Israel – Thailand Tax Treaty

Business activity in Thailand

Thailand has the second largest economy in southeast Asia, is the largest automotive exporter in the region and the second largest Hard disk drive producer in the world. The country mainly exports manufactured goods and electronics, machinery and equipment, agricultural goods, mainly rice and rubber. Major trading partners of Thailand are China, Japan, the United States, Australia and Malaysia.

The country is developing its digital infrastructure, by opening the Digital Park Thailand, which allows access to submarine cable system, data center and a landing station. Additionally, the Software Park Thailand offers IT training courses, office facilities and rooms for meeting and more. There are also incentives for R&D activities.

The Thai government puts an emphasis on attracting foreign investment and easing the process of opening or expanding business activities in the country. These initiatives include, allowing foreigners to invest in the country without prior governmental approval. Moreover, most sectors are open to foreign investors.

Bilateral agreements between Thailand and Israel

Several agreements were signed between Israel and Thailand:

1. Investment Promotion and Protection Agreements
2. Convention on the Prevention of Double Taxation

Reciprocal Promotion and Protection of Investments

The Reciprocal Promotion and Protection of Investments (RPPI) signed on February 18, 2000. The RPPI is an agreement between Israel and Thailand that is designed to encourage and safeguard investments made by individuals and companies from each country in the territory of the other. These agreements typically include provisions related to non-discrimination, compensation for expropriation, dispute resolution, and the transfer of funds.

To read the agreement in English, click here.

Convention on the Prevention of Double Taxation

The Convention on the Prevention of Double Taxation (DTA) is an agreement designed to eliminate the double taxation of income that involves both jurisdictions. This agreement helps taxpayers by defining how each country taxes specific types of income and provides mechanisms to avoid or mitigate double taxation.

The Israel-Thailand DTA was signed on January 22, 1996, and entered into force on December 24, 1996. This agreement covered various aspects, including the taxation of income from dividends, interest, royalties, and capital gains, as well as rules for determining tax residency, and mechanisms for dispute resolution.

To access the full text of the agreement in English click here.

Applicability of the MLI

Both the Kingdom of Thailand and the State of Israel have signed the Multilateral Convention, commonly known as the MLI. Therefore, there exists an established framework for the automatic exchange of information between these two nations.

Israel signed the MLI on the 7th of July 2017, with its provisions entering into force on the 1st of January 2019. Thailand, on the other hand, affixed its signature to the MLI on the 9th of February 2022, and its provisions became effective as of the 1st of July 2022.

Residency for tax purposes in Thailand

Residence of an individual

For tax given purposes in Thailand, one’s residency status is determined by the duration of their stay within the country during a given tax year. Residents are defined as persons residing in Thailand 180 days or more in a calendar year.

Residency of a company for tax purposes

In Thailand, the residency of a company is primarily determined by its place of incorporation. A Thai Resident Company is company that is incorporated under the laws of Thailand.

The tax system in Thailand

The country Tax Authority is called The Revenue Department of Thailand.

Personal Income Tax Rate: 5-35%

Corporate Tax Rate: 0-20%

VAT: 7%

Capital gains tax: 15%

Withholding Tax

Inheritance tax and estate tax in Thailand

Thailand imposes an inheritance tax on all inheritance worth more than 100,000,000 baht. The tax rate is 5% for ascendants and descendants and 10% for all other beneficiaries, spouses are exempt from taxation.

Relocation to Thailand

To relocate to Thailand, you are required to apply for a visa. Thailand offers various types of visas to cater to different purposes of stay, and for long-term relocation, the general visa to apply for is the “Thailand Non-Immigrant Visa.” These non-immigrant visas are specifically designed for individuals planning long-term stays in Thailand. Thailand, known as the “Land of Smiles,” has been attracting people from across the world for years with its tropical beauty, temples, ancient structures, unique cuisine, and vibrant nightlife, which is similar to Israel, adding to its appeal.

More information about relocation can be found on our website relocation page.

Real estate taxation in Thailand

Real property transfer registration fees of two percent and mortgage registration fees of one percent are imposed in Thailand, with reduced rates in certain cases.

In addition, there is a land and building tax, which is collected annually by the local authorities. The tax is based on the official appraised value of the property. Depending on the type of property, there is a maximum rate of taxation, for example, for residential land and buildings this rate is 0.3 percent.

If a land or a building is vacant or undeveloped for three years or more, the tax rate is increased by 0.3 percent every three years, with a maximum rate of three percent.

The exemptions from the land and building tax, include, among others, a residential property where, as of January 1^st of the year, the owner’s name is on the house registration and the value of the property is less than 50 million baht (or 10 million baht if the owner doesn’t own the land on which the building stands).

It should be noted that under Thai law, foreigners are generally prohibited from directly owning land.

Transfer of funds from Israel to Thailand

According to section 170(a) of the Israeli Income Tax Ordinance, all payments transferred to non-Israeli residents are subject to a 25% withholding tax. However, this tax can be reduced or even waived if certain conditions are met.

As mentioned above, the countries have signed a tax treaty, that allows taxpayers to submit 2513/2 form – Statement regarding a payment to a foreign resident that is exempt from withholding tax, to potentially transfer the payments without paying the withholding tax.

In addition to assisting with withholding tax matters, our firm also helps with other issues related to transferring funds abroad. This includes providing an accountant’s approval regarding the payment of taxes, reviewing additional actions required under the CRS standard, and more.

Moreover, banks often raise many difficulties and charge high fees for converting shekels into other currencies. Therefore, consulting with a specialist before transferring the funds is highly recommended, click here to contact us.

For more information on money transfers abroad, click here.

Types of business entities in Thailand

The type of business entities available in Thailand include the following entities:

• Ordinary Partnerships – A partnership is a type of entity formed by the agreement between two or more individuals to conduct business as co-owners. In an ordinary each partner assumes unlimited liability.
• Limited Partnerships – In a limited partnership, there are two types of partners, partners that assume unlimited liability and partners that assume limited liability.
• Joint Venture – A joint venture can be described as a collaborative effort between two or more parties to undertake a specific project or business endeavor.
• Limited Liability Company – A limited liability company is a distinct legal entity separate from its shareholders, meaning the shareholders assume limited liability. There are two primary categories of limited companies, private and public. A private limited company is the most popular of the two. In a private limited company, there is a requirement for a minimum of three shareholders, whereas a public limited company requires at least 15.

Incentive laws in Thailand

Thailand has a wide range of incentives laws available. These incentives can be granted for operating in a certain industry, part of the country, engaging in certain activities and more.

The Board of Investment (BOI) in Thailand serves as the primary government agency responsible for encouraging foreign investment within the country. In pursuit of this objective, the BOI extends various benefits, services, and resources to enterprises operating in its promoted industries (including agriculture, high-value services, creative industries, and more). These offerings include exemption from corporate tax for up to 13 years, exemption from certain import duties, etc.

Additionally, location dependent incentives include those for operating in low-income provinces. Businesses operating in one of the 20 low average income provinces, such as, Kalasin and Buriram, can receive exemptions and reductions to corporate tax, among other benefits.

Thailand Double Tax Treaties: