WHT- Thai WHT on payment for technical service to the US entity

Situation:  For technical training services, US entity as an enterpreneur and the IP owner is entitled to 95% of the invoiced amount, while the local Thai entity retains 5%. Thai company invoices the customer in Thailand for the full 100% and subsequently is supposed to remit 95% of the amount to the US.

In this case,

Is withholding tax applicable on the payment from Thai to the US?

If so, what is the applicable withholding tax rate & type of payment to the US?

Response: 

Obligation to withhold and file WHT Return (Form PND.54 for payment to overseas entities) only arises when a payment/transaction is subject to Thai WHT. 

So for us, if payment is made on 1 October 2025 by a Thai Company for an invoice dated in 2023 for technical service fees to overseas service provider for which we have determined that WHT is not applicable (i.e. tax exempt) under double tax treaty (e.g. between Thai-US), then there is no need/no requirement for TH company to file a WHT return (including a NIL return). However, Deloitte recommends the company to obtain and retain the Certificate of Residence (CoR) from the overseas service provider and keep this on file together with other documents e.g. agreement, invoice, which serve as supporting evidence in case of a future tax audit.

Point of note for your future payment transactions involving various fees with different WHT treatments: If various payments are made by a Thai Company for various types of fees, some of which WHT is applicable and some of which WHT is not applicable under double tax treaty, only the income remitted which are subject to WHT need to be reported (and WHT paid) using Form PND.54. That is, for those income remitted in which WHT are not applicable, there is no need to even report/declare/disclose them at all in the WHT return (Form PND.54).

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95% payment from the Th entity to the US entity is exempt from Thai WHT, provided it qualifies as "business profits" under the US-TH treaty and the US entity does not have a PE in Thailand.

1. The default rule: Thai Domestic law

Generally, it is subject to 15% WHT (without tax treaty)

2. Tax treaty

95% payment for 'technical training' could fall into one of two main categories under the DTT:

A) Business Profits (Art. 7 of the DTT)

B) Royalties (Arc.12 of the DTT)

Tax treatment as

A) Business Profits (Most likely Scenario) - This is the interpretation that the provided answer is based on.

- What are Business Profits? income earned from the active conduct of a business, such as providing a service. When the US entity provides training, it is earning profit from its business operations

- The DTT Rule: Art. 7 of the Thai-US DTT : business profits of a US enterprise shall only be taxable in the US, UNLESS the enterprise carries on biz in Thai through a PE situated therein.

<=> If the US entity provides the training remotely (e.g., online) or sends personnel to Thai for ST projects without creating a PE, its income is considered "Business Profits". 

According to the DTT, Thailand has no right to tax this income. Since there is no underlying tax liability in Thailand, there is no obligation to withhold tax. 

Income is exempt under the DTT, the obligation to withhold tax never arises. 

B) Royalties (less likely, but possible) 

The DTT rule: If the payment were for licensing the training materials (the IP) to the Thai company so it could conduct the training itself, it would likely be a royalty. 

Under Art. 12 of the Thai-US DTT, royalties can be taxed in Thailand. The WHT rate on royalties is tiered: 

5% - for the use of copyright 

8% - for patent, trademarks, or industrial/commercial equipment 

15% - for other types of know-how and secret formulas