Your Thai company is profitable. Now how do you get the money out?
Foreign owners ask this later than they should, usually when the parent needs cash. There are five routes out of a Thai company, each with a different tax cost and a different set of requirements, and the gap between choosing well and choosing badly is measured in real money.
- Dividends
- Cleanest, usually dearest
- Service fees
- Needs real substance
- Royalties
- Needs genuine IP
- Shareholder loan interest
- Set at funding time
- Capital reduction
- An exit decision
- Treaty relief
- Never automatic
- What we do
- Model the total cost
Five ways money leaves a Thai company
Dividends
The cleanest route and usually the most expensive. Profits are taxed at the company level first, then a withholding tax applies on the dividend itself, reduced under some double taxation treaties. Dividends can only be paid out of retained profits, with a legal reserve set aside, and they require the accounts to be finalised and approved.
Management and service fees
A charge from the parent for genuine services rendered. Deductible in Thailand if the service is real, documented and priced at arm’s length, which makes this route entirely dependent on transfer pricing discipline. Foreign withholding applies and treaty relief may reduce it.
Royalties and licence fees
Where the parent genuinely owns brand or technology the subsidiary uses. Subject to withholding, treaty-reduced in some cases, and the same arm’s length and documentation requirements apply.
Interest on shareholder loans
Funding the subsidiary with debt rather than equity means repayments and interest come out more easily than dividends. Interest is deductible and withheld on, and the arrangement has to survive scrutiny on rate, terms and whether the debt level is reasonable.
Capital reduction or liquidation
Returning the capital itself. Procedurally heavy, requiring creditor notice periods and regulatory steps, and generally a decision about exiting rather than a routine distribution.
Six expensive assumptions
Assuming the treaty rate applies automatically
A reduced withholding rate under a double taxation treaty is not automatic. It depends on residence certification, beneficial ownership and correct documentation at the time of payment. Claimed afterwards, without the paperwork, it frequently fails.
Service fees with no evidence the service happened
The most challenged item in any Thai tax review of a foreign-owned company. A management fee with no contract, no deliverable, no time records and no benefit demonstrable to the Thai entity is disallowed, taxed, and penalised.
Retained earnings that exist on paper but not in cash
A company can be legally able to declare a dividend and completely unable to fund it, because the profit is sitting in receivables and inventory. This is a working capital problem wearing a tax costume, and it is common.
Forgetting the legal reserve
Thai companies must appropriate a portion of annual net profit to a legal reserve until it reaches a set proportion of registered capital. Skipping it makes the distribution defective.
Extracting nothing for years, then everything at once
A large one-off distribution attracts attention and often a worse tax outcome than the same amount taken steadily. Extraction should be planned annually alongside the budget, not improvised when the parent needs cash.
Never modelling the total cost
Corporate tax, then withholding, then tax in the parent jurisdiction with or without credit. Owners frequently know each number and have never seen them added up on one page.
One page, all the numbers
The deliverable is a model that takes your actual retained earnings, cash position and structure, and shows what each route yields net to the parent, after every layer of tax, over a multi-year horizon.
Alongside it: a check that your retained earnings are genuinely fundable in cash rather than trapped in working capital, a review of whether existing intercompany charges are documented well enough to survive a challenge, the treaty position and what evidence it requires, and an annual extraction plan that sits in your budget rather than being improvised.
Where a position needs formal tax advice or a filing with the Revenue Department, that goes through a qualified adviser. Our job is making sure the numbers and the records underneath the position are right.
The obvious ones
Which route is cheapest?
It depends on your treaty position, whether the parent provides real services, how the subsidiary was funded and what the parent jurisdiction does with the income. There is no universal answer, and anyone who gives you one without looking at your structure is guessing. The point of modelling it is that the difference between the best and worst route is usually material.
Is this tax avoidance?
No. Every route described here is ordinary and legitimate, and each has requirements attached. What we do is make sure the route you use is properly documented and correctly priced, so it survives a review. Aggressive structuring is not something we do or recommend.
Do you give tax advice?
We model the cash and tax outcomes and make sure the underlying accounting supports the position. Formal tax opinions and dealings with the Revenue Department go through a qualified tax adviser, and our sister firm Narai Partners covers Thai tax law and double taxation treaties if you do not already have one.
We have never taken anything out. Is that a problem?
It creates one eventually. Accumulated retained earnings with no extraction plan tend to become a large, awkward decision at exactly the moment you need flexibility, such as a sale or a shareholder change. Plan the extraction annually even if the answer some years is nothing.
Does this apply outside Thailand?
The principle applies wherever you hold a subsidiary, though the mechanics differ. Vietnam has its own profit remittance rules and Singapore and Hong Kong operate quite differently. For a group we look at it across all the entities at once. See regional groups.