Key takeaways
Every commission payment made abroad must be checked for two taxes: PND 54, which a double tax treaty may reduce, and PP 36, which a treaty cannot reduce. For condominium unit sales expenses, the related VAT cannot be credited and is included in the cost to obtain the contract. A Net contract makes the cost about 25.9% higher than the face amount of the contract.
Seven principles
| # | Principle | Practical effect |
|---|---|---|
| 1 | Condominium unit sales are subject to SBT and are outside the VAT system | VAT on the tax invoice and PP 36 on commission for selling units cannot be credited; they are a cost |
| 2 | Commission paid because a contract is secured = cost to obtain a contract (CAC) | Record as an asset per unit and transfer to expense on transfer day |
| 3 | The right to payment arises under project policy, e.g. when the buyer has paid 35% in full (example) | Disburse only once evidence is in place |
| 4 | The recipient's status determines the tax | If the status is unclear, do not pay |
| 5 | Check both taxes every time | A treaty can reduce PND 54 only |
| 6 | Pay only into an account in the counterparty's name | No cash, no third parties, no verbal account changes |
| 7 | File every form by the 7th, or by the extended date for e-Filing | If tax is not withheld or is under-withheld, the payer is jointly liable |
The two taxes to check
| Issue | Withholding tax (WHT) | VAT remitted by the payer on the recipient's behalf |
|---|---|---|
| Law | Section 70 | Section 77/2 paragraph 2, Section 83/6 |
| Use when | Payment of assessable income under Section 40(2)-(6), from or in Thailand, to a foreign juristic person not carrying on business in Thailand | Services from abroad that are used in Thailand |
| Rate | 15% or the treaty rate | 7% of the amount paid, including WHT borne on the recipient's behalf |
| Type | PND 54 | PP 36 |
| Does the treaty help? | Yes | No |
| Can it be credited or refunded? | - | Not for unit sales expenses; it is a cost |
| Type of expense | Income | WHT | PP 36 | Under the treaty |
|---|---|---|---|---|
| Commission on condominium unit sales | 40(2) | 15% | 7% | Article 7 if there is no PE and a COR is held |
| Service fees, consultancy, marketing | 40(2) | 15% | 7% | Article 7 if there is no PE and a COR is held |
| Software (usage rights) | 40(3) | 15% | 7% | Reduced under the treaty with the relevant country |
| SaaS or cloud | 40(2) or 40(3) | Withhold 15% initially | 7% | Depends on the facts of the contract |
| Interest on overseas loans | 40(4)(a) | 15% | None | Reduced under the treaty |
SaaS fees paid by credit card must be checked for PND 54 and PP 36 just like a bank transfer; this is a commonly missed point. Commission offset against money remitted is also treated as paid under Section 39.
Conditions for claiming treaty benefits
- The recipient is resident in the treaty country and holds a Certificate of Residence (COR) for the year of payment
- No Permanent Establishment (PE) in Thailand, whether an office, personnel working beyond the threshold, or an agent who concludes contracts on its behalf
- Passes the MLI Principal Purpose Test (check whether the MLI is already in force for that treaty), i.e. the structure was not arranged with obtaining the benefit as one of its principal purposes
- The recipient is the true beneficial owner of the income and is the same party as the account holder
If any condition is missing, withhold 15% first. For high-value items, request a written ruling from the Revenue Department.
Gross-up where the contract is Net
Income before tax = net amount the recipient must receive ÷ (1 − WHT rate)
The PP 36 base is the pre-tax (grossed-up) amount, not the amount transferred. Tax borne on the recipient's behalf is deductible only when the contract clearly states that the payer bears the tax.
Example: THB 300,000 commission, 4 scenarios
| Item (THB) | 3A Gross, with COR | 3B Gross, no COR | 3C Net, no COR | 3D Net, with COR |
|---|---|---|---|---|
| Income before tax | 300,000.00 | 300,000.00 | 352,941.18 | 300,000.00 |
| WHT PND 54 | 0.00 | 45,000.00 | 52,941.18 | 0.00 |
| PP 36 VAT 7% | 21,000.00 | 21,000.00 | 24,705.88 | 21,000.00 |
| Transfer to the agency | 300,000.00 | 255,000.00 | 300,000.00 | 300,000.00 |
| CAC (total cost) | 321,000.00 | 321,000.00 | 377,647.06 | 321,000.00 |
| Compared with the contract amount | +7.0% | +7.0% | +25.9% | +7.0% |
Company-side bank fees (estimated at THB 1,500 when OUR is selected) are recorded as an expense and are not included in CAC. All figures are examples.
