The box that sits before your allowances — and usually dwarfs them
Every December, Thai freelancers scramble for deductions: buy the fund, buy the insurance, chase the government scheme. Fair enough. But look at the order of operations in Thai personal income tax and you will notice a box that comes before allowances and is usually worth many times more: expenses.
The formula is: income − expenses − allowances = net income, and only then do the tax brackets apply.
For a freelancer earning ฿1.2 million a year, the personal allowance is ฿60,000. The expense box might be ฿720,000 or more. That is twelve times larger. And unlike the allowance, it is not filled in automatically. Thai law lets you choose how to fill it, and that single choice sets your tax bill for the whole year.
This article is about that choice: flat-rate deduction or actual expenses, what determines which one you can use, when each is worth it, and what you have to be collecting right now for the option to still exist when you file.
The two methods
Flat rate: one line, no paperwork
The flat-rate method multiplies your income by a percentage fixed in law. No receipts, no proof, no explanation. Service work and contract-for-work income — Category 8 income, where most freelancers sit — gets 60%. Category 7 income (contracting where you supply both labour and materials) also gets 60%.
That 60% ceiling has applied since tax year 2017, when Royal Decree No. 629 levelled the Category 7 and 8 rates down to a maximum of 60%. If you find an older article claiming your trade can deduct 70% or 85% flat, that is pre-2017 information. Do not rely on it.
Category 2 income — fees tied to you personally, with no business cost structure of your own — deducts 50% capped at ฿100,000, and there is no actual-expense option at all. So if your income is classified as Category 2, this article ends here for you. Your real question is the classification itself, not the deduction method.
Actual expenses: you get what you can prove
The alternative is deducting what the law calls necessary and reasonable expenses — your real costs, with no percentage ceiling. If your costs ran 80% of revenue this year, you deduct 80%. If they ran 95%, you deduct 95%.
The price is one condition, and it is heavier than it sounds: you must be able to prove every baht. The statute is blunt about the consequence — if what you can substantiate is less than what you claimed, your expenses are treated as only the amount you proved. There is no rounding in your favour, and no falling back to the flat rate afterwards.
That is where most people lose money. Not by miscalculating, but by electing the method that fits their real costs and then failing to document them.
First gate: can your work use the flat rate at all?
Before any comparison, clear this gate.
The flat-rate deduction for Category 8 income is not available to every occupation. The law lists the eligible business types in Section 8 of Royal Decree No. 11 of 1959 — currently 43 sub-clauses covering things like contract-for-work and services of all kinds, buy-and-resell trading, photography and image processing, leather goods, and public performers.
If your business is not on that list, you cannot use the flat rate at all. Actual expenses are your only option.
This matters more every year, because newer income streams often do not map cleanly onto a 1959 list. Platform ad-revenue shares, digital licensing income, payments that look like royalties for the use of a right — each has to be assessed on its own facts, and plenty of them land in territory where you must substantiate real costs.
Public performers have their own rule worth knowing: singers, musicians, actors and professional athletes deduct 60% on the first ฿300,000 and 40% above that, capped at ฿600,000 total. If you are in that group and earning well, you hit the ฿600,000 ceiling faster than you expect — and actual expenses become interesting immediately.
Check this first. If the answer is wrong, everything below is meaningless.
The numbers: ฿1.2 million in service income
Take a freelancer with ฿1,200,000 of Category 8 service income, eligible for the 60% flat rate, claiming only the ฿60,000 personal allowance.
Path 1 — flat 60%
- Expenses: ฿720,000
- Net income: 1,200,000 − 720,000 − 60,000 = ฿420,000
- Tax: ฿19,500
Path 2 — actual expenses of ฿850,000, fully documented
- Net income: 1,200,000 − 850,000 − 60,000 = ฿290,000
- Tax: ฿7,000
A saving of ฿12,500 from filling in one box differently.
Path 3 — actual expenses of ฿850,000, but only ฿600,000 provable
The missing ฿250,000 is handwritten cash slips, transfers with no counterparty on record, subcontractors paid in cash with nothing issued.
- Net income: 1,200,000 − 600,000 − 60,000 = ฿540,000
- Tax: ฿33,500
That is ฿14,000 worse than simply taking the flat rate — even though real costs clearly exceeded 60%.
Path 4 — actual expenses elected, nothing provable
- Net income: 1,200,000 − 0 − 60,000 = ฿1,140,000
- Tax: ฿150,000
Same revenue, same real costs, four outcomes between ฿7,000 and ฿150,000. The only variable is paperwork.
