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Hiring in Thailand
Thailand, officially known as the Kingdom of Thailand, is a country in Southeast Asia. Bangkok is the capital and the largest city of Thailand. Thai is the official language and Baht is the official currency. Thailand is a newly industrialized country that relies on exports. Thailand’s main exports are jewelry, electrical appliances, automobiles, textiles and fishery products. Tourism is also an important industry. Thailand’s main trading partners are Malaysia, China, US, Japan and Singapore. Global PEO or Employer of Record (EOR) play a pivotal role in providing companies with services related to hiring employees, and ensuring compliance with Thailand’s legal and tax regulations. Labor Code stipulates that employees are entitled to 6 days of annual leave. Residents are taxed on their worldwide income; non-residents are taxed on their Thai-source income. Global PEO’s or Employer of Record (EOR) facilitate companies by ensuring compliance with Thailand’s Labor Code and tax laws.
statutory labor requirements
Probation Period
- Probation period of no more than 120 days may generally be agreed to in the employment contract.
- This is not a statutory requirement.
Annual Leave
- Employees are entitled to a statutory minimum of 6 vacation days per year, after the first year of service.
- In practice, many employers of professionals provide 10-15 days of paid vacation per year.
Public Holidays
- New Year's Day (1st January)
- Māgha Pūjā (10th February)
- Chakri Memorial Day (6th April)
- Songkran (13th to 15th April)
- Family Day (14th April)
- Labour Day (1st May)
- Coronation Day (5th May)
- Vesak
- Royal Ploughing Ceremony (11th May)
- H.M Queen Suthida Bajrasudhabimalalakshana's Birthday (3rd June)
- Asalha Puja
- Beginning of Vassa (6th July)
- Queen's Birthday (12th August)
- Chulalongkorn Memorial Day (23rd October)
- Royal cremation of King Bhumibol Adulyadej (26th October)
- King's Birthday (7th December)
- Constitution Day (10th December)
- New Year's Eve (31st December)
Maternity Leave
- Female employees are entitled up to 98 days of maternity leave.
- 45 days are paid by the employer, and the remaining 45 days are paid by the social security fund.
- 8 days are unpaid, or paid by the employer if agreed.
Paternity Leave
- There are no statutory requirements for paternity leave.
Sick Leave
- Under Thai labor law, an employee is entitled to annual sick leave of up to 30 paid working days per year.
- If the employee is out for 3 or more consecutive days, the employer has the right to request a medical certificate.
- If the employee was injured or became ill at work, the days out cannot be deemed sick leave.
Work Hours
- Normal working hours are eight hours per day.
- If the work is physically exhausting, the maximum number of hours is usually seven hours per day and 42 hours per week.
- An employee must be given at least one hour's break a day.
Overtime
- Overtime cannot exceed 36 hours a week.
- Overtime compensation must be paid at a rate of between 1.5 to three times the normal hourly rate to qualifying employees.
- On weekends, overtime pay is equal to 3 times the base salary.
- If an employee is not eligible for overtime, such as an officer of the company, then he/she should get 2 times their salary for overtime payment.
Notice Period
- An employer or employee can terminate an employment contract by giving an advance notice in writing to the other party.
- This notice must be given before the date wages are due in order to take effect the following wages due date.
- Therefore, it is generally a one-month advance notice period, unless other terms are provided for under the employment contract.
- The employer does not need to give advance notice or payment in lieu of advance notice if the employment relationship is terminated due to serious misconduct by the employee.
Severance
- The amount of statutory severance pay is based on the employee's length of service within the company, as follows:
- At least 120 days but less than one year's service: at least 30 days' basic salary.
- At least one year but less than three years' service: at least 90 days' basic salary.
- At least three years but less than six years' service: at least 180 days' basic salary.
- At least six years but less than ten years' service: at least 240 days' basic salary.
- At least ten years but less than 20 years' service: at least 300 days' basic salary.
- More than 20 years' service: at least 400 days' basic salary.
- The employee is not entitled to severance payments if the employment relationship is terminated due to their serious misconduct.
13th / 14th Month Pay
- Yes
- There is no statutory requirement to pay the 13th or the 14th month salary.