Splitting commission among several parties
Example: THB 10,000,000 unit, 3% pool = THB 300,000
| Recipient | Proportion | Commission | WHT | VAT / PP 36 | Net payment | CAC | Type |
|---|---|---|---|---|---|---|---|
| Overseas agency, Gross, no COR | 50% | 150,000 | 22,500 | 10,500 | 127,500 | 160,500 | PND 54, PP 36 |
| Thai juristic person, VAT-registered | 20% | 60,000 | 1,800 | 4,200 | 62,400 | 64,200 | PND 53 |
| Sales employee | 20% | 60,000 | 6,000 | - | 54,000 | 60,000 | PND 1 |
| Thai individual, 3% policy | 10% | 30,000 | 900 | - | 29,100 | 30,000 | PND 3 (confirm) |
| Total | 100% | 300,000 | 31,200 | 14,700 | 273,000 | 314,700 | 5 cases |
Check: net payment 273,000 + WHT 31,200 + PP 36 10,500 = 314,700 (VAT of 4,200 is already included in the payment amount). Employee WHT is calculated from a salary of THB 50,000 per month.
Recipient registered in Indonesia
Use the same framework as for other countries, adding a check of the current Thailand–Indonesia treaty and of whether the MLI is in effect. Payment to an Indonesian juristic person is possible when there is a contract directly with that company, the recipient is both the contracting party and the account holder, it passes KYC, and Thai taxes are remitted in full.
| No. | Key points | Effect on the payer |
|---|---|---|
| Business profits | Taxed in the country of residence unless there is a PE in Thailand | If the conditions are met, WHT is 0%, but PP 36 must still be filed |
| Service PE | Providing services through personnel in Thailand beyond the treaty threshold is treated as having a PE | If the person who actually makes the sale works in Thailand, 15% should be withheld |
| Agent PE | A person who concludes contracts, or plays the principal role in concluding contracts, on behalf of the entity | Check who negotiates and closes the sale in Thailand |
| Principal Purpose Test | The benefit can be denied if obtaining it is a principal purpose | Moving the recipient to avoid Thai withholding does not pass the test |
If the actual salesperson lives and works in Thailand but invoices through an overseas company, overlapping risks arise: PE, PPT, work permit, brokerage business by foreigners, and AML. The approach is to pay the overseas company only if it passes KYC and a substance test; otherwise withhold 15% and file PP 36, or pay through a Thai juristic person that does real work.
Example: 12.5% and 10% commission on a THB 10,000,000 unit
| Item (THB) | 12.5% A Gross, with COR | 12.5% B Gross, no COR | 12.5% C Net, no COR |
|---|---|---|---|
| Income before tax | 1,250,000.00 | 1,250,000.00 | 1,470,588.24 |
| WHT | 0.00 | 187,500.00 | 220,588.24 |
| Transfer to the agency | 1,250,000.00 | 1,062,500.00 | 1,250,000.00 |
| PP 36 | 87,500.00 | 87,500.00 | 102,941.18 |
| CAC | 1,337,500.00 | 1,337,500.00 | 1,573,529.42 |
| Item (THB) | 10% A | 10% B | 10% C |
|---|---|---|---|
| Income before tax | 1,000,000.00 | 1,000,000.00 | 1,176,470.59 |
| WHT | 0.00 | 150,000.00 | 176,470.59 |
| Transfer to the agency | 1,000,000.00 | 850,000.00 | 1,000,000.00 |
| PP 36 | 70,000.00 | 70,000.00 | 82,352.94 |
| CAC | 1,070,000.00 | 1,070,000.00 | 1,258,823.53 |
A rate of 10–12.5% is higher than typical market levels; it should be supported by a benchmark or an approved commission policy.
