Thailand first concluded the double tax agreement (DTA) with Sweden in 1963. The Thai DTA network continues to be expanded and updated. So far Thailand has concluded DTAs with 56 countries (as of May2006). In general a DTA comprises 4 major parts:

A.   Scope

(1)   Persons Covered

- An individual who stays in Thailand for a period or periods exceeding in the aggregate 180 days in a tax year;

- A juristic person who is incorporated under the Civil and Commercial Code of Thailand.

(2)   Taxes Covered

B.   Types of income

In general the DTA does not stipulate any specific item of income and tax rate. It provides whether the source or resident country is entitled to tax certain income. If the source country has taxing rights, the income will be subject to tax according to the domestic laws of that country.

The DTA also prescribes a tax rate level on investment income; namely, dividends, interest and royalties. Then the source country can tax such income at a rate not exceeding the rate prescribed within the agreement. In many cases the tax rates within the DTA are lower in comparison to the domestic tax rates in order to reduce tax impediments to cross border trade and investment.

Some Articles of the DTA clearly do not allow the source country to exercise taxing rights on income such as income from international air transport and business profits provided that the business is not carried through a permanent establishment in the source country.

C.   Elimination of double taxation

The focus of a DTA is the elimination of double taxation. Each DTA may prescribe different methods of elimination of double taxation of a person by the resident country:

(1)   Exemption method

The country of residence does not tax the income which according to the DTA is taxed in the source country.

(2)   Credit method

The resident country retains the right to tax the income which was already taxed in the source country. It calculates its tax on the basis of the taxpayer's total income including income from the other country which according to the DTA is taxed in that other country. However, it allows a deduction from its own tax for the tax paid in the other country.Where a DTA does not exist with a particular country, there are provisions within the Royal Decree No. 300 which allow unilateral credit relief against Thai tax for tax paid in the other country by a Thai juristic person.

D.   General provisions

The last part of the double tax agreement provides administrative assistance such as exchange of information between tax administrations and dispute resolution procedures.