New income tax rates restructuring to go ahead despite political crisis

At the end of 2012 the cabinet of prime minister Yingluck Shinawatra approved a new personal income tax rate, and despite the on-going political crisis in the country, this new structure is set to come into effect for the 2013 tax year.

Although parliament has been dissolved and fresh elections are scheduled, the caretaker cabinet said a royal decree will ensure the new tax structure comes into force. Once parliament is reconvened after the elections and a new government is formed, the taxation bill, which had already gone to parliament, will once more be brought before the House of Representatives and the legislation enacted.

The previous income tax bracket system covered just five levels, starting at 5 percent and working up to 10, 20, 30, and 37 percent. The new structure aims to reduce the income tax impact for those in what would be termed the middle band.

The new rates will still begin at 5 and 10 percent at the bottom end of the scale, but instead of a quite substantial leap to 20 percent, there will now be a 15 percent bracket. Equally, instead of the quite large jump from 20 to 30 percent, a 25 percent scale has been introduced. In the meantime, the top personal income tax rate has been dropped from 37 to 35 percent.

Overall, the two new rates of 15 and 25 percent will substantially ease the tax burden of those taxpayers who were formerly paying at rates of 20 and 30 percent respectively.

The rates are expected to cut government revenue for the fiscal year 2013 by as much as 27 billion baht. On the plus side, the increased spending power for those who see a reduced tax burden should help boost business overall.

The tax-free threshold remains the same as previously, with people earning 149,999 baht a year or less not required to pay income tax. According to the Finance Ministry there are approximately 6.5 million people who fall into the less than 150,000 baht a year bracket.

At the other end of the scale, the top rate of 35 percent (down by two percent) will apply to those earning four million baht per annum (or 333,334 baht a month) or more. This currently applies to around 20,000 taxpayers.

The new income tax regime will run as follows: 0-149,999 baht, nil; 150,000-300,000 baht per annum, five percent; 300,001-500,000 baht a year, 10 percent; 500,001-750,000 baht, 15 percent; 750,001-999,999 baht, 20 percent; one-two million baht, 25 percent; two-four million baht, 30 percent.