Thailand income tax:
A taxing experience for spouses separate tax returns for spouses and
changes in rate bands
by
Stephen Frost and Teerakarn Noichiaum,
Bangkok International Associates
Introduction In July 2012, the Constitutional Court held that the Revenue Code
provisions whereby a wife’s income (except for income from employment) had to be
aggregated with that of her husband and declared in his tax return, were
discriminatory and contrary to the equality provisions of the Constitution. Each
spouse has a right to file his/her own tax return.
In this article, we discuss current provisions relating to income tax obligations of
husbands and wives and the filing by them of joint or separate returns, and proposals
for reform which are under consideration.
Residence in Thailand for income tax purposes Taxpayers are classified into resident
and non-resident. “Resident” means a person who resides in Thailand for a period or
periods totaling 180 days or more in the tax (i.e., the calendar) year.
Any taxpayer, whether or not Thai tax-resident, is liable to pay tax on income from
sources in Thailand on a cash basis, regardless of where the money is actually paid.
A Thai tax-resident is also subject to tax on income from sources overseas, if that
income is brought into Thailand. In contrast, a tax non-resident is not subject to tax on
income sourced from overseas.
Date for filling personal tax returns: Personal tax returns have to be filed and the tax
due paid by 31 March of the year following the year of assessment.
Current provisions regarding taxation of husband and wife The current provisions
regarding tax allowances for married taxpayers and their children, and the filing of
separate or joint tax returns are as follows:
(a) Personal allowance for the taxpayer A personal allowance of Baht 30,000 per
year may be claimed by the taxpayer.
(b)
Personal allowance for non-working spouse A personal allowance of Baht
30,000 a year may be claimed by one spouse in his/ her tax return for a non-working
spouse. This may not be claimed where the spouse has income other than from
employment, e.g. rent, dividends or interest.
(c) Child allowance An allowance of Baht 15,000 may be claimed for each child
who is either not studying or is studying outside Thailand, and 17,000 Baht for each
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child who is studying in Thailand. In addition, this allowance may be claimed for
every child born before 1980, but regarding children born in or after 1980 the
allowance may only be claimed for a maximum of three children.
(d)
Separate returns for spouses If both husband and wife receive income from
employment, they may file separate tax returns and divide their children's allowance
between themselves. But if a wife receives income other than from employment, this
income must be declared in the husband’s tax return and their combined income is
subject to progressive rates of 10-37%.
(e) A child’s income must be aggregated with its parents and declared on the
parent’s tax return. This is the position until the child attains the age of 20. There are
no proposals to change these provisions.
Proposals for change The requirement for husbands and wives to aggregate their
income (with the exception of a wife’s income from employment) often results in a
higher tax burden for a married couple, than if each spouse were entitled to file a
separate return and claim separate allowances. The Revenue Department is currently
studying how to deal with this problem to comply with the court ruling. One way
would be where a married couple elects to file separate returns, then only one personal
allowance may be claimed. Another way to deal with this would be to divide the
personal allowance so that each spouse may claim 50% of the allowance. No decision
has been announced yet.
Other changes under consideration The government is also considering changes to
the income tax rate bands. The current rate bands are as below:
Income
(Baht)
Taxable
Income
(Baht)
Tax
rate
Tax payable
(Baht)
Cumulative tax
(Baht)
0 – 150,000
Nil
Nil
Nil
Nil
150,001– 500,000
350,000
10%
35,000
35,000
500,001- 1,000,000
500,000
20%
100,000
135,000
1,000,001- 4,000,000
3,000,000
30%
900,000
1,035,000
4,000,001 or more
Variable
37%
variable
variable
It has been proposed that the rate bands will be changed to 10%, 15%, 20%, 25% and
30%, and the current top rate of 37% be abolished.
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Conclusion It is not clear yet how and when the Revenue Department will implement
the changes required to allow the filing of separate returns, and what will happen to
the allowance for a non-working spouse. Similarly, the changes to income tax rate
bands are also still under consideration. But time is passing, and if these changes are
to apply to 2012 tax returns that must be filed by 31 March 2013, they should be
agreed and announced as quickly as possible.
©
Stephen Frost, Bangkok International Associates 2012
__________________________
Bangkok International Associates is a general corporate and commercial law firm.
For further information, please contact Stephen Frost by email at sfrost@bia.co.th or
telephone (66) 2 231 6201.
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