SME Tax Benefits: 10-15% Rate Instead of 20%

If your company qualifies as an SME (Small and Medium Enterprise), you can pay significantly less corporate income tax than the standard 20% rate.

 

SME Definition

To qualify as an SME in Thailand, you must meet both criteria:

1. Paid-Up Capital

Maximum: 5 million THB

This is the registered capital actually paid into the company, not just authorized capital.

 

2. Annual Revenue

Maximum: 30 million THB per year

Gross revenue from all sources.

 

SME Tax Rates

If you qualify, you pay progressive rates instead of flat 20%:

| Net Profit (THB) | Tax Rate | |------------------|----------| | 0 - 300,000 | 0% | | 300,001 - 3,000,000 | 10% | | Over 3,000,000 | 20% |

 

Real Calculation Examples

Example 1: Small Startup

• Paid-up capital: 1 million THB ✓
• Annual revenue: 5 million THB ✓
• Net profit: 500,000 THB

Tax calculation:

• First 300,000 THB: 0% = 0 THB
• Next 200,000 THB: 10% = 20,000 THB
• Total tax: 20,000 THB (4% effective rate)

vs. Standard rate: 100,000 THB (20%) Savings: 80,000 THB

 

Example 2: Growing Company

• Paid-up capital: 3 million THB ✓
• Annual revenue: 25 million THB ✓
• Net profit: 4 million THB

Tax calculation:

• First 300,000 THB: 0% = 0 THB
• Next 2,700,000 THB: 10% = 270,000 THB
• Next 1,000,000 THB: 20% = 200,000 THB
• Total tax: 470,000 THB (11.75% effective rate)

vs. Standard rate: 800,000 THB (20%) Savings: 330,000 THB

 

Strategic Implications

Stay Below Thresholds

If you're close to the limits, consider:

Revenue management:

• Defer invoicing to next year
• Spread large projects across years
• Separate activities into multiple entities (carefully)

Capital management:

• Keep paid-up capital at or below 5M THB
• Use shareholder loans instead of capital increases
• Delay capital injections until necessary

 

Growth Planning

The 30M revenue threshold is critical:

At 29M revenue:

• SME rates apply
• Effective tax: ~10-15%

At 31M revenue:

• Standard 20% rate applies
• Sudden tax increase

Planning: If you're approaching 30M, plan for the tax impact.

 

Common Scenarios

Scenario 1: Multiple Companies

Question: Can I split my business into 2 companies to stay under SME limits?

Answer: Technically yes, but:

• Each must be genuinely separate
• Different activities/customers
• Separate management
• Revenue authorities watch for artificial splitting

 

Scenario 2: Foreign Ownership

Question: Can foreign-owned companies be SMEs?

Answer: Yes! SME status has no nationality restrictions. A 100% foreign-owned company (via BOI or Treaty) can qualify.

 

Scenario 3: BOI Companies

Question: Can BOI companies claim SME rates?

Answer: No need—BOI companies already pay 0% tax during promotion period, which is better than SME rates.

 

Documentation Requirements

To claim SME rates:

• Affidavit confirming SME status
• Capital verification (company registration documents)
• Revenue records (accounting books)
• Annual filing with SME status declaration

 

Losing SME Status

You lose SME benefits if:

• Paid-up capital exceeds 5M THB
• Revenue exceeds 30M THB
• You become a BOI-promoted company

Effect: Revert to standard 20% rate from that tax year forward.

 

SME vs. BOI Comparison

| Factor | SME | BOI | |--------|-----|-----| | Tax rate | 0-20% progressive | 0% for 8 years | | Ownership | 49% limit (unless Treaty) | 100% allowed | | Work permits | 4:1 ratio | No ratio | | Revenue limit | 30M THB | Unlimited | | Best for | Small local businesses | Growth companies |

 

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Related Service: Accounting & Tax Compliance — SME status planning and optimization.