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Published on March 10, 2008

Stock investors always hope to reap double gains - capital gains and dividends - when piling up stocks, but some benefit from triple gains by taking advantage of their right to file for dividend tax credits.

Those who receive dividends from Thai incorporated companies are subject to a flat withholding tax of 10 per cent, but any tax-paying investors domiciled in Thailand are entitled to take dividends as credits against their income-tax liability.

Don't sniff at the amount of baht you can claim just from the thousands of baht you receive as dividends. Assuming that your tax bracket is 10 per cent, you could save Bt300 for every Bt1,000 received as dividends - if the dividend payer is subject to corporate income tax of 25 per cent.

You can receive Bt385.71 for every Bt1,000 dividend if the company pays corporate income tax of 30 per cent, and the amount rises Bt900 per Bt1,000 if the company pays tax of 50 per cent.

Tax-paying investors are not obliged to take the dividend tax credit, as it is up to you whether

to add dividends to your

annual personal income-tax calculation.

In the event that you want to include dividends in you personal income tax, you must file for a personal income-tax return form Por Ngor Dor 90 - which covers a broader range of income than Por Ngor Dor 91.

However, not all tax-paying investors enjoy the same windfall.

Those who pay tax at the lowest bracket (10 per cent) are the biggest winners, as they can benefit from the tax credit regardless of the rate of tax paid by the dividend issuer.

For those within the 37-per cent tax bracket, however, it might not be worth exploiting the dividend tax credit as they might have to pay additional tax if the company pays a lower corporate income tax than the beneficiary's personal income-tax rate.

Let's make some calculations: if your taxable income is Bt500,000 a year, you are entitled to a Bt31,000 rebate of personal income tax if you are in the 10-per-cent tax bracket.

However, during the year you receive a dividend of Bt5,000 from a listed company paying 25-per-cent corporate income tax.

If you take off the 10-per cent withholding tax collected from dividends, you will pay yearly tax of Bt31,500 if you do not claim the dividend tax credit, but you are eligible for a rebate of Bt1,500 if you do submit a claim - meaning you only pay Bt30,000 tax in the year.

In another case, if taxable income is Bt4.5 million, you will pay personal income tax of about Bt1.19 million based on the 37-per-cent tax bracket. In that year you receive, say, dividends of Bt5,000 from a company that pays corporate income tax at 25 per cent.

In addition to the 10-per-cent withholding tax from the dividend, you will have to pay another Bt300 in the event that you file for the dividend tax credit.

At this stage, you might be confused as to whether you should claim the dividend tax credits, so here are some tips for saving tax from the credits.

Taxpayers who pay personal income tax of 10 per cent should file the dividend tax credits.

Those who pay the 20-per-cent rate can benefit from the tax credits if dividend issuers pay corporate income tax starting at 15 per cent. If taxable income is in the 30-per-cent bracket, you should file the dividend tax credits only when the dividend is issued by a company that pays corporate income tax of 25 per cent or higher.

For those who are in the 37-per-cent tax bracket, you will have to pay additional tax if the companies offering you a dividend pay corporate income tax of less than 25 per cent.

You will not reap any benefits if these companies pay corporate income tax at 30 per cent. However, you can save tax if dividend payers are levied corporate income tax of 50 per cent.

If you are not sure how much tax you can save from the tax credits, you can calculate taxable income at www.rd.go.th before filing a tax claim.

Oranan Paweewun

The Nation