Withholding Income Tax

     "Withholding income tax" refers to a method of prepaid tax collection. The law mandates that the payor must deduct taxes from the income paid to the recipient each time such income is disbursed. This tax deduction must comply with the guidelines, methods, and conditions stipulated by the law. The payor is then required to remit the withheld tax to the Revenue Department.

     The practice of withholding tax can help alleviate the tax burden on taxpayers when it is time to file their income tax returns. Instead of having to pay a large sum of tax once a year, the tax is incrementally submitted to the Revenue Department upon receipt of income.

Those obliged to withhold income tax include:

1. As per form Por Ngor Dor 3, the payor who pays income to the recipient who is a personal income taxpayer.
2. As per form Por Ngor Dor 53, the payor who pays income to the recipient who is a corporate income taxpayer.

Withholding income tax consists of three main components as follows:

1. The income payer, as designated by the law to withhold taxes at source. This can be an individual such as a sole proprietor, ordinary partnership, or a group of persons that is not a legal entity, or a legal entity such as a company or limited partnership.
2. Assessable income (to be withheld at source), not being income that is exempt from tax.
3. The income recipient, being a person liable to pay income tax. This can be an individual such as a sole proprietor, ordinary partnership, or a group of persons that is not a legal entity, or a legal entity such as a company or limited partnership.

     SME entrepreneurs, whether operating as individuals, such as a sole proprietor, ordinary partnership, or a group of persons that is not a legal entity, or as legal entities, such as a limited company, limited partnership, or legal entity partnership, when paying income types that the law specifies should have taxes withheld at source, must follow these procedures:

1. Have and use a taxpayer identification number (except for individuals who do not have to pay Value Added Tax, who should use their citizen identification number instead).
2. Deduct tax at source every time income is paid, which the law requires to be deducted at source, at the rate specified by the law.
3. Issue a certificate of withholding tax at source to the tax deductee as evidence for filing the income tax return. If it involves the government, an organization of the government, a municipality, a sanitary district, or another local administration organization, the paying officer should issue a receipt for the tax that has been deducted to the income recipient.
4. Remit the withheld tax within seven days from the end of the month in which the income was paid, to the local branch of the Revenue Department where the person obliged to withhold income tax at source has their office.

Source: The Revenue Department, 90 Phaholyothin 7, Phayathai, Phayathai, Bangkok 10400

Tel. +66 2272 8000

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