Withholding Tax on Employee Shuttle Van Services in Thailand: 1% or 5%?
Companies in Thailand often outsource transportation services to ensure safe and reliable employee commuting. However, one recurring compliance issue is determining the correct withholding tax rate:
Should the company withhold 1% (transport service) or 5% (vehicle rental with driver)?
A recent Revenue Department ruling provides important clarification.
Overview of the Scenario
Company A enters into a 2‑year contract with Company B to provide air‑conditioned van services to transport employees. Under the agreement:
- Company B provides the vehicle, driver, fuel, maintenance, and operational support.
- Company A determines the routes, pickup times, and usage schedule.
- Company A may also request the van for additional hours outside regular service time.
- Payment is made daily but paid monthly, based on actual service days.
- The fee includes:
- Vehicle hire cost
- Fuel
- Driver wages
- Maintenance
- Tax and other operating expenses
- Overtime (if applicable)
- Fuel price adjustments may allow one contract-wide price revision if fuel fluctuates by 20% or more for at least one month.
The question is: What is the correct withholding tax rate for this arrangement?
Understanding the Revenue Department’s Criteria
To determine the correct rate, it is essential to distinguish between:
1. Transportation Service (1% WHT)
- Fees calculated based on distance, delivery tasks, or transport complexity
- Contractor performs transportation work independently
- The hiring company does not control the vehicle or driver
2. Vehicle Rental with Driver (5% WHT)
- The contractor provides the vehicle and driver
- The hiring company controls the route, schedule, and instructions
- Fees represent the cost of vehicle usage, not transport services
Revenue Department Interpretation
In this case, the Revenue Department examined the nature of the contract and concluded:
This arrangement constitutes renting a van with a driver—not transportation service.
Key reasons:
- Company A controls how and when the van is used
- The fee is calculated based on operational components (vehicle cost, fuel, driver wages, maintenance), not transport distance or delivery tasks
- Company B’s role resembles an operator providing a vehicle at the disposal of Company A, not an independent transporter
Applicable Withholding Tax Rate: 5%
Based on Section 3 ter of the Revenue Code and Revenue Department Order ท.ป.4/2528 (Clause 6), payments for vehicle rental with driver are subject to 5% withholding tax.
This position is reaffirmed by:
**Revenue Department Official Ruling
กค.0702/5985 dated 20 October 2023**
The ruling explicitly states that the arrangement is treated as vehicle rental, and therefore Company A must withhold tax at 5% when paying Company B.
Key Takeaways for Businesses
- Employee shuttle arrangements are often misclassified as 1% transportation services
- If the hiring company controls the vehicle, schedule, and route → it is 5% withholding tax
- Review shuttle, bus, and van service contracts to ensure compliance
- Incorrect withholding rates can lead to penalties, surcharges, and additional tax assessments
Conclusion
When a company hires a van service provider and has control over the route, schedule, and usage of the vehicle, the arrangement is considered vehicle rental with driver, not transport service.
Therefore, a 5% withholding tax applies under Thai tax law.
Companies should carefully assess their service contracts to ensure proper classification and compliance with Revenue Department guidelines.
