Running a Company in Thailand: CIT, VAT and Withholding Tax Explained

Who this is for: foreign business owners and directors who are setting up, or have already set up, a company in Thailand, as well as staff inside multinational companies responsible for the finance and compliance of a Thai entity.

This article makes three things clear: what Thailand’s Corporate Income Tax (CIT), Value Added Tax (VAT) and Withholding Tax each are, who pays them, and how they’re filed; when a foreign company will be found to have a “permanent establishment” in Thailand; and the compliance reality foreign-owned companies now face after the 2025–2026 tightening of nominee shareholder scrutiny.

Who Needs to Understand Thai Corporate Tax?

As long as your business has a substantive connection to Thailand, it is hard to avoid the Thai corporate tax system entirely.

Foreign business owners/directors who set up a company or branch in Thailand need to understand how corporate income tax is paid on operating profit, whether the company is a tax resident in its own right or has a permanent establishment in Thailand.

Staff responsible for a Thai entity’s accounts and outgoing payments — including finance managers, accountants, HR or operations staff — will encounter withholding tax and monthly filing obligations as soon as they handle payments such as payroll, service fees or dividends.

Foreign businesses that only charge Thai customers without setting up a company — for example, an overseas company that only collects service fees or royalties from Thai clients — may not be treated as having a permanent establishment, but still need to deal with withholding tax at source and the question of what counts as “Thailand-sourced income.”

The key first step is working out which of three categories you fall into in Thailand — a “resident company,” a “foreign company with a permanent establishment,” or a “foreign company with only source income” — because the taxes and obligations attached to each are completely different.

Thailand’s Three Pillars of Corporate Tax

One: Corporate Income Tax — Tax on Company Profit

Corporate Income Tax (CIT) is a tax levied on company profit. It applies to Thai companies, as well as certain foreign companies conducting business in Thailand.

• Who pays it? A tax resident company (incorporated in Thailand, or managed and controlled from Thailand) pays corporate income tax on its worldwide income. A foreign company with a permanent establishment (for example, one with a branch, office or construction site in Thailand) pays tax on the Thailand-sourced net profit generated by that permanent establishment.
• Rate: the standard rate is 20%. Some smaller companies and specific industries have preferential arrangements — follow the Revenue Department’s guidance for the relevant year.
• Tax base: calculated from accounting net profit adjusted under tax law — adding back disallowed expenses, deducting allowable items and tax depreciation, then applying the 20% rate. The specific additions and deductions are highly technical, and in practice are usually handled by a Thai accountant or tax advisor.
• Filing rhythm: Thailand uses an “annual filing plus mid-year advance payment” structure: a company closes its books for the accounting year, calculates the tax due, and files and pays within the statutory deadline. Specific forms and deadlines follow the Revenue Department’s annual announcements.

For most readers, the most important judgment call is this: if the company has a physical presence, employees or ongoing business in Thailand, assume you fall under the CIT framework, then work through whether you also have withholding tax obligations layer by layer.

Two: VAT — Almost Every Company Selling Goods or Services in Thailand Runs Into It

Value Added Tax (VAT) is a turnover tax levied on transactions in goods and services. A business supplying goods or services in Thailand needs to first check whether it falls under the VAT registration requirement.

• Who needs to register for VAT? A business supplying taxable goods or services, whose taxable annual turnover exceeds the threshold set by tax law, must apply to the Revenue Department for VAT registration. The specific threshold amount follows the Revenue Department’s current regulations.
• Rate: Thailand’s statutory VAT rate is 10%, but a reduced rate of 7% was introduced after the 1997 Asian financial crisis and has since been extended every year by royal decree — making it, in effect, the actual rate for more than thirty years. Most recent extensions: in September 2025, the Cabinet approved an extension to 30 September 2026; in April 2026, the Cabinet approved a further extension to 30 September 2027. It legally remains a reduced rate that requires a separate royal decree each time, and could still be adjusted if policy changes in future.
• Filing rhythm: registered VAT taxpayers must file monthly, reporting output tax, input tax and the tax payable or refundable for the period, and pay by paper or electronic filing within the statutory deadline.

If you’re an ordinary B2B or B2C goods/services provider in Thailand, you will almost certainly need to check whether you fall under the VAT registration requirement and the monthly filing cycle.

Three: Withholding Tax — A “Source Tax” That Starts With Every Payment

Withholding tax is the part of the Thai tax system closest to day-to-day operations: when your company pays certain amounts to employees, suppliers or foreign companies, it may need to withhold part of the tax first and remit it to the Revenue Department.

