“Royalties” ค่าสิทธิ
Section 70 of the Thai Revenue Code
Section 70 of the Revenue Code stipulates that any payment of royalties made from or in Thailand to a company or juristic partnership established under foreign law and not carrying on business in Thailand is subject to withholding tax. The payer is required to withhold tax from the assessable income paid at the applicable tax rate and remit it to the local district office, together with a submission of the prescribed form, within seven days from the end of the month in which the payment was made.
The term “royalties” under Section 40(3) of the Revenue Code can be complex. Therefore, it is necessary to carefully consider the definition of “royalty” as set forth in each relevant Double Tax Agreement (DTA), including the applicable tax rate. The standard withholding tax rate is 15% of the gross amount, though some DTAs provide for a reduced rate.
Although the Revenue Code does not define “royalty,” the term is generally defined under most DTAs to include payments in the following three categories:
1. Payments for the Use of or the Right to Use Intellectual Property
This includes payments for the use of or the right to use copyrights in literary, artistic, or scientific works (including motion picture films or tapes for radio or television broadcasting), patents, trademarks, designs, or models.
Such payments are considered royalties under a licensing agreement—that is, remuneration paid in exchange for rights to reproduce, distribute, modify, or otherwise exploit intellectual property. If such payments were not made, the use would be considered an infringement of intellectual property rights.
2. Payments for the Use of Industrial, Commercial, or Scientific Equipment
These are usually payments in the form of equipment rental, such as machinery rental. Typically, these would be treated as business profits rather than royalties, meaning there would be no obligation for the payer to withhold tax.
However, some DTAs (including many that Thailand has signed) classify such rental payments as royalties. Therefore, the payer must review the specific DTA provisions carefully to determine the correct tax treatment and whether withholding is required.
3. Payments for Information Concerning Industrial, Commercial, or Scientific Experience (Know-how)
This refers to payments made in exchange for access to specialized knowledge, expertise, or experience in industrial, commercial, or scientific fields that have not been publicly disclosed. The provider of such know-how is not required to perform any activity or guarantee any particular outcome.
Example: Ruling by the Thai Revenue Department (Ruling No. GorKhor.0702/1626 dated 19 March 2025)
Company K, engaged in the business of application development, contracted with Company A—a U.S.-based company with no permanent establishment in Thailand—for IT infrastructure services, data storage, and cloud computing services. Company K can report service issues via Company A’s website.
Company A owns all rights and technology involved in providing these services. Payments were made by Company K based on usage duration.
The Revenue Department’s Interpretation:
If the service fees paid by Company K to Company A are not for the rights to reproduce, distribute, adapt, or otherwise use the intellectual property (which, if unpaid, would constitute copyright infringement), and are also not in exchange for know-how or technical information, then such fees do not constitute royalties under paragraphs (a) or (c) of Article 12 of the Thailand–U.S. DTA.
Instead, these payments fall under Article 7 of the Thailand–U.S. DTA as business profits. Since Company A does not have a permanent establishment in Thailand (per Article 5 of the DTA), it is not subject to Thai income tax on those payments.
Read Thai Version Click Here: ค่าสิทธิ
