Contributor
Santana Saksudhayakom
Senior Advisor, Transfer Pricing
Refund of Withholding Tax Paid Without Legal Obligation under Section 3 Tredecies
Under Revenue Department Order No. Tor.Por. 4/2528, issued pursuant to Section 40 of the Thai Revenue Code, payers of certain categories of assessable income are required to withhold income tax at source and remit such tax to the Revenue Department.
Examples of income subject to withholding tax include general services, hire of work, construction services, advertising services, rental of property, insurance premiums, transportation fees, and similar payments. The applicable withholding tax rates vary depending on the type of income, and the withheld tax must be remitted within the statutory time period.
However, there are exceptions. Certain types of assessable income are not subject to withholding tax, meaning the payer has no obligation to withhold tax at the time of payment. One common example is the sale of goods together with installation services, where the transaction is regarded as a sale of goods rather than a service.
In practice, payers may be uncertain or confused about their withholding tax obligations and may withhold income tax and remit it to the Revenue Department even though no withholding obligation exists. This raises the question of whether the withholding tax that has already been deducted and remitted can be refunded.
Revenue Department Clarification
The Revenue Department addressed this issue in Ruling No. Gor.Kor. 0702/9205 dated 8 October 2015, confirming that a refund is possible, provided specific conditions are met.
Answer: A refund is possible
The Revenue Department has clarified this issue in Ruling No. Gor.Kor. 0702/9205 dated 8 October 2015. Based on this ruling, the key principles and procedures may be summarized as follows:
Refund the withheld tax to the payee
The payer who withheld the tax must refund the amount of withholding tax to the income recipient and obtain the original withholding tax certificate previously issued. Such withholding tax certificate must then be cancelled.Amend the withholding tax return
The payer must file an amended withholding tax return to correct the previously filed return in accordance with the actual facts.Confirm that the payee has not used the tax credit
The payer must ensure (and may need written confirmation from the payee) that the recipient of income has not claimed the withholding tax as a tax credit in its corporate income tax return (Form PND. 50).
Once these steps have been properly completed, the payer—being the party who has suffered a loss from remitting tax without a legal obligation—is entitled to apply for a tax refund under Section 27 Tre of the Revenue Code.
Why This Matters
Incorrect withholding tax treatment can result in unnecessary cash outflows, administrative burdens, and compliance risks. A proper review of transaction structures and withholding tax obligations can help businesses recover overpaid tax and avoid similar issues in the future.
