GuruSpeak: Tips for filing your personal income tax return as the deadline looms
This article appeared in the March 16, 2012 issue of the The Nation .
Source: The Nation Website (Eng)
By Prapasiri Kositthanakorn
April 2 is fast approaching and with it the deadline for filing your 2011 personal income tax return and making any required tax payment. So, what is new this time around?
New Expat ID number:
Expatriates filing their tax returns will have to use the new tax ID - the 13-digit identification number that came into effect on February 1. Thai taxpayers have been using the 13-digit National ID number for years, but this is new for expats working in Thailand, who previously had a 10-digit number.
Your employer should be able to give you your new 13-digit number, which can be found on last year's tax receipt, or you can call the Revenue Department on 1161 to obtain your number. Fear not, the all-knowing Revenue Department will recognise you by your old 10-digit number.
First home tax privilege:
If you bought or plan to buy your first home (land and building) or a condominium during the period from September 21, 2011 to December 31, 2012, you can claim a tax deduction of 10 per cent of what you paid for the property for the next five years, but not exceeding Bt100,000 per year. To claim this tax privilege, you must have this first home registered in your name within the mentioned period. You must own this property for at least five years and retain the necessary documentation and certification to support the tax deductions.
You will not be eligible to claim this first-home tax deduction, if you have ever a) claimed tax deduction on home mortgage interest, or b) claimed tax exemption for the sale of a residence to purchase a new one under Ministerial Regulation 241 (in year 2546), or c) claimed tax exemption for the purchase of a residence under Ministerial Regulation 271 (in year 2552).
You can claim a deduction of 1.5 times on cash donations for flood relief in Thailand made between September 1 and December 31 2011, but the deduction including other charitable donations is limited to 10 per cent of net taxable income.
In addition, flood damage victims can claim a tax deduction in 2011 and 2012 for expenses incurred to repair their home (Bt100,000 maximum deduction for two years) and/or car (Bt30,000 maximum deduction). The tax deduction should be claimed in the year the expenses were actually paid, and proof of ownership plus receipts showing the payment for the repair must be produced. You can start claiming this deduction in your 2011 tax return.
New tax rate:
There is still a year to go, but the new corporate tax rate of 23 per cent applies to companies whose financial year began on or after January 1, 2012; the rate will drop to 20 per cent the following year.
Meanwhile a new tax rate for personal income tax is under consideration. Many have questioned whether we will see a personal income tax rate closer to 28 per cent. Why 28 per cent? With the corporate tax rate at 30 per cent, the individual receiving a dividend from a corporation is subject to another 10 per cent withholding tax, so effectively the rate becomes 37 per cent, which is the top rate for personal income tax. So a 20-per-cent corporate tax rate plus 10 per cent gives us 28 per cent, which is more competitive with Malaysia whose top marginal tax rate is 26 per cent. (Singapore's is 20 per cent.) However, many countries prefer to keep their personal income tax rate as high as 40 per cent, in line with places like Japan, Australia, Germany, etc.
Thai authorities are reportedly reviewing the appropriateness of the tax rate and the level of allowances and deductions, as a few deductions have economic impact on capital markets and the country's saving policy.
Foreign tax credit:
With local companies expanding their investment in other countries, a number of Thais have been assigned to work overseas to manage the business. This offshore-sourced income should not be taxed here if it's not remitted to Thailand. However, overseas workers will be subject to Thai tax on this income if their earnings are paid into a Thai bank account or otherwise remitted back to Thailand. If they work in the countries that have a double taxation agreement with Thailand, they can claim foreign tax paid on offshore-sourced income as credit against Thai tax (but the credit cannot exceed the Thai tax on the income). The difference between tax regimes means the employer may need to help overseas workers' file their foreign taxes and claim credits against Thai tax to avoid double taxation. At the end of the day, that may well come at a cost to the employer if they have a tax equalisation programme.
Prapasiri Kositthanakorn is a partner at PwC International Assignment Services Thailand.