Withholding Tax in Thailand: Guide for Foreign Service Providers

Foreign service providers earning income from Thailand must navigate the country’s withholding tax (WHT) system carefully to remain compliant and minimize unnecessary tax burdens.

Thailand imposes WHT on payments made to offshore entities for services, royalties, interest, and dividends. With a broad double tax agreement (DTA) network and strict documentation requirements, understanding how WHT applies is essential for foreign businesses operating in or serving Thai clients.

Understanding withholding tax in Thailand

Withholding tax is a mechanism under Thailand’s Revenue Code designed to collect tax at the source of income. When a Thai entity makes a payment to a non-resident company or individual for specific types of income, such as services performed outside of Thailand, it is required to withhold a portion of the payment and remit it to the Thai Revenue Department.

This applies regardless of whether the foreign service provider has a physical presence in Thailand. The Thai entity acts as the withholding agent and bears the legal obligation to deduct the correct tax amount. This system ensures tax is collected before the payment leaves Thailand and places the compliance responsibility on the local payer.

Withholding tax rates for foreign service providers

Thailand’s domestic WHT rates vary depending on the nature of the payment. For most service fees paid to foreign entities, the rate is 15 percent, unless modified by a DTA. Payments for royalties and interest are also subject to a 15 percent rate, while dividends attract a 10 percent WHT.

These rates apply even if the services are rendered entirely outside Thailand, provided the payment originates from a Thai source. Foreign entities should be aware that receiving gross payments without tax deductions is not the default position under Thai law.

Double tax agreements and treaty relief

Thailand has signed DTAs with more than 60 countries, including key ASEAN partners and major global economies. These agreements may reduce or eliminate the WHT otherwise applicable under domestic law, depending on the nature of the payment and the recipient’s tax residency status.

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Work with Dezan Shira & Associates to stay compliant with Thailand’s withholding tax rules. Contact us to ensure treaty benefits and avoid tax risks.

To access DTA benefits, the foreign service provider must supply a Certificate of Tax Residence issued by their home country’s tax authority and complete Thailand’s DTR (Double Tax Relief) form. These documents must be submitted to the Thai Revenue Department through the Thai payer before the payment is made. Without this, the standard domestic WHT rate will apply, even if a treaty exists.

Case study

A Singapore-based consulting firm provides remote IT services to a Thai company and invoices 1 million baht. Under Thailand’s domestic rules, the Thai client must withhold 15 percent (150,000 baht). However, under the Thailand–Singapore DTA, service income may fall under business profits, which is exempt from Thai WHT if the Singapore firm does not have a permanent establishment in Thailand.

To enjoy this benefit, the Singapore firm must provide a tax residency certificate and ensure the DTR form is filed in time.

Many of Thailand’s DTAs treat service income under business profits or technical service articles. Where categorized as business profits, WHT may be exempted, provided the foreign provider does not maintain a permanent establishment in Thailand.

Permanent establishment risk and service income

A foreign company providing services to clients in Thailand must evaluate whether its activities constitute a permanent establishment under relevant DTAs. Suppose a PE is deemed to exist, such as through repeated on-site presence, deployment of personnel, or contract negotiation in Thailand. In that case, the foreign company becomes subject to Thai corporate income tax on its Thailand-sourced income, beyond WHT obligations.

The threshold for PE differs by treaty. In some cases, sending personnel for more than 183 days within 12 months may trigger PE status. Service providers should assess these risks before engaging in long-term or recurring projects with Thai clients.

Claiming DTA benefits: Required steps

To ensure the application of reduced WHT rates under a DTA, the following process must be followed:

1. Tax Residency Certificate: The foreign provider must obtain this from its home country’s tax authority.
2. Completion of Thai DTR Form: This must be prepared in advance and submitted by the Thai payer to the Revenue Department.
3. Timely Submission: These documents must be provided before or at the time of payment to apply treaty benefits.

Delays or failure to comply will result in the full domestic rate being applied, and refunds may be difficult to obtain retrospectively.

Compliance risks and penalties

Incorrect or missing withholding can result in penalties for the Thai payer, including surcharges and interest on unpaid tax. For the foreign provider, improper handling may lead to double taxation, especially if the tax is not creditable in their home country due to missing paperwork or late filings.

Additionally, a reputation for tax non-compliance can negatively affect ongoing commercial relationships in Thailand, especially in regulated sectors or large public contracts.

Tax-efficient structuring for service providers

Foreign businesses can take proactive steps to manage their tax exposure:

• Service Structuring: Evaluate the nature and duration of services provided to avoid triggering PE thresholds.
• Treaty Jurisdiction Invoicing: Where legally justifiable, route services through entities based in jurisdictions with favorable treaties with Thailand.
• Regional Hubs: Set up ASEAN regional offices to consolidate service contracts and standardize documentation.

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