Israel – Thailand Tax Treaty

Business Activity in Thailand

Thailand has the second largest economy in Southeast Asia, is the largest automotive exporter in the region, and is the second largest Hard disk drive producer in the world. The country mainly exports manufactured goods and electronics, machinery and equipment, and agricultural goods, rice, and rubber. Major trading partners in Thailand are China, Japan, the United States, Australia, and Malaysia. The country is developing its digital infrastructure, by opening the Digital Park Thailand, which allows access to the submarine cable system, data center, and a landing station. Additionally, Software Park Thailand offers IT training courses, office facilities rooms for meetings, and more. There are also incentives for Research and Development activities. The Thai government emphasizes attracting foreign investment and easing the process of opening or expanding business activities in the country. These initiatives allow foreigners to invest in the country without prior governmental approval. Moreover, most sectors are open to foreign investors.

Bilateral Agreements Between Israel and Thailand

• Double Taxation Agreement
• International Investment Agreements

Convention on the Prevention of Double Taxation

The agreement between the Governments of Israel and Thailand regarding the avoidance of double taxation was signed on January 21, 1996, and entered into force on the first of December 31, 1996.

To read the agreement in English, click here.

Reciprocal Promotion and Protection of Investments

The Reciprocal Promotion and Protection of Investments (RPPI) between both countries was signed on February 17, 2000. The RPPI is an agreement between Israel and Thailand that is designed to encourage and safeguard investments made by individuals and companies from each country in the territory of the other. These agreements typically include provisions related to non-discrimination, compensation for expropriation, dispute resolution, and the transfer of funds.

To read the agreement in English, click here.

Applicability of the MLI

Both Thailand and the State of Israel have signed the Multilateral Convention, commonly known as the MLI. The MLI is a convention that is meant to fix double taxation treaties according to the BEPS framework.

Israel signed the MLI on the 7th of June 2017, with its provisions entering into force on the 1st of January 2019. Thailand on the other hand, affixed its signature to the MLI on the 9^th of February, 2022, and its provisions became effective as of the 1^st of July, 2022.

Residency for Tax Purposes in Thailand

Residency of an Individual

Residents in Thailand are considered those who live in the country for a total of 180 days or more within a tax calendar year.

To read about how an individual is considered a resident of Israel, click here.

Residency of a Company

A company is a Thai resident if it is incorporated in Thailand.

To learn about how a company is considered a resident of Israel, click here.

The Tax System in Thailand

Thailand Authority is called the Revenue Department of Thailand.

Income Taxation: 0% – 35 %

Taxation of Companies and Branches: 0%, 15% and 20%

VAT: 7%

Capital Gains Tax: Individual 5%-35%; Company 20%

Withholding Tax

Inheritance Tax Thailand

Inheritance in Thailand is exempt from personal income tax but is subject to inheritance tax. Heirs only pay tax on the portion of an inheritance exceeding THB 100 million from each testator. The tax rate is 10%, but it is reduced to 5% for direct ascendants or descendants. Spouses are fully exempt. Taxable assets include real estate, securities, bank deposits, registered vehicles, and certain financial assets.

Relocation to Thailand

Thailand is the center of the ASEAN Economic Community, a market of 671.7 million. It is the second-largest economy in Southeast Asia. Because of its world-class infrastructure, skilled labor, digital connectivity, and high quality of life, it is now an attractive, affordable, and aspirational investment hub with government policies and incentives.

Thailand has become a popular base for global companies and a key supply chain hub, thanks to its many advantages. Foreign investments have been encouraged by simplified government laws, a growing local market, and access to resources like finance and expertise.

Thailand benefits from nearly tariff-free trade with 18 countries, including major economies like Australia, China, New Zealand, and South Korea, as well as ASEAN members. It has signed 14 Free Trade Agreements and, in 2021, ratified the Regional Comprehensive Economic Partnership, which started in January 2022 and covers about one-third of the global economy and population.

Thailand is home to about 200 Jews, of both Sephardic and Ashkenazi descent. The Jewish community plays an important role in the country’s economy and culture. They are represented by the Jewish Association of Thailand, which is part of the World Jewish Congress. Thailand is known for being open and welcoming to Jews.

More information about relocation can be found on our website relocation page.

Real Estate Taxation in Thailand

Local authorities impose a land and building tax, payable annually by April. The maximum rates are 0.15% for agricultural land and buildings, 0.3% for residential properties, and 1.2% for other or vacant properties. If land or buildings remain unused for three years or more, the rate increases by 0.3% every three years, up to a maximum of 3%.

Exemptions and reduced rates apply in specific cases, such as for residential properties owned by individuals listed on the house registration book as of January 1, with a value below 50 million baht (or 10 million baht if the individual owns only the building). Additional exemptions include properties owned by approved foundations or charitable organizations that are not used for profit and common areas in condominiums as regulated by law.

In addition, Thailand applies a real property transfer registration fee of 2% and a mortgage registration fee of 1%.

Transfer of Funds from Israel to Thailand

According to section 170(a) of the Israeli Income Tax Ordinance, all payments transferred to non-Israeli residents are subject to a 25% withholding tax. However, this tax can be reduced or even waived if certain conditions are met. Our firm handles withholding tax matters with the Israeli Tax Authority.

As mentioned above, the countries have signed a tax treaty, that allows taxpayers to submit a 2513/2 form – Statement regarding a payment to a foreign resident that is exempt from withholding tax, to potentially transfer the payments without paying the withholding tax. 

In addition to assisting with withholding tax matters, our firm also helps with other issues related to transferring funds abroad. This includes providing an accountant’s approval regarding the payment of taxes, reviewing additional actions required under the CRS standard, and more. 

Moreover, banks often raise many difficulties and charge high fees for converting shekels into other currencies. Therefore, consulting with a specialist before transferring the funds is highly recommended, click here to contact us. 

For more information on money transfers abroad, click here. 

Types of Business Entities in Thailand

The type of business entities available in Thailand include the following entities:

Ordinary Partnerships: A partnership is a type of entity formed by the agreement between two or more individuals to conduct business as co-owners. In an ordinary, each partner assumes unlimited liability.

Limited Partnerships: In a limited partnership, there are two types of partners, partners that assume unlimited liability and partners that assume limited liability.

Joint Venture: A joint venture can be described as a collaborative effort between two or more parties to undertake a specific project or business endeavor.

Limited Liability Company: A limited liability company is a distinct legal entity separate from its shareholders, meaning the shareholders assume limited liability. There are two primary categories of limited companies, private and public. A private limited company is the most popular of the two. In a private limited company, there is a requirement for a minimum of three shareholders, whereas a public limited company requires at least 15 shareholders.

Incentive Laws in Thailand

The Thai Board of Investment provides tax incentives to businesses in target sectors, which include green technology, advanced manufacturing, and the digital economy, to encourage investment and economic expansion. The incentives involve, for example, exemptions from a reduction in import duties for machinery, raw materials, and research and development items and corporate income tax exemptions for a maximum of 13 years, depending on the type of industry, location, and scale of investment. Furthermore, companies can also take advantage of a 50% cut in corporate income tax rates for up to 10 years following tax holidays and can deduct extra expenses for transport, utilities, research and development, and infrastructure. Special provisions are provided for low-income province projects, Eastern Economic Corridor-based projects, or those projects related to research and development activities. Companies doing business as international business centers qualify for reduced corporate income tax, personal income tax exemptions, and other tax reliefs. These provisions are intended to encourage investment in critical sectors and areas, offering significant tax benefits to qualifying businesses.

Thailand Double Tax Treaties