- However, it is customary for employers to pay the 13th month.
income tax
- All resident and nonresident individuals earning income from sources in Thailand are subject to personal income tax (PIT).
- A Thai resident is also subject to PIT on self-employment and business income from sources overseas if the income is remitted to Thailand.
- Taxable income consists of assessable income, less deductible expenses and allowances.
- All benefits derived from employment are assessable, unless expressly exempt by law.
- Examples of assessable benefits are wages, salaries, per diem allowances, bonuses, bounties, gratuities, directors’ fees, pensions, house rental allowances, the monetary value of rent-free accommodation provided by an employer, and income tax paid and borne by an employer on behalf of an employee.
|
Net income (THB) |
PIT rate (%) |
|
0 to 150,000 |
Exempt |
|
150,001 to 300,000 |
5 |
|
300,001 to 500,000 |
10 |
|
500,001 to 750,000 |
15 |
|
750,001 to 1,000,000 |
20 |
|
1,000,001 to 2,000,000 |
25 |
|
2,000,001 to 5,000,000 |
30 |
|
Over 5,000,000 |
35 |
deductible expenses
Employment Expenses
- A standard deduction of 50%, with a limit of THB 100,000, is permitted in respect of income from employment.
- Business deductions are not available against employment income.
Personal Deductions
- Donations to educational institutions, public health care facilities, approved charities, and the Technology Development Fund for Education are deductible in the amount donated but not exceeding 10% of net income after all allowances and deductions.
- A double deduction is allowed in respect of donations to support certain educational programs, cultural activities, and state hospitals.
- Life insurance premiums, in an amount not exceeding THB 100,000, paid by a taxpayer on one's own life are allowed as a deduction, provided that the insurance policies are for a minimum period of ten years and the insurer is carrying on a life insurance business in Thailand.
- If the policy includes a savings plan that provides an annual return to the policy holder exceeding 20% of the annual premium, the entire premium will be non-deductible.
- Qualified pension life insurance premiums paid to a Thai insurer are available as a deduction in the amount not exceeding 15% of total assessable income with a maximum of THB 200,000.
- A health insurance premium, up to a maximum of THB 15,000, paid to a life or non-life insurance company in Thailand by a taxpayer for one's own health is allowed as a deduction.
- However, the deduction for this premium together with the above life insurance premiums paid cannot exceed THB 100,000 in total.
- A health insurance premium, up to a maximum of THB 15,000, paid to a life or non-life insurance company in Thailand for the taxpayer's parents or the parents of the spouse of the taxpayer is allowed as a deduction.
- A deduction of up to THB 60,000 for each pregnancy is allowed for expenses paid by the taxpayer or spouse for antenatal care and child delivery.
- Mortgage interest incurred for the purpose of purchase or construction of a residential building in Thailand may be deducted up to a maximum of THB 100,000.
- A contribution to an RMF is deductible in an amount not exceeding 15% of assessable income received that is subject to income tax, with a maximum of THB 500,000 in any tax year.
- A contribution to an LTF is also deductible in an amount not exceeding 15% of assessable income received that is subject to income tax, with a maximum of THB 500,000 in any tax year, provided that the investment units are held for at least seven calendar years, except in the case of incapacity or death.
- The contribution to the government's Social Security Fund is also deductible.
Personal Allowances
- There is a personal allowance of THB 60,000 each for the taxpayer and the taxpayer’s spouse (provided that the taxpayer's spouse does not file one's own return).
- There is also an allowance of THB 30,000 for each child and an additional THB 30,000 for the second child onwards born in or after 2018.
- Moreover, an allowance for parental care of THB 30,000 per parent is deductible.
- A non-resident is allowed deductions for spouse, children, and parent only if they are resident in Thailand.
- In addition, a deduction is allowed for the care of disabled or incapacitated family members of THB 60,000 per person and for the care of a disabled or an incapacitated person other than a family member of THB 60,000 in total.
|
Deductible Expenses |
|
|
Employment Expenses |
|
|
Personal Deductions |
|
|
Personal Allowances |
|
immigration
- Foreign nationals who wish to work in Thailand must obtain work permits from the Employment Department.
- To be eligible for a work permit, a foreign national must enter Thailand on a Non Immigration Category “B” (Non-B) Visa.
