Withholding tax

By Sirirat C.,NAT

Many foreigner who own or manage a registered company or limited partnership do not know that they have a duty to withhold tax from their suppliers when paying for certain kinds of services and submit to the Revenue Department.

The payer of the services is required to file a return (Form PND. 3/53) and submit the amount of tax withheld to the District Revenue Offices within seven days of the following month in which the payment is made.

Keep in mine that paying any kind of services to local supplier is always subjected to withholding tax laws but as the tax rate are vary from 1 to 5%, depending on which type of service you use. Below I give a sample of some of these rates but if you need the full table of withholding tax you can email me, we have both Thai and English versions to give you at no cost.

1) Rental 5%

2) Service(for example..paying for services to any subcontractor) and professional fees( such as legal or accounting fee) 3%

3)Advertising Fees 2%

For example, if you are going to pay for advertising at Bht.500, you have to withhold 2%= 10 Bht and issue withholding tax certificates to your supplier (which he can use as a 10 Bht tax credit when paying annual income tax) and by the 7th of the following month you have to submit this 10 Bht to the Revenue dept. by using report PND.3 if your supplier is an individual or report PND.53 if he is under a corporation.

 

The tax withheld will be credited against final tax liability of the supplier.
but if you as the payer forgets to withhold the tax then you have to pay the tax yourself plus penalty and interest (1.5% per month calculated from the tax amount from the date you were supposed to have submitted). The penalty itself is not so much, just a few hundred baht, but interest of 18% per year is quite expensive.

Therefore, if your business was registered as a company or limited partnership, any time that you are going to pay for any kind of services to your supplier no matter whether they are a corporation or individual, you have to check the withholding tax table and see how many percent you have to withhold from the supplier when they get paid.

It is very easy for the tax officer to audit and found that you did not withhold the tax, just reconcile between your services expense account in your accounting book and the tax form(PND.3 and PND.53) you’ve been submitting during the audit year. So in order to get no pain of a future risk of taxes, penalties and interest please do not forget to withhold the tax when paying for services.

Miss Sirirat C. is the Managing Director of NAT,the U.S. franchise chain accounting firm.

NAT is not only an ISO 9001:2000 company but also the first accounting firm in Thailand that has been certified by the Ministry of Commerce (Ref.www.dbd.go.th)

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www.thaiaccounting.com

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