Same income, a ฿43,000 difference in tax
Picture two Thai freelancers. Both earn ฿800,000 a year. Both work similar hours on similar jobs. At filing time, one pays roughly ฿48,500 in tax and the other pays roughly ฿5,500.
The gap isn't a secret deduction or anything shady. It comes down to one question most freelancers never answer clearly on day one of a job: which category of assessable income does your money fall under, per Section 40 of the Thai Revenue Code?
This is a decision that belongs at the moment you agree the work, not in March when you're staring at the filing form. Your income category controls three things at once: how much you can deduct as expenses, what rate gets withheld at source, and whether you owe a half-year filing.
The deduction ceiling is the whole story
Most Thai freelancers land in one of four categories, and they are not treated alike.
| Category | Typical work | Expense deduction |
|---|---|---|
| 40(2) | Services rendered, general fees, brokerage, commissions, meeting allowances | Flat 50%, capped at ฿100,000 (shared with salary income under 40(1)) |
| 40(6) | Liberal professions: law, accounting, engineering, architecture, fine arts | Flat 30% or actual (medical practice 60%) |
| 40(7) | Contract work where the contractor supplies the essential materials | Flat 60% or actual |
| 40(8) | Business, commerce, trading, and income not covered by (1)–(7) | Flat rate set by law (commonly 60%) for listed business types, or actual |
The painful line is the first one. That ฿100,000 cap on 40(2) is absolute. Whether you bill ฿400,000 or ฿3,000,000, your deduction stops at one hundred thousand baht. And if you also draw a salary, your salary and your side work share that same single ceiling.
By contrast, if your work genuinely falls under 40(8) and your business type qualifies for the flat rate, ฿800,000 of income can carry ฿480,000 of deemed expenses without you keeping a single receipt.
The arithmetic
Assume ฿800,000 of income and only the ฿60,000 personal allowance — no social security, no funds, nothing else.
- As 40(2): deduct ฿100,000, leaving ฿700,000. Minus the ฿60,000 allowance gives net income of ฿640,000. Run through the progressive brackets, tax lands near ฿48,500.
- As 40(8) with the 60% flat deduction: deduct ฿480,000, leaving ฿320,000. Minus ฿60,000 gives net income of ฿260,000, and tax of roughly ฿5,500.
That's about ฿43,000 of difference on the same body of work. Which is exactly why the boundary is worth understanding before you sign anything.
Where the real line sits
One thing has to be said plainly: you don't get to pick the category that saves the most tax. The category follows the facts of the work. The Revenue Department looks at the substance of what you did, not at the wording on your invoice.
Signs your work looks like 40(2)
- You're mainly selling labour and hours, with almost no cost beyond yourself
- The client dictates the method, the schedule, or supplies the tools and software
- You're paid a fixed monthly amount in an arrangement that resembles employment without the employment
- The money is a commission, a referral fee, a brokerage cut, or a subsidy on work performed
Signs your work looks like 40(8) or 40(7)
- You invest meaningfully in your own equipment, materials, or software licences
- You have a team, an assistant, or you subcontract part of the job
- You deliver a defined output or milestone rather than selling hours
- You carry the risk on the result: unlimited revisions until approval, a warranty period, liability if it fails
- You sell goods, digital products, or have other commercial income
A wedding photographer who owns the bodies, lenses and lighting, hires a second shooter and pays an editor is running a business. A graphic designer sitting in the client's office on the client's machine for ฿40,000 a month is providing services. Both do creative work; the structures are not the same, and neither are the categories.
Three consequences people forget
1. The withholding rate isn't always 3%
The familiar 3% comes from Revenue Departmental Order Tor Por 4/2528, clause 8 — and it applies specifically to hire-of-work payments that qualify as income under 40(7) or 40(8).
If your income is 40(2), such as a commission, a corporate payer is supposed to withhold using the progressive rates under Section 50(1), estimating your annual income and spreading the deduction across payments. That can come out higher or lower than 3%.