- The granting of a work permit is discretionary, based on such criteria as the nature of the work, the knowledge and skills of the applicant, the capital of the employer, and the proportion of Thai national employees to foreign national employees.
- The consideration process and criteria for companies with Board of Investment (BOI) privileges are different, and an expedited process is available.
- After all required documents are received, the time for processing a work permit can range from approximately a few days up to two weeks, at the discretion of the authority.
- Applicants may not begin working in Thailand while their work permit applications and other papers are being processed.
- Non-BOI companies seeking to extend a visa must show evidence of payroll withholding and Thai Social Security Fund contributions of the foreign national.
- To change employers after an applicant receives a work permit, the applicant must cancel the existing work permit before filing a new application reflecting a change of employer.
- Work permits are usually granted for one year.
- An application for renewal is required if the holder wishes to continue working in Thailand.
- A foreigner caught working without a valid work permit is subject to a fine or imprisonment or both.
- The employer in Thailand is also subject to a fine of up to THB100,000 per person.
|
Type of Visa/ permit |
Documentation |
Validity |
Eligibility |
|
Non-immigrant B Visa |
|
90 days |
|
|
Work Permit |
|
1 year |
|
value added tax
- The standard rate of VAT is 10%, but the rate is currently reduced to 7% until 30 September 2020 (unless further extended by the government).
- VAT is levied on the sale of goods and the provision of services.
- There is also a zero rate on certain services including: export sales; international transports services; goods sold within customs free zones; and other.
- Certain supplies are exempt from VAT including: textbooks; healthcare services; property rental; and other.
|
VAT |
|
|
Standard Rate |
7% |
|
Exempt |
0% |
withholding tax
Dividends
- Dividends paid to another Thai company are subject to a 10% withholding tax, or are exempt if certain conditions are satisfied under the Revenue Code or investment promotion law
- Dividends paid to a nonresident company are subject to a 10% withholding tax
- Dividends paid to an individual are subject to a 10% withholding tax
Interest
- Interest paid to a nonresident company is subject to a 15% withholding tax unless the rate is reduced under a tax treaty
- Interest paid on loans from a bank, financial institution or an insurance company is subject to a 10%withholding tax if the lender is resident in a country that has concluded a tax treaty with Thailand
- A 1% advance withholding tax applies to interest payments made by a corporation to a corporation carrying on business in Thailand
- Interest paid to a resident individual is subject to a 15% withholding tax that can be considered either as a final tax or as an advance tax payment to be used as a credit against the personal income tax due for a tax year
Royalties
- Royalties paid to another Thai company are subject to a 3% advance withholding tax, which may be credited against the final corporate income tax due for the accounting period
- Royalties paid to a nonresident are subject to a 15% final withholding tax, unless the rate is reduced under a tax treaty
Technical service fees
- Technical services fees paid to another Thai company are subject to a 3% advance withholding tax, which may be used as a credit against the final corporate income tax due for the accounting period
- Technical service fees paid to a nonresident are subject to a 15% withholding tax, unless the rate is reduced under a tax treaty
|
WHT |
|
|
Dividends |
10% |
|
Interest: - |
|
|
Nonresident Company |
15% |
|
Nonresident (tax treaty countries) |
10% |
|
Corporation to Corporation within Thailand |
Advance 1% |
|
Resident Individual |
15% |
|
Royalties: - |
|
|
Resident Company |
Advance 3% |
|
Nonresident |
15% |
|
Technical Service Fees: - |
|
|
Resident Company |
Advance 3% |
|
Nonresident |
15% |
termination
- An employer or employee can terminate an employment contract by giving an advance notice in writing to the other party.
- This notice must be given before the date wages are due in order to take effect the following wages due date.
- Therefore, it is generally a one-month advance notice period, unless other terms are provided for under the employment contract.
- The employer does not need to give advance notice or payment in lieu of advance notice if the employment relationship is terminated due to serious misconduct by the employee.
- The amount of statutory severance pay is based on the employee's length of service within the company, as follows:
- At least 120 days but less than one year's service: at least 30 days' basic salary.
- At least one year but less than three years' service: at least 90 days' basic salary.
