taxation of partnerships in thailand

Tax on Partnerships in Thailand

Reported by

Princess Joy G. Florentin

on

December 13, 2014

3 Types of Partnerships

I. Ordinary (Unregistered)II. Registered OrdinaryIII. Limited

“Thai National” Partnerships

partnerships having 2 Thai natural or juristic persons for each alien partner.

can engage in practically all forms of business.

“Alien” Partnerships

Partnerships which have a foreigner as the managing partner or as the manager; OR

foreigners’ investments amount to 1/2 or more of the total capital

subject to the Foreign Business Act.

I. Unregistered Ordinary

Partnerships

DEFINITION

Ordinary (Unregistered) Partnership consists of two or more persons

who join together for a business purpose. The partnership agreement does not have to be in writing and is not publicly registered.

considered as Joint Venture.

LIABILITY OF THE PARTNERS

All partners are liable without limitation for any acts done by any partner in the course of operating the partnership. Creditors may claim against the assets of any partner, without first claiming against the assets of the partnership.

TAX ADVANTAGES OF ORDINARY PARTNERSHIPS

they are taxed as natural persons, but separately from the partners.

they file income tax returns and pay tax at the progressive natural person rates of 10%-35% with the same standard deductions that are permitted to individuals.

no matter how many partners there are, may deduct two personal exemptions.

COMMERCIAL REGISTRATION

Ordinary partnerships are liable to apply for commercial registration with the Ministry of Commerce, in the same manner as sole proprietorships.

Commercial registration does not convert the ordinary partnership into a registered ordinary partnership.

II. Registered Ordinary

Partnerships (“ROP”)

DEFINITION

Registered Ordinary Partnership• For a partnership to be an "ROP",

the partnership agreement, including the details of capital contributions, management and objects, must be in writing, and registered with the Ministry of Commerce.

TAX OF “ROPs”

ROPs are subject to the general corporate tax rate of 20% of net income.

Profits distributed by a ROP are subject to taxation in the hands of the partners.

Distributions of profits to natural persons are subject to a withholding tax rate of 10%, but a tax credit is allowed.

PARTNERSHIPS’S ASSETS

Where a claim is made against ROP, a creditor must first look to partnership assets before looking to a partner's separate assets.

DISADVANTAGE OF ROP

the ROP form of business organization is not very popular, since it offers little or no apparent tax advantages and little or no protection against liability.

III. Limited Partnerships

(“LP”)

DEFINITION

Limited Partnership• a form of registered partnership

in which there are 1 or more managing partners who manage the business and who are personally liable for the partnership's debts, AND 1 or more partners who are not personally liable for the partnership's debts, except for their undelivered or withdrawn capital contributions.

COMMERCIAL REGISTRATION

The partnership agreement, including the details of capital contributions, management and objects, must be filed with the Ministry of Commerce, in the same manner as a registered ordinary partnership.

LIABILITY OF THE PARTNERS

Partners with limited liability become liable without limit, where they actually manage or lend their name to the partnership.

ADVANTAGE LPs provide an element of

limited liability with less formalities than are required for limited companies.

TAX OF “LPs”

LPs are subject to the general corporate tax rate of 20% of net income.

TAX FILING AND PAYMENT

Form PND 50 must be filed within 150 days from the closing date of their accounting periods.

Tax payment must be submitted together with the tax returns.

Any company disposing funds representing profits out of Thailand is also required to pay tax on the sum so disposed within 7 days from the disposal date (PND 54).

SUMMARY

Nature Tax Extent of Liability

Unregistered Ordinary

Partnership

Not a legal (juristic) entity

PIT(10% - 35%)

All partners are liable

ROP Legal entity CIT(20%)

Partnership assets before

partner's separate assets.

LLP Legal entity CIT(20%)

Managing partners are

liable without limit

The Thailand Business and Legal Guide (retrieved from http://www.bia.co.th/008.html)

http://www.rd.co.ths

http://www.jurists.co.jp/en/publication/tractate/docs/101014_Thailand_E.pdf

References