• When does withholding apply? When paying specific types of income such as service fees, interest, royalties, director remuneration or rent, the payer must withhold tax at the rate set by tax law and remit it to the Revenue Department. If the recipient is a foreign company with no permanent establishment in Thailand, the withholding tax is generally treated as its final tax liability in Thailand; whether a tax treaty can reduce it needs to be confirmed case by case.
• Rate: there is no single, unified withholding tax rate. Practical guides often use 3% as an example, but different payment types (service fees, interest, royalties, rent, etc.) each have their own statutory withholding rate, and the threshold amount can also vary by the nature of the payment — follow the Revenue Department’s rules and a professional advisor’s interpretation.
• Filing rhythm: the payer must file and pay within the month following payment: paper filing is generally due by the 7th of the following month, and e-filing can extend this by a few days. The exact dates may change with policy — follow the Revenue Department’s annual announcements and e-filing rules.

The core point of withholding tax is this: your company is not just a “taxpayer” — it is also a “withholding agent.” If you don’t withhold and file on time, the risk of back tax and penalties falls directly on the company.

Four: Foreign Companies in Thailand — Permanent Establishment Is the Key Dividing Line

Whether a foreign company needs to pay corporate income tax in Thailand, or only faces withholding tax, depends on whether it has a “permanent establishment (PE).”

When there is a permanent establishment — a foreign company with a branch, fixed office, construction site or long-term sales outlet in Thailand may be found to have a PE, and must pay ordinary corporate income tax on the profit generated by its Thai business.

When there is no permanent establishment — a company with no physical presence in Thailand that earns income such as service fees, interest or royalties from Thailand is mostly taxed through withholding tax deducted at source by the payer. Whether treaty relief applies needs to be confirmed against whether a Double Taxation Agreement exists between that country and Thailand, and its specific terms.

The core question to confirm is: is your activity in Thailand merely “collecting payment,” or has it reached the level of genuine presence — an office, employees or a construction site — because this fundamentally changes the scope of your tax obligations.

Five: Foreign-Owned Companies and Nominee Shareholders — the Compliance Reality of Tighter DBD Scrutiny

Beyond tax, foreign-owned companies in Thailand also have to deal with compliance around company registration and shareholding structure. In recent years the Department of Business Development (DBD) has notably tightened its stance on nominee shareholder arrangements.

In the past, some foreign investors held a majority of shares through Thai nominee shareholders while retaining actual control themselves, to get around foreign ownership restrictions — an arrangement that already carried risk under Thai law. From January 2026, the DBD requires Thai shareholders of all newly established Thai companies to submit proof of the source of their funds; from 1 April 2026, filings for share transfers, capital increases and director changes are also brought under the same scrutiny. The DBD has also rolled out an AI-driven audit system (IBAS) that integrates company filings, tax data and land records to automatically screen for signs of nominee arrangements.

The practical impact on foreign-owned companies: those using a nominee shareholder structure face a higher risk of investigation and being required to restructure, including possibly being asked for Thai shareholders’ bank statements, a signed declaration that they are not holding shares as a nominee, and shareholder interviews. Anyone planning to set up a company in Thailand with a complex shareholding arrangement should discuss it early with a lawyer familiar with Thai company law and foreign business law, rather than relying on past market practice.

Common Misunderstandings

“As long as the company is based overseas, Thailand won’t tax it.” As long as there is Thailand-sourced income, withholding tax at source may be due; and if the company is found to have a permanent establishment, it may even be taxed under ordinary CIT. Not incorporating a company in Thailand does not mean having no Thai tax obligations.

“VAT at 7% is a permanent, unchanging standard rate.” 7% is legally a reduced-rate arrangement, kept in place by an annual royal decree extension. Thailand’s statutory standard rate is 10%; the reduced rate has continued to this day because of policy choices, and could still be adjusted if policy changes in future.

“Withholding tax is just a formality — under-withholding or not withholding isn’t a big deal.” Withholding tax is an important revenue source and audit tool for the Thai tax authority. Failing to withhold and file as required puts the risk of back tax and penalties directly on the payer — this should not be taken lightly.

“A nominee shareholder structure is still an acceptable industry practice.” In recent years the DBD has, through new orders, bank statement requirements and its AI audit system, made clear its stance against nominee shareholder arrangements. The related compliance risk has risen significantly and should no longer be treated as a gray area.

“Just use a template structure — it fits every company.” Determining tax residency, establishing permanent establishment, and assessing shareholding-arrangement risk all depend heavily on the specific business model. No single structure covers every situation; a case-by-case assessment is still needed in practice.

Scenario Examples

Scenario One: A Multinational SaaS Company Setting Up a Subsidiary in Thailand

A multinational SaaS company sets up a wholly-owned subsidiary in Thailand, hires local sales and customer-support staff, and the subsidiary invoices and collects payment from Thai customers directly.

As a tax resident, the Thai subsidiary pays 20% CIT on its Thai operating profit. It should confirm whether its annual turnover has reached the VAT registration threshold — if registration is required, it files 7% VAT monthly. When paying service fees, rent or similar amounts, it needs to determine whether a withholding tax obligation applies and file on time.

If there are significant international service fee or royalty arrangements between the parent and subsidiary, watch out for transfer pricing rules to avoid a challenge from the tax authority.

