Types of taxable income for individuals

     Individuals who earn income are obligated to pay personal income tax, and due to the diverse sources of these earnings, the law has classified income (assessable income) into various categories to ensure fairness. The most appropriate methods of tax calculation are then determined based on these categories. Currently, the Revenue Code classifies assessable income into 8 categories, as follows:

1. Type 1 Income: Income derived from employment, including

• Salaries, wages, allowances, bonuses, gratuities, pensions, and retirement benefits.
• Rental payments received from the employer.
• Money calculated from the value of residence provided by the employer without rent payment.
• Money paid by the employer to settle any debts which the employee is obligated to pay.
• Money, property, or any benefits derived from employment, such as the value of provided meals.

2. Type 2 Income: Income derived from professional services or from employment duties or positions, including

• Fees, brokerages, discounts.
• Grants for work, meeting allowances, bonuses.
• Rental payments received from professional services or employment duties or positions.
• Money calculated from the value of residence provided by the payer without rent payment.
• Money paid by the payer to settle any debts which the recipient is obligated to pay.
• Money, property, or benefits derived from professional services or employment duties or positions, whether they are permanent or temporary.

3. Type 3 Income: Goodwill, rights or other benefits, annuities, or income that is in the nature of annual income resulting from inheritance, other legal transactions, or court judgment.

4. Type 4 Income: Interests, dividends, profit shares, capital reductions, capital increases, benefits from stock transfer, etc.

     The law, in many cases, allows the choice to pay tax by the withholding tax method instead of combining with other income as per the general principle. This could lead to tax savings for individuals who are required to pay tax at a higher rate than the withholding tax rate.

5. Type 5 Income: Money or other benefits received from renting out properties, defaulting lease-purchase contracts, or defaulting installment sale contracts whereby the seller has repossessed the sold property without having to return the money or benefits already received.

6. Type 6 Income: Income derived from a liberal profession, such as law, medicine, engineering, architecture, accounting, creative arts, or other professions as designated by a royal decree.

7. Type 7 Income: Income derived from contract work in which the contractor must invest by providing significant assets in addition to the tools.

8. Type 8 Income: Income derived from business, commerce, agriculture, industry, transportation, real estate sale, or other activities not specified in income types 1 to 7.

Data updated on November 21, 2020

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

Tel. +66 2272 8000

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