The break-even is not exactly 60%
Arithmetically, actual expenses win once your provable costs exceed 60% of revenue. In practice, leave yourself margin, because the actual-expense route carries three hidden costs.
First, time. You keep books, chase receipts, and collect documents from counterparties all year.
Second, audit exposure. Unusual ratios invite questions, and the burden of proof sits with you, not with the officer.
Third, uncertainty. You only learn what you can actually substantiate after you finish assembling the file — which is usually days before the deadline.
A workable rule: if your documented costs are not comfortably past roughly 70% of revenue, take the flat rate. The difference does not justify the work. But if you routinely hire a team, buy materials on behalf of clients, or carry heavy production costs — event production, video work with a crew, fit-out and construction, or reselling goods with a real cost of sales — your true costs almost certainly clear 60%, and actual expenses are simply the correct answer.
What counts, and what gets struck out
The principle: the cost must relate to earning the income, must not be personal, and the recipient of the money must be identifiable.
Commonly missed but valid:
- Subcontractor and crew fees — but you must withhold tax and issue the withholding certificate. Skip that and the expense becomes very hard to defend.
- Software and subscriptions — keep the electronic receipt and the payment record. A foreign invoice on its own is often not enough.
- Workspace rent, or a defensible proportion of home rent genuinely used for work. Be ready to explain the proportion; do not claim the whole thing.
- Internet and phone, apportioned to work use.
- Travel tied to an identifiable job.
Commonly misunderstood:
- Equipment such as computers or cameras is not deducted in full in the year of purchase — it is depreciated, typically over three years for computers and software.
- Daily lunches, coffee, ordinary clothing are personal, not business costs.
- Slips with no vendor name, tax ID, or date fail the identifiable-recipient test.
The cash receipts-and-payments report nobody mentions
This one is under-discussed and matters.
Revenue Department Notification on Income Tax No. 161 requires people earning Category 5 to 8 income who are not VAT-registered to maintain a cash receipts-and-payments report in the prescribed format. There is no minimum-income threshold.
In practice, that report is the condition for exercising the actual-expense right. If you never kept one and simply have a pile of receipts, defending your numbers under review gets considerably harder.
The format is not complicated: date, description, cash in, cash out, in chronological order, entered within three business days of the transaction, kept together with the supporting documents. The hard part is not the format — it is doing it continuously instead of reconstructing twelve months in a panic each March.
Good timing: the half-year return is open until early October
If you earned Category 5 to 8 income between January and June, you must file PND 94, the half-year return. For tax year 2026, paper filing closes 30 September and online filing runs to 8 October.
Two things to know: allowances are halved on the half-year return (the personal allowance becomes ฿30,000), and the tax you pay now is not lost — it credits against your annual PND 90 liability.
The real value of the half-year return is that it forces you to look at six months of actual numbers. Right now you know what you earned, what you spent, and how complete your documentation is. If your true costs are running at 75% but only half of them have receipts behind them, you still have six months to chase the missing documents and change how you work. That beats discovering it next March, when nothing can be fixed.
Make “actual expenses” an option you actually have
Here is the uncomfortable part. Plenty of freelancers overpay not because they chose wrong, but because they never had a choice. Their real costs have exceeded 60% for years, but they never had numbers they were willing to stand behind, so they took the flat rate every year because it was safer.
The fix is not working harder in December. It is moving the moment of recording: record when you pay, not when you file.
Three habits are enough:
- Every time you spend money on work, log it immediately with a photo of the receipt or slip. Photograph it there and then — thermal receipts fade within months.
- Attach each cost to the job or client it belongs to, so you can answer how it relates to earning income.
- Look at your cost-to-revenue ratio quarterly, not annually.
A spreadsheet does this fine if you have the discipline, and many people have run one for years without trouble. Its only weakness is that it never reminds you when you forget, and it never tells you what percentage you are sitting at this month.
Where MANA helps is that it sits where the money already moves: log an expense with the receipt file attached, in the same place as your invoices and client documents; tag costs to a project to see per-job profit; and open the finance reports any time to see what share of revenue your costs represent so far this year. When decision time comes, you compare numbers instead of impressions.
Three rules to take away
One. Check whether your business is on the flat-rate list at all. If it is not, you have no choice — start collecting documents today.
Two. If your documented costs are not around 70% of revenue or higher, take the flat rate. It is simple, safe, and the difference does not repay the effort.
Three. If you are going the actual-expense route, do not decide in March. Decide now and document all year — because the law gives you what you can prove, not what you actually spent.
If you want that number available on demand, start logging income and expenses with receipts attached in MANA, and let the report tell you which method your year actually calls for.