Recent changes to the personal income tax regime which are effective from tax year 2017 onwards, serve to reduce the overall tax burden on individuals and increase personal disposable income by taking into account the current cost of living and economic situation in Thailand. Taxpayers with earned income from self-employment, with some exceptions for certain types of income, may choose between itemizing the expenses incurred during the tax year or taking the standard deduction. While the new law increases a typical wage earner’s standard deduction from 40% of total income capped at THB 60,000 to 50% capped at THB 100,000, a self-employed income earner‘s standard expense deduction has been reduced from between 70% and 85%, depending on the type of assessable income, to a mere 60%. As a result of this reduction, a self-employed income earner may be forced to choose the actual expenses deduction, in order to lessen his or her tax burden, as itemized deductions typically total greater than the standard deduction.

While no limit on self-employed taxpayers’ itemized deduction baht amount has been stipulated, you should be aware that the rules and conditions for the computation of net taxable profits for corporate income tax purposes apply in determining the deductible expenses. That is, if you choose to itemize, you must be able to provide supporting evidence which shows that the itemized deductions are in accordance with Sections 65 bis. and 65 ter. of the Thai Revenue Code (TRC).  Section 65 bis. of the TRC stipulates the conditions for the computation of net taxable profits, such as the methods for calculation of depreciation and inventory. Section 65 ter. of the TRC lists the items for which a company is not allowed to take a deduction when computing its net taxable profit.

In the event of a tax audit, the tax authorities will require you to furnish evidence to support the expense deductions. If the tax authorities disallow certain expense deductions, causing the itemized deduction total to be less than the standard deduction total, you cannot change back to the standard deduction method and you will be assessed the additional tax plus a 1.5% per month surcharge on the amount of tax due. Thus, before filing your tax return, you should review your expenses and consider whether your itemized expenses fit the definition proscribed by the TRC, which means you have maintained solid evidence, and whether their total is larger than the standard deduction.