Reforms for Thai Income Tax Deductions Coming in 2026

The Thai government plans to restrict personal income tax deductions and increase taxes in certain categories,” for more directness, as announced by Finance Minister Ekniti Nitithanprapas. These efforts come as Thailand sees declining tax revenue driven by an increase in tax-deductible activities, poor collection methods, and limited alternative reform measures.

While no measures have been finalized, timelines for the rollout of the planned tax deduction reforms are being prepared. The first wave of these reforms is likely to impact the 2026 tax year, which begins on January 1st. 

In other words, income earned in 2025 will not be affected, so these changes will not affect returns filed in 2026. However, the changes will affect income earned in 2026, so taxpayers can expect a change to the available deductions when filing in 2027.

Why is the Thai Government Limiting Personal Income Tax Deductions?

The new tax plan is another effort by the government to stimulate economic growth and strengthen fiscal stability in recent years. More specifically, tax officials across the Revenue, Excise, and Customs departments reported lower-than-expected revenue for the 2025 fiscal year.

• Revenue Department: 1.3% under target
• Excise Department: 11.8% under target
• Customs Department: 7.1% under target

Corporate tax, specific business, and property tax collection rates also fell short of expectations to varying degrees. 

Various reasons have been attributed to these shortfalls, including poor collection methods, the rapid expansion of e-commerce, which has outpaced existing tax enforcement mechanisms, and consumers switching to electric vehicles and other subsidized products, among others.

A Viable Alternative

The proposed changes to tax deductions and the potential increase in personal income tax are seen as a more viable alternative to other proposed tax reforms. Recently, the Fiscal Policy Office and Finance Ministry officials floated the idea of increasing Thailand’s Value Added Tax (VAT) rate above the current rate of 7% to make up for declining government revenue.

Thailand’s VAT rate is below the average of non-fuel-exporting emerging markets by 2.9% of GDP, so the increase would have brought Thailand up to the global standard. However, the increase met with stiff opposition and was quietly shelved, as there were fears that it might harm tourism and put undue pressure on lower-income households.

Considering that Thailand’s personal income tax collection rate is also below the average rate in non-fuel-exporting emerging markets, the proposed forms are arguably “fairer” and might be easier to get public approval for.

Why Target Income Tax to Increase Thailand’s Revenue?

Currently, there is a wide range of tax deductions available for those paying personal income tax. Some taxpayers can claim total tax deductions in excess of 1 million THB each, and many officials in the government see the current deduction systems as scattered and unclear.

A wide range of high-value deductions, such as:

• Contributions to Retirement Mutual Funds (RMFs),
• Life insurance premiums,
• Parental care costs,
• And child-rearing expenses

Each of these deductions can reach into the hundreds of thousands of baht, significantly reducing or even completely negating the taxpayer’s income tax liability. These deductions contribute to the low rate of income tax collection in Thailand compared to similar countries. 73% of working-age Thais with income do not file tax returns, and only 10% of those who do file are liable to pay taxes.

Finance ministry officials also point to archaic tax collection systems that are not sufficiently digitized as a reason for Thailand’s lagging tax revenue. As part of the proposed income tax reforms, the government hopes to modernize the tax collection system with better digital integration. This would not only expand Thailand’s tax base and revenue but also make it easier for individuals to file and avoid errors that could lead to legal trouble.

Prepare for the New Changes to Thai Income Tax in 2026

An operational framework for the restructuring of Thailand’s income tax and collection systems is expected as early as November 2025, according to the Ministry of Finance. This is when the new tax deduction rules should be unveiled, as well as any increase or decrease in existing tax rates. 

With this information, taxpayers will be able to better plan their spending and income for the 2026 tax year. The new tax framework will come into effect in early 2027 when taxpayers file their 2026 personal income tax returns.

Professional Tax Advisory Services for Expats in Thailand

Are you unsure about your tax responsibilities in Thailand and back in your home country? Do you want to ensure your taxes are fully compliant with Thai law and avoid any potential legal exposure with the Thai Revenue Department? 

Contact Siam Legal for a consultation with our international tax advisors. With over 20 years of experience serving the legal needs of foreigners in Thailand and a tax team of both local and foreign tax experts, we can help minimize your risks and provide peace of mind. Get in touch today, and Siam Legal’s tax team will help you make sense of these new changes and ensure a smooth tax year in 2026.

Category: Thailand Tax