The Finance Ministry will next week seek the cabinet's approval to offer a personal income tax rate option to those working for companies that invest in the government's 10 targeted industries and are headquartered in the Eastern Economic Corridor (EEC), in a bid to entice investment.
If the tax incentive option comes into force, it will be possible to pay personal income tax either under the current structure that applies to all individual income earners or a flat tax rate of 17% without any tax breaks, said Finance Minister Apisak Tantivorawong.
Those who currently pay rates higher than 17% can save on their tax bills if they pick to pay the flat tax rate, while those who pay below 17% can still opt for the normal tax structure, Mr Apisak said.
Apisak: Foreigners can also choose rate
A gross rate of 17% is viewed as a competitive rate in Asia, he said, adding that Singapore's top personal income tax rate is levied at 20%, while Hong Kong has a progressive rate with a ceiling of 17%.
The current structure of personal income tax has seven brackets. Taxable income of 150,001-300,000 baht is charged a rate of 5%, progressing upward to brackets of 300,001-500,000 (10%), 500,001-750,000 (15%), 750,001 to 1 million (20%), over 1 million to 2 million (25%), over 2 million to 4 million (30%) and over 4 million (35%).
The EEC spans Chon Buri, Rayong and Chachoengsao provinces. The project is intended to accommodate 10 targeted industries to be promoted as clusters by the government.
The 10 industries are next-generation cars; smart electronics; affluent, medical and wellness tourism; agriculture and biotechnology; food; robotics for industry; logistics and aviation; biofuels and biochemicals; digital; and medical services.
Mr Apisak said both local and foreign employees working at firms that are investing in the 10 targeted industries headquartered in the EEC or have received investment incentives from the Board of Investment (BoI) can enjoy the personal income tax rate option.
The tax privilege will be provided for the same period as the BoI's incentives for each company, he said.
Foreign direct investment to Thailand has been discouraged by the country's high personal income tax rates, and the government has lost out on tax revenue as some foreign workers have required their employers to pay a part of their salaries in Thailand and the other part overseas to avoid full tax liabilities, Mr Apisak said.