Paying Foreign Suppliers from Thailand: Withholding Tax Explained

If your Thai company pays fees to foreign businesses or freelancers abroad, there is a tax obligation that catches many small business owners off guard. Thailand requires companies to withhold a portion of certain cross-border payments and remit that amount to the Revenue Department. Getting this wrong can result in penalties for your company, and in some cases the foreign supplier ends up bearing a cost they never expected. This guide explains how the system works in plain terms, so you know what to do before the next payment goes out.

What Is Withholding Tax on Payments to Foreign Suppliers?

When a Thai-registered company makes a payment to a non-resident entity or individual for services, royalties, interest, or similar income, Thai law treats part of that payment as Thai-sourced income. The paying company must deduct a percentage, hold it back, and pay it directly to the Revenue Department on behalf of the foreign recipient. This is withholding tax, and the rate varies depending on the type of payment.

The standard withholding tax rate applied to service fees paid to foreign companies is generally 15 percent. Royalties are also typically 15 percent. Interest payments to foreign lenders are usually 15 percent as well. Dividends paid to foreign shareholders carry a standard rate of 10 percent. These are the default rates under Thai domestic law, but they can be reduced or eliminated if a tax treaty applies.

What Types of Payments Trigger This Obligation?

Not every payment you make to an overseas supplier requires withholding. The obligation applies to income that is considered to have a source in Thailand. In practice, this generally means the foreign supplier is providing services that benefit your Thai company, licensing intellectual property for use in Thailand, or earning interest on a loan to your Thai entity.

Payments for physical goods are not normally subject to this withholding requirement. If you are importing products and paying an overseas manufacturer for merchandise, that payment is typically outside the scope. However, if you are paying a foreign software company a monthly licence fee to use their platform, or paying an overseas consultant for work they did that benefits your Thai operations, those payments very likely fall within scope. The nature of the income is what matters, not simply the fact that the supplier is overseas.

How Double Tax Agreements Can Reduce the Rate

Thailand has signed Double Tax Agreements, commonly called DTAs, with a significant number of countries. A DTA is a bilateral treaty between Thailand and another country that determines which country has the right to tax particular types of income, and in many cases it sets a lower withholding tax rate than Thai domestic law would otherwise apply.

For example, the domestic rate on royalties is 15 percent, but a DTA between Thailand and the supplier's country of residence might reduce that to 10 percent or even 5 percent. Some DTAs eliminate withholding tax on certain categories of income entirely. The key point is that the relief is not automatic. Your company must actively apply for it by following the correct process, and the foreign supplier must genuinely be a tax resident of the treaty country.

What Your Company Needs to Do to Claim DTA Relief

To apply a reduced rate under a DTA, you need to collect a Certificate of Tax Residence from the foreign supplier. This is a document issued by the tax authority in the supplier's home country confirming that the supplier is a tax resident there for the relevant period. Without this document, you cannot reduce the withholding rate, and you should apply the full domestic rate instead.

Once you have the certificate and you have verified that the relevant treaty provides relief for the type of income being paid, your company deducts the reduced rate from the payment, remits that amount to the Revenue Department using the appropriate form, and issues a withholding tax certificate to the foreign supplier. This certificate is important to the supplier because they may need it to claim a credit for the Thai tax withheld in their own home country. The whole process needs to happen within seven days of the end of the month in which the payment was made.

Common Mistakes That Thai Companies Make

One of the most frequent errors is paying the full invoice amount to the foreign supplier without deducting anything, then trying to absorb or ignore the withholding tax obligation afterwards. This leaves your company exposed because the Revenue Department can assess the tax, interest, and surcharges against you as the paying entity.

Another common mistake is assuming a DTA applies without checking properly. Not every country has a treaty with Thailand, and even where a treaty exists, it does not cover every type of payment. Some business owners also collect a tax residency certificate from a previous year and use it indefinitely. In practice, the certificate should correspond to the year in which the payment was made. Finally, some companies apply the wrong form when filing with the Revenue Department. Payments to foreign entities are reported on a different form than payments to Thai residents, so it is important to use the correct one.

What Happens If You Get It Wrong?

If your company fails to withhold and remit correctly, the Revenue Department can hold your company liable for the full amount that should have been withheld, plus a surcharge of one and a half percent per month on the outstanding amount, plus a penalty. The liability sits with the paying company in Thailand, not the foreign supplier. This means the tax exposure for errors is yours, even if the foreign supplier was unaware of the requirement.

If you discover a past error, it is generally better to voluntarily correct it and make the payment with interest rather than wait for an audit. Revenue Department officers do review payment records during corporate tax audits and will look at significant overseas transfers.

Getting Set Up Correctly From the Start

If your Thai company regularly pays foreign suppliers, it is worth reviewing each supplier relationship to understand what type of income is involved, whether a treaty exists with that country, and whether you have the right documentation in place. This is not a one-time exercise. Supplier arrangements change, and treaty benefits require fresh documentation each year.

Working with an accountant who understands both Thai Revenue Department requirements and how DTAs operate in practice will save you time and reduce your risk considerably. The compliance steps are manageable once you have a clear process, but they do require attention to detail and consistent follow-through each time a payment is made.