- At least three years but less than six years' service: at least 180 days' basic salary.
- At least six years but less than ten years' service: at least 240 days' basic salary.
- At least ten years but less than 20 years' service: at least 300 days' basic salary.
- More than 20 years' service: at least 400 days' basic salary.
- A dismissed employee is also entitled to:
-
- Any outstanding salary or other expenses.
- Payment of in lieu of advance notice, if advance notice is not given.
- Payment for accumulated holidays in the previous year.
- Payment for unused leave of the current year on a pro-rata basis.
- The employee is not entitled to severance payments if the employment relationship is terminated due to their serious misconduct.
statutory benefits
- These are mandatory benefits as postulated by law
- These include annual leave, public holidays, sick leave, maternity leave, overtime pay, notice period, and severance pay.
- Statutory benefits also include social security benefits
|
Statutory Benefits |
|
Annual Leave |
|
Public Holidays |
|
Maternity Leave |
|
Sick Leave |
|
Overtime Pay |
|
Notice Period |
|
Severance Pay |
|
Social Security Benefits |
payments and invoicing
- PIT payable by employees is withheld by employers.
- Some self-employed individuals, including certain professionals and those engaged in the rental of property, must make an interim income tax payment by September.
- All individuals who earn income in Thailand during a calendar year must file personal income tax returns with the Revenue Department by the end of the following March.
- Self-assessed income tax must be paid on the filing date.
- Married persons are taxed jointly or separately, at the taxpayers’ election, on employment income and jointly on all other types of income.
ease of doing business
- The ease of doing business index is an index created by Simeon Djankov, an economist at the Central and Eastern Europe sector of the World Bank Group.
- Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
- According to the World Bank Thailand ranked 21st in the World in 2019 in terms of ease of doing business.
employee accruals
| Christmas Bonus% |
Based on one month bonus (it is not compulsoty but customary - if mentioned on the contract then it becomes compulsory) |
| Christmas Bonus Over Vacations % |
0% |
| Severance per Year % |
Employees are entitled to severance pay that equals 90 days of pay after one year of service (24.72% of annual salary) |
| Vacations % | Employees are entitled to a statutory minimum of 6 vacation days per year, after the first year of service (1.64% of annual salary) |
| Notice % |
Employees are entitled to a 1 month of notice period for one year of service or more (8.33%) |
| Christmas Bonus Over Notifications% | 0% |
| Vacations Plus% |
0%
|
|
Total percentage of Salary (yearly)
|
The total employment accruals as a percentage of salary per anum are equal to 43.02%
|
employer accruals
Additional information (Country Accruals)
| Social insurance | 3.00% |
| Vacations | 5.21% |
| Severence | More than 120 days but less than 1 year = 30 days wages or salary At least 1 year but less than 3 years = 90 days wages or salary At least 3 years but less than 6 years =180 days wages or salary At least 6 years but less than 10 years = 240 days wages or salary
|
Employer Accruals Additional information
| Employment Accruals | ||
| Annual Leave | Employees are entitled to 20 days of paid recreational leave and 10 days of paid essential leave. Therefore, Employers must take into account the costs associated with this paid leave. | This equals 30 days of pay or 8.22% of annual salary (30/365 days) |
| Maternity Leave | A female employee is entitled to 90 days of paid maternity leave. | This equals 24.65% of annual salary (90/365) |
| Sick Leave | Under Thai labor law, an employee is entitled to annual sick leave of up to 30 paid working days per year. | This equals 8.22% (30/365 days) of annual income |
| Overtime Pay | Overtime cannot exceed 36 hours a week. Overtime compensation must be paid at a rate of between 1.5 to three times the normal hourly rate to qualifying employees. |
Overtime is paid at an additional 300 THB |
| Severance Pay | The amount of statutory severance pay is based on the employee's length of service within the company, as follows: • At least 120 days but less than one year's service: at least 30 days' basic salary. • At least one year but less than three years' service: at least 90 days' basic salary. • At least three years but less than six years' service: at least 180 days' basic salary. |
This equals 8.22% (30/365 days) of annual income |
| Social Security | The social security contribution rate is 5% on a capped remuneration of THB15,000 per month. | This equals 5% of annual income, capped at THB 15,000 |