Scenario Two: An Overseas Consulting Firm With No Thai Entity Charging Thai Clients

An overseas consulting firm has no company or office in Thailand, but provides online consulting services to Thai businesses and charges Thai clients directly.

It first needs to assess whether its activity in Thailand constitutes a permanent establishment. If not, it generally does not pay CIT on its profit in Thailand. But when the Thai business pays the service fee, it may need to withhold a set percentage of tax as required, which serves as this overseas company’s final tax liability in Thailand.

If the tax treaty isn’t used properly, or the necessary documents aren’t provided, the withholding tax may end up higher than expected; the overseas company also needs to assess whether it can claim a credit for the withheld tax in its home country.

Scenario Three: A Foreign-Owned Restaurant Chain Held Through Thai Shareholders

A foreign investor and a Thai partner jointly set up a restaurant chain; the Thai shareholders hold the majority of shares, but the actual funding and operational control mainly come from the foreign investor.

The company itself pays CIT on its operating profit, and confirms whether VAT filing is required based on its business type. At the shareholding level, it needs to watch for DBD scrutiny of nominee shareholders — including a possible requirement for Thai shareholders to provide bank statements and proof of capital contribution, and to sign a declaration that they are not holding shares as a nominee.

If the DBD determines the structure is substantively a nominee arrangement, it may require the shareholding to be adjusted, additional documents submitted, or take stricter measures. Reviewing the structure and preparing documentation early can reduce this risk.

FAQ

Q1: Does a foreign company in Thailand always have to pay 20% CIT?

Not necessarily. If it has a permanent establishment in Thailand, the profit generated by that establishment is generally taxed at 20%. If there is no permanent establishment but there is Thailand-sourced income, in most cases tax is collected through withholding at source, and the actual burden depends on the applicable tax treaty.

Q2: After setting up a company in Thailand, when do you file corporate income tax?

After the accounting year ends, the annual return is filed and tax paid as required by tax law, and there is generally also a mid-year advance payment arrangement. Specific forms and deadlines follow the Revenue Department’s annual announcements, and in practice this is usually handled by an accountant.

Q3: Will Thailand’s 7% VAT rate change?

The current 7% reduced rate has been extended to 30 September 2027. The statutory standard rate is 10%; keeping the rate at 7% requires a royal decree each time, and whether it rises in future depends on policy decisions. A prudent approach for businesses is to assume 7% will continue, while leaving room to adapt if it changes.

Q4: Is withholding tax always 3%?

There is no single fixed rate. Practical guides often use 3% as an example, but different payment types (service fees, interest, royalties, rent, etc.) each have their own statutory withholding rate — follow the Revenue Department’s rules and a professional advisor’s interpretation.

Q5: How do you work out the withholding tax filing deadline?

Paper filing is generally due by the 7th of the month following payment; e-filing can extend this by a few days. The exact date may change from year to year — confirm against the Revenue Department’s announcements and current e-filing rules, and leave enough internal processing time.

Q6: Is a nominee shareholder arrangement still safe after 2026?

No. The DBD has significantly stepped up scrutiny through its AI audit system and a series of new orders, and the related compliance risk has clearly increased. If a structure involves actual foreign control with a Thai nominee shareholder, review it early and seek professional advice.

Q7: If a foreign company only receives Thai dividends or interest, does it still need to file corporate income tax?

This type of passive income is generally withheld at source by the Thai payer and remitted to the Revenue Department; the foreign company generally does not need to separately file CIT in Thailand. The actual rate, and whether treaty relief is available, varies by type of income and by the specific bilateral agreement — check the applicable treaty terms.

For case-specific structures, consult a professional familiar with Thai company and tax law; for general questions about how the system works, ask Zagdim.

Disclaimer

This article is compiled from publicly available information from Thailand’s Revenue Department and major international accounting firms, with the aim of helping readers understand the basic outline of the Thai corporate tax system. It does not constitute individualized legal, tax or financial advice. Actual tax liability, filing obligations and compliance risk vary by company structure, business model and the latest regulations. Relevant Thai regulations may be updated at any time; readers should follow the latest announcements from official bodies such as Thailand’s Revenue Department and Department of Business Development, and consult a qualified local professional where necessary.

Have a question about this guide? Leave a comment below, or ask Zagdim directly.

Sources

• The Revenue Department – Corporate Income Tax
• The Revenue Department – Value Added Tax
• The Revenue Department – Income Tax Guide for Foreign Company
• PwC Thailand – Thai Tax 2024/25 Booklet
• EY – Thailand International and Corporate Tax Snapshot 2024
• Forvis Mazars – Withholding Tax in Thailand
• PKF Thailand – DBD Announced 4 New Measures to Address Nominee and Mule Account Risks
• One Asia Lawyers – Strengthening the DBD’s Measures Against Nominee Arrangements
• Luther Lawfirm – Thailand Tightens Rules on Foreign Shareholding
• THAILAND.GO.TH – Corporate Income Tax: Calculated from Earnings Paid from or Within Thailand