Withholding Tax on Services: Understanding the 15% Rate

If your Thai company pays for services from overseas—whether it's software licenses, management fees, or consulting—you have a withholding tax obligation. This 15% tax catches many foreign business owners by surprise.

 

What is Service Withholding Tax?

When a Thai company makes certain payments to non-residents (individuals or companies outside Thailand), it must withhold tax and remit it to the Revenue Department.

Standard rate: 15% of the gross payment

 

What Payments Trigger Withholding?

Management or Technical Services

• Consulting fees
• Management fees
• Technical assistance
• Professional services

Example: You pay 100,000 THB to a Singapore consulting firm

• Withhold: 15,000 THB
• Pay consultant: 85,000 THB
• Remit to Revenue Dept: 15,000 THB

 

Royalties

• Software licenses
• Patent usage
• Trademark fees
• Copyright payments

Example: Annual software license of 200,000 THB

• Withhold: 30,000 THB (15%)
• Pay vendor: 170,000 THB

 

Interest Payments

• Loans from foreign lenders
• Interest on bonds
• Deferred payment interest

Rate: Also 15% (can be reduced under tax treaties)

 

Double Taxation Treaties

Thailand has tax treaties with many countries that reduce withholding rates. Common reductions:

| Country | Standard Rate | Treaty Rate | |---------|---------------|-------------| | USA | 15% | 10-15% | | UK | 15% | 10-15% | | Singapore | 15% | 10-15% | | Japan | 15% | 10% |

To claim treaty benefits, you need:

• Tax residency certificate from the foreign entity
• Proper documentation
• Advance filing with Revenue Department

 

Common Scenarios

Scenario 1: SaaS Subscriptions

You subscribe to Salesforce, HubSpot, or similar:

• Technically: Subject to 15% withholding
• Reality: Most companies don't withhold on small subscriptions
• Risk: Technically non-compliant

 

Scenario 2: Parent Company Management Fees

Your Thai subsidiary pays management fees to overseas parent:

• Must withhold: 15%
• Parent can claim: Foreign tax credit in home country
• Net effect: Depends on tax treaty

 

Scenario 3: Freelance Consultants

You hire a foreign consultant remotely:

• If they're in Thailand: Subject to PIT withholding
• If they're overseas: Subject to 15% withholding
• Documentation: Essential to prove location

 

Filing Requirements

When you withhold tax on services:

1. Issue: Withholding tax certificate (Por Ngor Dor 3)
2. File: Monthly return (Por Ngor Dor 53)
3. Remit: Within 7 days of month-end
4. Penalties: 1.5% per month for late payment

 

Strategic Considerations

Structuring Service Agreements

Some companies structure payments as:

• Reimbursement of costs (may not be subject to withholding)
• Purchase of goods (different tax treatment)
• Equity investment (no withholding)

Warning: Aggressive structuring can be challenged. Professional advice essential.

 

BOI Companies

BOI promotion does not exempt you from withholding obligations. You still must withhold on payments to non-residents.

 

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Related Service: Accounting & Tax Compliance — Proper withholding tax management and treaty optimization.