CIT vs. PIT: Corporate vs. Personal Income Tax Explained

As a foreign business owner in Thailand, you'll encounter two main types of income tax. Understanding the difference is crucial for proper planning.

 

Corporate Income Tax (CIT)

Who pays: Your Thai company (the legal entity)

What's taxed: The company's net profits

Rate: 20% standard (10-15% for SMEs, 0% for BOI)

When: Annual filing within 150 days of fiscal year-end

 

How CIT Works

Your company calculates:

1. Total Revenue (all income)
2. Minus Allowable Expenses (salaries, rent, etc.)
3. Equals Net Profit
4. Times 20% = Tax owed

Example:

• Revenue: 10,000,000 THB
• Expenses: 7,000,000 THB
• Net Profit: 3,000,000 THB
• CIT owed: 600,000 THB

 

Personal Income Tax (PIT)

Who pays: You (the individual)

What's taxed: Your personal income (salary, dividends, etc.)

Rate: Progressive 0-37% based on income level

When: Annual filing by March 31

 

How PIT Works

You pay tax on income you personally receive:

• Salary from your company
• Dividends distributed to you
• Consulting fees paid to you personally
• Rental income
• Interest income

 

The Double Taxation Reality

Here's what many foreign entrepreneurs don't realize: you can be taxed twice on the same money.

Example:

1. Company earns 1,000,000 THB profit
2. CIT: 200,000 THB (20%)
3. Remaining: 800,000 THB
4. You take 800,000 THB as dividend
5. Withholding tax: 80,000 THB (10%)
6. You receive: 720,000 THB
7. Total tax: 280,000 THB (28% effective)

 

Strategic Implications

Salary vs. Dividend Decision

• Salary: Deductible from CIT, but subject to PIT (5-37%)
• Dividend: Not deductible from CIT, but only 10% withholding

The optimal mix depends on your income level and company profitability.

 

Reinvestment Strategy

Some entrepreneurs keep profits in the company to:

• Defer personal tax
• Reinvest in growth
• Build company value for eventual sale

 

BOI Advantage

BOI-promoted companies pay 0% CIT for up to 8 years, eliminating the first layer of taxation. This is why BOI is so powerful for tax optimization.

 

---

Related Service: Accounting & Tax Compliance — Strategic tax planning to minimize your total tax burden.