Certain types of income paid to companies are subject to withholding tax at the source. The withholding tax rates depend on the type of income and the tax status of the recipient. The payer of the income is required to file a return (Form PND. 3/53) and submit the amount of tax withheld to the District Revenue Offices within seven days of the following month in which the payment is made.

The tax withheld will be credited against final tax liability of the taxpayer. Many people who have a registered company or limited partnership are likely to know that they have a duty by law to withhold tax from their suppliers when paying for certain kinds of services and submit to the Revenue Department.

But if that person forgets to withhold the tax then they have to pay the tax themselves plus penalty and interest (1.5% per month calculated from the tax amount from the date they were supposed to have submitted). The penalty itself is not so much, just a few hundred baht, but interest of 18% per year can create a huge tax burden for you.

Therefore, I would like to remind you that as a company or limited partnership, any time that you are going to pay for any kind of services to your supplier no matter whether they are a corporation or individual, you have to check the withholding tax table and see how many percent you have to withhold from the supplier when they get paid.

The rates vary from 1 to 5%, depending on which type of service you use. Below I give a sample of some of these rates but if you need the full table of withholding tax you can email me at sirirat@thaiaccounting.com, we have both Thai and English versions to give you at no cost.

1) Dividends 10%
2) Interest 10% if paid to associations or foundations 1%
3) Royalties 10% if paid to associations or foundations 3%
4) Advertising Fees 2%
5) Service and professional fees 3% if paid to a Thai company or foreign company having permanent branch in Thailand, 5% if paid to a foreign company not having a permanent branch in Thailand.

For example, if you are going to pay for advertising at Bht.100, you have to withhold 2 Bht and issue withholding tax certificates to your supplier which he can use as a 2 Bht tax credit when paying annual income tax and by the 7th of the following month you have to submit this 2 Bht to the Revenue dept. by using report PND.3 if your supplier is an individual or report PND.53 if he is under a corporation.

How can the tax officer know that you forget to withhold? Actually, it is very easy to check, just reconcile between your services expense account in your accounting book and the tax form(PND.3 and PND.53) you’ve been submitting during the audit year. So do not forget to withhold the tax when paying for services so that you will get no pain of a future risk of taxes, penalties and interest.

For more information, please contact NAT Phuket branch: 076 212 989 info@thaiaccounting.com www.thaiaccounting.com