How does Withholding Tax work in Thailand?

The Withholding Tax (WHT) is a deduction made on payments to suppliers for the provision of services. The WHT applies to expenses greater than THB 1,000 and to expenses for which a long-term agreement is in place although the expense may be lower than THB 1,000 (ex: telephone or internet bills). For more info on the WHT and its rates, you may visit our dedicated page here.

The Withholding Tax may sometimes be confusing so here are a few tips to help you understand how it works:

1. WHT is calculated on the amount before VAT

Let’s say you receive an invoice from BizStep as follows:
Total Before VAT: THB 5,490
+ VAT: THB 384.30
Grand Total: THB 5,874.30

Withholding Tax: 3% * THB 5,490 = THB 164.70

2. It applies to services only

Be reminded that the Withholding Tax applies to services and NOT to the purchase of products. However, invoices from your suppliers may include both products and services. Let’s say your company receives an invoice for the purchase and installation of office furniture. The supplier may either issues 2 invoices: 1 for the products costs and 1 for the labour cost but may also include both the products and labour cost in the same invoice, which could be confusing at times.

Invoices may also combine different types of services on which different WHT rates apply. For instance, most serviced offices in Thailand issue invoices for ‘Rent’ and ‘Rental service’.
Rent: 5% WHT and no VAT
Rental service: 3% WHT and 7% VAT

As this can get tricky, do not hesitate to check with your accountant whether you should deduct the WHT and if so, at which rate and on which amount.

3. Duty of the payer

It is the duty of the payer only to deduct and submit the Withholding Tax. Should you not withhold the tax, the seller has the right not to reimburse such amount to you and in this case, you must anyway submit the tax that should have been deducted to the Revenue Department.

Although some sellers kindly indicate the amount of Witholding Tax in their invoices or add a mention similar to ‘x% Withholding Tax can be deducted from the Total Before VAT’, note that most invoices do not show the amount of WHT to be deducted (if any).

4. Do not forget to send the Withholding Tax certificate

Following each payment, be reminded to mail a Withholding Tax certificate (signed and stamped by an authorized Director) to your supplier for the amount of WHT deducted.

Basically, your suppliers will need this certificate when they file their Corporate Income Tax (CIT) return at year end since the amount of tax withheld is deductible against the CIT due (if any). Without this certificate, they cannot claim the deduction.