Intellectual Property Taxation in Thailand
There are two application of IP taxation as follows:
A. IP that is granted the right of use
1).The Revenue Code.
- Section 40(3) prescribes that income will be classified as falls under “Royalties” if it is a“Fee of goodwill, copyright or any other rights, annuity or annual payment of income derived from a will, any other juristic act, or court decision.”
- The Revenue Department has further verified the types of “royalties” income based on the type of consideration as follows;
a). the use, and the right to use, any copyright of literary, artistic and/ or scientific work including cinematographic films, tapes or videotapes for use in connection with radio or television broadcasting, patent, trademark, design, model, plan, proprietary formulas or processes, or information concerning industrial, commercial, or scientific experience.
b). the transfer of knowledge concerning computer technologies.
c). computer programming, and/or the utilization of computer software including related supporting activities.
d). the transfer of technical knowledge for manufacturing.
e). golf course design.
f). the use of commercial contractual rights and/or, services including the use of names and commercial images.
g). the use of copyrights of publications.
Condition of Tax Liabilities :
Payment of Tax liabilities on royalties income is subject to the following:
i).Any payment made to a company or legal entity carrying on business in Thailand is subject to withholding tax at 3% of gross payment amount.
ii). All income shall be declared for the relevant annual income tax computation. The withholding tax is treated as a credit against the tax payable.
iii).All payment is made to a foreign recipient who is a resident of a country that does not have a double tax agreement (DTA) with Thailand is subject to a withholding tax of 15% of the gross amount of any payments.
iv). A royalties fee is considered to be any income derived from the granting of the right to use or utilize any asset of the Royalties owner. Therefore, such royalties fee is treated as “service” income.
v). The owner of the Royalties is subject to charge VAT at 7% on top of the fee to domestic users of the assets.
vi). When remitting royalties fee to an overseas asset owner, the domestic user of the asset is subject to pay a VAT of 7% on top.
2). Double Tax Agreement (DTA)
- Thailand has currently concluded DTAs with 60 different countries and states.
- “Royalties” is defined in a similar fashion in most of the DTAs.
- The definition. “Royalties” is typically defined in the DTAs as ;
“ payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic, scientific work including cinematograph films, tape or videotape for use in connection with radio or television broadcasting, any patent, trademark, design or model, plan, proprietary formula or process, or for the use of, or the right to use industrial, commercial, or scientific experience.”
Condition of Tax Liabilities :
- Payment of Royalties income is subject to a normal withholding tax rate at 15% on gross. However, more than one rate tax rate may be imposed, for instance at 5%, 10% and 15%, depending on the types of Royalties, as are classified in each particular DTA.
- Payment of Royalties income to the Royalties owner who is a resident of the Country of that DTA is subject to withholding tax in the source country at the rate specified in the relevant DTA.
- The payer of Royalties income is subject to pay VAT OF 7% on top when remitting Royalties income to an overseas owner.
B. IP that is an the asset
- Any income received from the sale, disposition or, transfer of ownership of IP is subject to income tax. The owner of such IP is liable to declare such income for the relevant annual income tax computation.
- Any costs incurred in respect to the acquisition or creation of IP is deductible as a depreciation cost. Total cost of the IP shall be amortized at the rate as follows (as specified in the Revenue Code):
- Rate of amortization :
– Unlimited time for the use of the IP : 10%
– Limited time for the use of the IP : 100% divided by the number years to be used.
- An owner of IP is subject to charge VAT at 7% of gross sale value to the buyer.
C. Research and Development (R&D) Tax Incentives
- For net profit computation for tax purposes, any company or limited partnership carrying on business in Thailand is entitled to claim a deduction at the rate of 200% of actual costs for expenses of payments to authorized government agencies or organizations, legal entities as consideration for the provision of R&D services.
- Conditionally, such R&D project must be presented to and approved by the National Scientific and Technologies Development Office prior to its commencement and after its completion.
As the business of our clients becomes more and more complex, it demands a proficient understanding of the global business environment.