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Thailand, a well-known tourist destination, has increased its investment opportunities recently and now owns the second-largest economy in Southeast Asia with a GDP of around 543 USD Billion. Thailand's economy is evolving due to the increasing importance of the manufacturing, tourism, and energy sectors, and the nation now has one of Asia's lowest unemployment rates. Thailand was ranked 21st out of 190 countries in the 2019 World Bank Ease of Doing Business Survey and is a member of ASEAN, the UN, and the WTO. The official currency of Thailand is the Thai Baht (THB).
Thailand's daily minimum wage is still much lower (from THB 328 to THB 354) than that of Singapore, the US, and Australia, despite being relatively higher than nations like the Philippines or Indonesia. Additionally, the cost of living in Thailand is currently almost 69% cheaper than that of Singapore and roughly 40% cheaper than the national average in the United States.
Payroll Cycle & Working Hours in Thailand
As per the payroll laws Thailand, the payroll cycle is typically monthly and the salary is paid on the last working day. For payroll processing in Thailand, regular working hours are 8 hours per day and 48 hours per week whereas the workweek is Monday to Saturday.
Payroll Tax in Thailand
Payroll processing in Thailand requires the company to have a legal entity in place. The social security fund (SSF) and provident fund (PF) are the two statutory social security contributions that employers in Thailand are required to make on behalf of their employees. Also, the employer can contribute to Injury Insurance for payroll tax in Thailand, employers and employees are required to make these mandatory statutory contributions to comply with payroll laws Thailand.
Social Security for Payroll Tax in Thailand
To process employment cost & employee costs, the following are the contributions for social security payroll tax in Thailand:
Social Security Fund (SSF): For payroll in Thailand, every employee is required to make a monthly contribution to a social security fund equal to 5% of their salary, up to a maximum of 750 THB. Employers must also make a similar amount of contributions each month. The standard contribution rate for both employee and employer is 5%, with a basic salary cap of THB 15,000. It has been decided to reduce the Social Security contribution rate due to the recent increase in the minimum wage.
The Social Security Department of Thailand must receive monthly social security payments by the 15th of the following month. Contributions for September, for instance, must be paid by October 15 in order to avoid incurring late fees of 2% of the outstanding balance per month until the payment is made.
If a company has at least one employee between the ages of 15 and 60, they are required to register with the Social Security Office and submit each employee's SSF application within 30 days of the start of their employment. In order to receive the same benefits as Thai workers, foreigners who are employed legally in Thailand must also register with the Social Security Office. Employees covered by the Social Security Act are qualified to receive a range of benefits, including maternity, illness, unemployment security, and old age pension benefits.
Provident Fund (PF) – Also known as Welfare Fund in Thailand, the contributions made by employers and employees to the Provident fund are voluntary. The practice of providing provident funds to employees is widespread in Thailand's neighboring nations, including Singapore, Malaysia, and Hong Kong. The provident fund's role is to act as a support system for people's finances by assisting with retirement savings. Unlike neighboring countries, the provision of PF is non-mandatory in Thailand.
For payroll in Thailand, employers and employees mutually establish the provident fund voluntarily. To the provident fund, employees may contribute between 2% to 15% of their monthly salaries, with the employer matching up to the same amount. Employees can benefit from tax advantages for as long as they are provident fund members.
The payroll laws Thailand allow employees to contribute and deduct the maximum amount permitted in PF i.e. 15% of yearly wages or THB 500,000, whichever is lesser regardless of how much their employer is contributing. An employee may contribute more than the employer does. Up to a certain amount, employee contributions are exempted from tax, which means that annual contributions up to that amount directly reduce the tax obligation.
The provident fund payment is due three days after the pay period and may differ depending on the trustee of the Provident Fund. On March 30, 2021, the Thai Cabinet approved the draft of the National Pension Fund Act on the mandatory provident fund (MPF) to encourage retirement savings among employees of the private and public sectors who are not yet already provident fund members. Within the upcoming years, this principle is anticipated to become reality.
Workmen Compensation Fund (WCF) - Employees in Thailand can receive Employment Injury Benefits from the Workmen's Compensation Fund. Following National Executive Council Announcement No. 103, Thailand's Workmen's Compensation Fund was established within the Department of Labour of the Interior Ministry. The Fund's goals are to substitute an employer's obligation and to provide quick and fair protection from illness, injury, disability, or death brought on by employment.
For payroll in Thailand, employers are responsible for paying a yearly contribution to the WCF alone, just like an insurance premium. In the event of work-related reasons, employees are eligible to receive compensation benefits including medical services, monthly annuity, compensation for loss of an organ, recovery grants, and memorial service grants.
The contributions are calculated using the total employee wages multiplied by the applicable business type's contribution rate. Based on the risk rating of the establishment type as identified by the range of the contribution rate is between 0.2% and 1.0% of wages. The maximum annual wage per employee for purposes of determining the contribution amount is THB 2,40,000.
Employer Contribution (Employment Cost) to Payroll Tax in Thailand (2022)
Employee Contribution (Employee Cost) to Payroll Tax in Thailand (2022)
Income Tax in Thailand
Individual income tax withholding from employees is a requirement for employers for payroll in Thailand. This is accomplished by withholding income tax from the employee's pay before disbursing it. The assumption used in calculating income tax is that employment income will be paid throughout the entire tax year, which is from 1 January to 31 December. The Revenue Department of Thailand must receive a monthly withholding tax return from employers by the seventh day of the following month. When completing the return, the tax owed to the Revenue Department must be paid. Depending on how many days the monthly holding tax return is past due, there may be incremental penalties for late submission as well as an additional 1.5% late fee.
The Employee Income Tax rate in Thailand for the year 2022 is:
