Thailand-U.S. Double Tax Treaty

Updated on Monday 05th September 2016

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If you are a foreign citizen looking to open a company in Thailand, it is important for you to know that, because of the rapid growth of the international trading market and the growth of economic relations between the nations, double tax treaties have increased their numbers worldwide. The Thailand-U.S. double tax treaty was signed in 1997, marking a new stage in the investments and commerce between these two countries. 

The Thailand-U.S. double tax treaty refers to citizens and residents of both nations, as well as to ex-citizens and residents who intentionally gave up on their citizenships in order to avoid taxations when they itend to set up a company in Thailand. The treaty is applied only on income taxes, excluding social security taxes in the U.S. and being also applied on petroleum income taxes in Thailand.
 

Taxation of business profits according to the Thailand-U.S. double tax treaty


Article 7 of the Thailand-U.S double tax treaty states that the income of a company will be taxed in that company’s country of incorporation (the source). The other country, though, could also impose taxation on the profits of the business if those profits can be attributed to a permanent location of the company in that country. 

Business profits which derive from a permanent residence in a source country are profits that derive from the sale of items or merchandise, or other activities of the company. Like most of the provisions of the treaty, there is an exception: that such activities do not take place with the specific intention of avoiding taxation.
 

Double taxation relief under the Thailand-U.S. double tax treaty


Both nations relieve double taxation by adopting the ordinary credit method. The U.S. also offers relief related to tax on underlying corporate profits if a U.S. business owns minimum 10% of the voting shares of a company which is located in Thailand
 

Maximum withholding tax rates


The Thailand-U.S. double tax treaty is commonly applied to national taxes on income. According to the treaty, the maximum withholding tax rates are:

•    Taxes on dividends: generally 15%, 10% if the receiver is a business that owns minum 10% of the voting power of the business offering the dividends;
•    Taxes on interest: generally 15%, with certain reductions. Our company registration advisors in Thailand can offer more details on these reductions;
•    Royalties and payments: 5% on copyright royalties, 8% on payments for the use of equipment and 15% on patents, trademarks and so on.

If you are interested to open a company in Thailand and you need to know more about the double tax treaties in this country, we invite you to get in touch with our agents.

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