Tax implications in Thailand of establishing branch office in Thailand has been viewed by some foreign corporations to be more practical than setting up a new business in Thailand.
So if you are planning to establish a branch office in Thailand, you should at least know the tax implications of establishing a branch office in Thailand. A company owned by a foreigner doing business in Thailand either by establishing a branch here or setting an office is required to apply for tax identification number from the Revenue Department. It is required to submit within 60 days from the date of registration or operation an application form Lor Por 10.3 with relevant documents such as copy of company’s registration license to the Area Revenue Officer of Thailand.
Income derived from activities of a branch office of a foreign corporation in Thailand is subject to Thai corporate income tax. However, the income derived from sources outside Thailand and income derived from unrelated business activities shall not be taxed. Since a branch office of a foreign corporation is taxed in the same manner as a corporation in Thailand, it is thus subject to a rate of 30% of its net profits after deducting the expenses and costs arising from business activities. A branch office of the foreign corporation in Thailand is also liable to a 10% levy on profits remitted to the foreign head office. This is known as a branch profit remittance. If the profit cannot be ascertained, the assessment shall be made based on the gross receipts and shall be taxed at 5%.
A branch office of a foreign corporation in Thailand may also be required to register its business for VAT purposes because it may become liable to pat the Value Added Tax imposed in Thailand. Also, transactions of branch office of foreign corporation in Thailand such as banking business, interest on loans and sale of immovable assets are subject to SBT or Specific Business Tax.
The tax implications of establishing a foreign office in Thailand by foreign corporations should be known beforehand to avoid serious legal consequences.