Red flags specific to this case
- Several agents ask at the same time to change the payee to an overseas company: record the reasons and carry out a substance test
- The person who actually sells is in Thailand but the invoice comes from abroad: treat as a PE risk
- Request to pay into a third party's account or a director's personal account: refuse
- Newly established company with no office or employees: do not apply treaty benefits
- Invoices split across several companies for a single unit: check the total against the pool and the shareholder relationships
- COR is not for the year of payment, or is a self-certified document: do not accept
- Recipient or shareholder is on a sanctions list: suspend payment and notify the approver
Documents from the recipient company
- Articles of incorporation and company certificate, business licence, and tax ID of the recipient's country
- COR for the year of payment, issued by the tax authority of the recipient's country
- List of directors and shareholders, and UBO declaration with identity documents
- Bank account confirmation letter, with the account name matching the company name
- Declaration of no PE in Thailand, and the number of days personnel were in Thailand in the past 12 months
- Agency Agreement signed directly with this company, including a Taxes clause
- Commercial invoice stating the unit number, buyer name, gross amount and currency
- Evidence of work performed, such as the booking form and client registration
CAC accounting
| Item | CAC | Expense immediately |
|---|---|---|
| Commission tied to units sold | Total | |
| VAT on a Thai agency's tax invoice that cannot be credited | Total | |
| PP 36 that cannot be credited | Total | |
| WHT borne on the recipient's behalf under the contract | Total | |
| Employee commission tied to units sold | Total | |
| Bank fees and foreign exchange differences | Expenses | |
| Sales team salaries, contributions, annual bonus | Expenses | |
| Marketing and advertising that do not depend on a sale | Expenses |
| Event | Journal entries |
|---|---|
| Payment date | Dr CAC per unit / Cr WHT payable, PP 36 payable, bank |
| Tax remittance date | Dr WHT payable, PP 36 payable / Cr bank |
| During construction | Treat as an asset, track per unit, and review for impairment |
| Transfer day | Dr Selling expense – commission / Cr CAC per unit |
| Cancelled, recoverable | Dr Agency receivable (clawback) / Cr CAC |
| Cancelled, not recoverable | Dr Impairment loss / Cr CAC |
Cancellation example for 3B: THB 255,000 is recoverable; the remainder, WHT of THB 45,000 and PP 36 of THB 21,000, totalling THB 66,000, is recognised as an impairment loss. Total CAC written off: THB 321,000.
Points to confirm with the auditor: whether leasehold falls under TFRS 15 or TFRS 16; that TFRS for NPAEs has no specific guidance on CAC; the timing of the tax deduction; and the VAT status and the apportionment of input VAT
Banking and remittance
| Fee arrangement | Borne by | Recommended when |
|---|---|---|
| OUR | Company bears all | The contract gives the recipient the full amount |
| SHA | Shared, each side bearing its part | Upfront fee |
| BEN | Recipient bears all | Agreed in the contract |
| Causes of stuck payments | How to prevent |
|---|---|
| Account name does not match the counterparty | Use a bank account confirmation letter and check at onboarding |
| Payment to a third party | Prohibited by policy |
| No contract or invoice | Attach the full set of documents |
| Partial sanctions match | Prepare director and UBO documents |
| Incorrect SWIFT code | Check against the bank's letter and make a small test transfer the first time |
Remittance documents should include the contract, invoice, purpose of remittance and tax calculation schedule. Use the Bank of Thailand reference rate on the payment date, and check the latest foreign exchange notification with the company's bank. Fees are estimates and must be confirmed with the company's bank.
Contract clauses to include
- Commission accrues when the buyer pays according to the policy criteria, and must be refunded within 30 days if the sale contract is cancelled before transfer
- Pay only into an account in the counterparty's name; any change of account must be made in writing, signed by a director
- Taxes clause stating that the amount is Gross, that the payer withholds Thai tax as required by law, and that the payer issues a withholding certificate
- Treaty benefits can be claimed only with a COR and a declaration of no PE before payment
- PP 36 is the company's burden and does not reduce the commission amount
- Agent's representations on registration, beneficial ownership, licences, sanctions, AML and anti-corruption
Have a legal adviser review before actual use
Controls and penalties
| Case | Result | Law |
|---|---|---|
| Tax not withheld or under-withheld | The payer is jointly liable for the shortfall in tax | Sections 54, 70, 52 |
| PND return filed late | Surcharge of 1.5% per month, capped at the amount of tax | s.27 |
| PP 36 filed late or not filed | Penalty and surcharge of 1.5% per month | Sections 89, 89/1 |
| No evidence of the recipient | Not deductible as an expense | Section 65 ter (18) |
| Disguised employee | Progressive-rate tax and retrospective social security contributions, plus surcharges | Section 50(1), Social Security Act |
- Quarterly: reconcile overseas transfers and credit card payments to PND 54 and PP 36
- Spot-check the recipient's status: the certificate of residence (COR) for the year of payment, and the PE/PPT results
- Recalculate the tax base and gross-up
- The remaining CAC balance agrees with units not yet transferred
- No VAT on commission for condominium unit sales is included in PP 30 as input VAT
- Red flag review: payments abroad with no matching tax treaty, WHT 0% applied without a COR, personnel continuously present in Thailand, change of payee after work was performed in Thailand