch/PE must be substantiated as genuine by documents issued by the tax authorities of the head office or other professionals acceptable to the director-general of the Thai Revenue.

Where the profits arising from sales in Thailand through a branch/PE, whether or not treaty protected, cannot be reasonably ascertained, the corporate tax may be notionally determined as 5% of gross sales. This notional tax then satisfies both the Thai corporate tax and branch profit remittance tax liabilities.

Effective from 14 May 2018, income from digital assets, including income from holding or transfer of cryptocurrency and digital tokens is treated as ordinary income and subject to withholding tax in Thailand.

Unless a tax treaty provides otherwise, foreign companies undertaking a shipping or air transport business in Thailand are subject to corporate tax on a notional basis. With respect to the carriage of persons, corporate tax is due on the gross amount (i.e. before any deductions) od fees, fares and other collectibles in Thailand. For the transport of goods, the corporate tax is 3% of the gross amount of freight fees and other collectibles for goods transported from Thailand.

Foreign companies without a branch/PE in Thailand are liable to tax in Thailand only on specified Thai-source income (but see limited force of attraction above).