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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.


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.

Author

Nopporn joined Baker McKenzie in 2007 after practicing tax law with another law firm in Bangkok for seven years. He became a Partner in 2016 and is currently active in the Tax Practice Group.

Author

Nam-Ake Lekfuangfu is a partner of the Employment & Compensation Practice Group in Bangkok. He is experienced not only in employment laws but also, corporate and commercial law, mergers and acquisitions, environment and trade regulations. Over the past year, Nam-Ake was lead lawyer for a wide range of employment matters involving high profile clients. With his extensive legal knowledge, combined with insights on industrial knowledge and practices and Supreme Court rulings, Nam-Ake assists clients on employment and immigration works, ranging from day-to-day advice to complex matters, such as advising on employment trends impacting employers globally, including global mobility, the use of modern workforce and gender pay gap.

Author

Theeranit joined Baker & McKenzie in 2013 and is now one of the key partners in the Corporate and M&A and Employment & Compensation Practice Groups in Bangkok. Theeranit has been involved in servicing a wide range of clients across industry sectors, recently focusing on the Healthcare & Life Sciences, Consumer Goods & Retail and Industrial Manufacturing and Transportation industry groups. He has been handling a number of high profile clients across a wide spectrum of corporate and commercial, with a particular focus on employment, immigration, work safety as well as merger and acquisition and post-acquisition integration advice. He has steadily earned trust and recognitions from a number of Baker & McKenzie key clients on his expertise in the Thai employment laws and regulations in particular, and for his proactive and responsive approach in handling clients' matters.
Theeranit was mentioned as one of experienced associates for Labour and Employment in Thailand by Legal 500 in 2019 and "Rising Star in Labour and Employment" by Legal 500 Asia Pacific 2022 and again 2023, in 2024 Theeranit was recognized as "Next Generation Partner" in 2024 and "Up and Coming for Employment" in Thailand by Chambers Asia-Pacific 2023.

Author

Suriyong Tungsuwan joined Baker McKenzie in 1982 and became a partner in 1993. He is active in the areas of corporate and commercial law, mergers and acquisitions, real estate and property development, labour, employment, executive transfers, and trade regulations and customs.

Author

Yada Pudpong is an Associate in Baker McKenzie, Bangkok office.

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