Thailand: Adjusted tax exemptions for severance pay to be expected soon

26 Jun 2024    1 minute read

In brief

The Cabinet has recently approved in principle the Draft Ministerial Regulation under the Revenue Code Regarding Revenue Tax ("Draft Ministerial Regulations") to increase the personal tax exemption amount on severance pay for terminated employees, aligning with the new maximum rate of severance pay. This change is intended to further ease the financial burden on terminated employees.

Currently, terminated employees are exempt from personal income tax on their statutory severance pay, up to an amount equal to their last 300 days' wages or THB 300,000, whichever is less. The current severance pay tax exemption amount is in line with the previous statutory severance pay rate, which provides a maximum rate equal to the employee's last 300 days' wage for those with 10 or more years of service.

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In more detail

In 2019, the rate of statutory severance pay was increased, with the maximum rate now being the employee's last 400 days' wages for those with 20 or more years of service. Thus, in order to align with this new maximum rate of severance pay, on 18 June 2024, the Cabinet approved in principle the Draft Ministerial Regulation to increase the personal tax exemption amount on severance pay for terminated employees to the employee's last 400 days' wages or THB 600,000, whichever is less, pursuant to the Draft Ministerial Regulation.

Similar to the current rules, this tax exemption will not apply to severance pay paid in cases of retirement or the expiry of a fixed-term employment agreement. Moreover, this tax exemption is not applicable to other types of payments, such as those given to employees in cases of resignation.

The new tax exemption under the Draft Ministerial Regulation shall be applicable to assessable income received from 1 January 2023. In this regard, the Revenue Department shall refund any excess portion of severance pay withheld in 2023 and filed in 2024, if any. Individuals seeking a tax refund should be aware that they may be subject to a tax audit by the Revenue Department, and relevant documents and supporting evidence may be required.

The Draft Ministerial Regulation is now pending its publication in the Royal Gazette and shall take effect afterwards.

We will keep you informed of further developments on this issue. Meanwhile, if you have any questions, please let us know.

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