Why Your Thai Customer Deducts 3% From Your Invoice

Many business owners in Thailand have experienced this moment: you issue an invoice for your full-service fee, but when the payment arrives, it’s 3% less than the total amount on the invoice.

At first, it can feel like your customer has made a mistake — or worse, is paying you less than agreed.

But in fact, this is completely normal in Thailand. What’s happening is called Withholding Tax, or WHT.

Making Sense of Withholding Tax (WHT) in Thailand

What Withholding Tax Really Is

Withholding Tax is not a penalty or a discount that your client is taking from your fee. It’s part of Thailand’s tax collection system.

When a Thai company pays for services — for example, consulting, design, accounting, marketing, training, or construction services, the payer is required by law to withhold 3% of the service amount and pay that directly to the Revenue Department under your company’s name.

That 3% counts as tax already paid by you. It’s a prepayment toward your company’s income tax and will appear as a tax credit when you file your annual return.

However, not every type of transaction is subject to WHT. If you sell goods or products: such as a fridge, a dress, office equipment, or furniture your customer should not deduct 3%. Similarly, payments like Social Security contributions, VAT remittances, or tax payments to government agencies are also not subject to withholding tax.

In short:
✅ Services = Yes, 3% WHT applies
❌ Goods and tax-related payments = No WHT deduction

A Simple Example

Here’s how the numbers work in practice. Suppose you issue an invoice for your service fee of THB 123,000, plus 7% VAT:

Item	Calculation	Amount (THB)
Service fee	–	123,000
VAT 7%	123,000 × 7%	8,610
Total Invoice	123,000 + 8,610	131,610
Less: WHT 3% on service fee	123,000 × 3%	–3,690
Net Payment Received	131,610 – 3,690	127,920

Your client will:

• Pay THB 127,920 to you, and
• Pay THB 3,690 directly to the Revenue Department in your name.

They will also issue you a Withholding Tax certificate (ใบหักภาษี ณ ที่จ่าย), showing that the 3% was paid on your behalf.

What Happens to That 3%

The 3% isn’t lost. It’s recorded as tax already paid in your company’s account with the Revenue Department. When you file your annual corporate income tax return, you can use these WHT certificates to offset your tax payable. If your company earns a profit, the withheld tax will reduce your tax bill. If your company makes little or no profit or operates at a loss you won’t automatically receive a refund. You need to apply to have the overpaid tax refunded.

Remember it is ‘only’ 3% of your services revenue so unless you made a loss or as an SME your profit is under 300’000thb you should be fine. And remember the surplus tax will not be carried over to the next year. You must apply for a refund. However, this will incur a tax audit by the Revenue Office. 

Think of WHT as a prepaid tax, not a guaranteed refund and manage your tax liability with care. 

Why Thailand Uses This System

The Thai government uses WHT to make sure part of the tax is collected early, rather than waiting until companies file their yearly accounts. It keeps the system transparent and ensures compliance. Especially in the service sector, where payments can vary and auditing can be complex. For businesses, it means slightly less cash up front but easier proof of tax compliance later.

How to Avoid Confusion with Clients

The confusion usually happens when quoting prices.

A client sees your invoice total and expects to pay the full amount, not realising the law requires them to deduct WHT. The best solution is to make it clear at the quotation stage. 

Simply add this line:

“Prices are exclusive of VAT and subject to 3% Withholding Tax (WHT).”

This small sentence prevents misunderstandings and reminds your customer that the deduction is required by Thai law, not a decision they made.

In Summary

When your Thai customer deducts 3% from your invoice, they aren’t underpaying you they are following the tax law. You receive slightly less cash now, but the 3% goes toward your income tax. Whether it becomes a refund or just a credit depends on your company’s profit at the end of the year.

Goods, retail sales, and tax or social security payments are not subject to WHT, but most services are.

Understanding this small but important rule will help you plan your pricing, manage cash flow, and avoid unnecessary confusion when it’s time to get paid.