Before any Thai freelancer calculates income tax, everyone passes through the same gate: deduct expenses from income first, then tax what remains. The law offers two routes — a fixed lump-sum percentage, or actual expenses as genuinely spent — and choosing the wrong one can mean overpaying tax by tens of thousands of baht a year. Here is the full decision, from first principles to worked numbers.
First gate: which income category are you?
Lump-sum rates are tied to your income category under Section 40 of the Revenue Code, so this question comes first. Most freelancers fall into one of three groups:
- 40(2) — hire of work: taking jobs personally, powered mostly by your own labour with minimal costs. Writers, translators, solo designers, consultants.
- 40(6) — regulated independent professions: only those the law names — medicine, law, engineering, architecture, accountancy, and fine arts.
- 40(8) — business income: work that operates like an enterprise, with real costs, equipment, or a team. Photography studios, production houses, online sellers.
The same craft can land in different categories depending on how you work. A photographer shooting alone with one camera may be 40(2); a studio with lighting rigs, sets, and assistants is 40(8). The practical test is where the costs sit: if the fee mostly buys your personal labour, it is 40(2); if delivering the work requires substantial materials, equipment, premises, or hired help, it looks like 40(8). A developer writing code alone on a laptop is squarely 40(2); the moment that developer subcontracts two others and rents an office, the operation has drifted into 40(8) territory.
Note also that the categories are not exclusive. You can earn a salary (40(1)), freelance fees (40(2)), and rental income (40(5)) in the same year — each stream takes its own deduction under its own rules on the same return, so classifying each one correctly is the foundation for everything that follows.
Lump-sum deduction: fast, simple, no receipts
The lump-sum route lets you deduct a flat percentage with zero documentation:
- 40(2): 50% — but combined with salary income (40(1)), capped at 100,000 baht total
- 40(6): 60% for medical practice; 30% for the other professions — or actual expenses
- 40(7) contracting: 60% or actual
- 40(8): 60%, but only for business types on the legally prescribed list (43 categories such as retail and restaurants) — or actual expenses. Businesses outside the list must use actual expenses.
The appeal is obvious: no receipts, no bookkeeping, no audit exposure on the expense side. You declare your gross income, the percentage comes off automatically, and the Revenue Department cannot challenge a deduction the law grants unconditionally.
The killer detail in 40(2) is the 100,000-baht cap. Earn 800,000 baht a year from freelance work and you still deduct only 100,000 — you are taxed on a 700,000 base regardless of your real cost of working. This cap is why high-earning freelancers eventually restructure toward genuine 40(8) operation or company registration.
Actual expenses: bigger savings, bought with discipline
Actual-expense deduction is available for categories 40(5)–(8) and parts of 40(6). The conditions:
- Expenses must genuinely serve the business and relate directly to earning the income
- Complete evidence: receipts, tax invoices, contracts, transfer records
- A cash receipts-and-payments report maintained continuously — not reconstructed in a December panic
- If the Revenue Department asks, you must produce the records; undocumented expenses are simply struck out
In practice, "complete evidence" means documents that identify the seller: a full tax invoice or a receipt showing the vendor's name and tax ID, matched where possible to a bank transfer. Cash payments to individuals — an assistant paid a day rate, a location fee handed over in notes — need a signed payment voucher with the recipient's name and ID details, or they will not survive scrutiny. Big-ticket equipment has its own rule: a 100,000-baht camera body is not deducted in the year of purchase but depreciated over several years, typically three to five depending on the asset class, so the deduction arrives in instalments.
Typically deductible: work equipment and software, office or studio rent, subcontractor and assistant fees, work travel, marketing. Mixed personal-business costs like home internet must be apportioned reasonably — a defensible split based on usage or floor area, not a hopeful 100%.
Two cases, side by side
Case one: solo designer, 40(2), income 500,000 baht, real costs about 60,000.
The lump sum allows 100,000 — more than actual costs. Take the lump sum. Done. Not a single receipt to keep. This is the quiet advantage of the lump-sum route for labour-driven work: the law assumes higher costs than you actually incur, and hands you the difference tax-free.
Case two: photography studio, 40(8), income 1,200,000 baht, real costs 850,000 (equipment depreciation, assistants, studio rent).
- Lump sum at 60%: deduction 720,000, taxable base 480,000
- Actual expenses: deduction 850,000, taxable base 350,000
A 130,000-baht difference in the base — at marginal rates of 10–15%, roughly fifteen thousand baht of tax, every single year. Well worth keeping receipts for. And the gap widens as the business grows: a studio whose real cost ratio holds around 70% of revenue saves progressively more with the actual route each year, while a lump-sum filer is silently taxed on phantom profit.
The short decision framework
- Income is 40(2) and under roughly 200,000 baht a year → lump sum. You essentially cannot lose — 50% of your income still sits under the cap, so the full deduction applies with zero paperwork.
- Real costs are below the lump-sum rate → lump sum. The difference is a free gift, and you carry no audit exposure on the expense side.
- Real costs clearly exceed the lump-sum rate, and your category allows the choice → actual expenses — but start keeping records today, not in December. Evidence cannot be created retroactively; a year of missing receipts is a year of lost deductions.
- Too close to call → lump sum. The audit risk of disallowed expenses is not worth a marginal saving.
The choice is made per tax year at filing time, so run this check annually — a studio's cost structure in its first lean year can look nothing like year three.
Common traps
- Assuming your income is 40(8) and claiming the 60% lump sum when the work is really 40(2) — retroactive reassessment is a real risk, with the underpaid tax plus surcharge landing years later
- Choosing actual expenses, then losing half the receipts and ending up below the lump-sum amount anyway — the worst of both worlds: full bookkeeping effort, smaller deduction
- Forgetting the 100,000 cap applies to 40(1) and 40(2) combined — the most common mistake among people with both a salary and freelance income. A 360,000-baht salary alone already exhausts the cap (50% would be 180,000, capped at 100,000), so every baht of freelance income arrives with no expense deduction left at all
- Slipping personal spending into the business ledger — family meals, the household car, a holiday with one client meeting attached. Auditors see these patterns daily, and one struck-out category invites a closer look at everything else
Whichever route you choose, one thing is non-negotiable: complete, accurate income records, because even the lump-sum route starts from knowing your true revenue. MANA keeps every baht of income attached to its document — from invoice to receipt, organised by client and project — so when filing season arrives, your numbers are ready instead of scattered across twelve months of chat threads.