In practice, plenty of accounting departments withhold 3% on everything because it's simpler. When you file, the category on your withholding tax certificate (the 50 Tavi) won't match the category you're claiming — and the Revenue Department already has that data on file. So when a 50 Tavi arrives, read the income-category box, not just the amount.
2. 40(8) means a half-year filing
Form PND 94 covers income under Sections 40(5) through 40(8) earned between January and June. If that total reaches ฿60,000 for a single filer (฿120,000 if married), you're required to file, generally between July and September, with online filing running to around the start of October.
So if all your income is 40(2), PND 94 never enters your life. If it's 40(8) and you only realise that in December, the tax that was due mid-year attracts a surcharge. The upside: half-year tax isn't lost money — it credits against your annual bill.
One detail worth knowing: personal allowances in the half-year return are granted at half the annual amount.
3. The 60% flat deduction is not universal
This is one of the more expensive misunderstandings out there. People hear "40(8) gets 60%" and apply it to everything. In reality the flat rates are prescribed only for the business types listed in Royal Decree No. 11 — roughly 43 of them. If your line of work isn't on that list, actual expenses are your only route.
Many modern digital services were never written into a schedule drafted decades ago. Before you plan a year around a 60% assumption, check whether your actual activity appears on the list, or spend ten minutes with an accountant confirming it.
And if you're deducting actual costs, the standard is "necessary and reasonable" — every baht needs documentation. Estimates don't survive an audit.
Six questions to settle your category
- Who pays for the materials, equipment and core software used on this job?
- Do you hire an assistant or subcontract any part of the work?
- Do you deliver a defined output, or sell time by the month?
- If the work fails, who carries the risk — do you fix it free, or offer a warranty?
- How tightly does the client control your method, hours and location?
- Last year, what percentage of your income went to costs you can actually prove?
If your answers lean toward "I invest, I carry the risk, I deliver a product," your work is structured like a business. If they lean toward "the client supplies everything and I supply effort," it's 40(2), and the honest move is to file it that way.
Make the paperwork tell the same story as reality
Getting the category right doesn't end with understanding it. It ends with evidence. If you're ever asked to explain, what you produce is a consistent set of documents.
- Quotations and contracts that spell out scope, deliverables and milestones — not a bare line reading "monthly service fee"
- Invoices tied to actual delivered milestones, matching the contract
- Expense receipts for everything job-related, especially if you deduct actual costs
- Withholding certificates (50 Tavi), all of them, with the category and amount checked against your own records
- A separate bank account for work, which pays for itself the first time you have to prove a cost or reconcile a payment
What doesn't work is dressing up the language in your documents while the substance of the work stays identical. If you want the work treated as a business, change how the work actually runs: buy your own tools, price by deliverable, own the outcome, subcontract when it makes sense.
When to start thinking about incorporating
Once revenue grows and your real costs exceed the flat rate — or once you approach ฿1.8 million a year, the VAT registration threshold — the question shifts from "which income category" to "stay as an individual or register a company."
There's no universal answer. A company brings bookkeeping fees, audit costs and a much higher documentation burden. But the inputs to that decision are the same numbers you needed for the category question: real annual revenue, real annual costs, and how much of the work you fund yourself. If those figures live only in your head, you're guessing.
In short
Your income category isn't a checkbox on a form. It's a description of how you work. Pure labour sits under the ฿100,000 ceiling of 40(2). A genuine business has more room, along with a half-year filing and a real record-keeping duty.
The thing you can do this week: pull up this year's income, sort it into work where you sold time and work where you invested and delivered an output, then compare that against the 50 Tavi certificates you've collected and see whether your clients categorised you correctly. Fixing a mismatch now is far easier than explaining it later.
This is general planning information, not advice on your specific case. For high-value or unusual arrangements, talk to an accountant or ask the Revenue Department directly.
If you want these numbers available whenever you need them, that's the part MANA handles: quotations and invoices that state scope and milestones clearly, costs tracked per project, and withholding amounts collected in one place — so at filing time you're working from real figures instead of scrolling back through a year of bank slips.