Deposits in Thailand: What Every Business Needs to Know, Whether You’re Taking Them or Paying Them

I am often asked about deposits when things go wrong for my clients. Many have no idea what the rules are around taking and giving deposits. A client who paid a deposit on a leased office and is now watching the landlord’s company quietly wind down. A business owner who has been collecting customer deposits for years and has never once asked whether the tax office sees that money the same way they do.

This is the first of three articles I want to write on deposits in Thailand. This one looks at the business side, taking deposits and paying them out. The second looks at the same problem from the other side of the table, the tenant or customer trying to get a deposit back. The third is a topic that comes up often enough on its own to deserve separate treatment, foreign landlords on retirement, marriage, or other non-working visas, and the work permit and Foreign Business Act questions that come with owning several rental properties here.

So let’s talk about it properly, because deposits touch almost every business in Thailand in more ways than people usually notice. You take them from customers booking a room, a service, or a rental. You pay them out when you lease your own office, hire a vehicle for the business, or sign for equipment. Most of us think carefully about the deposit we deal with most often, and barely think about the others at all.

That is a mistake, because Thai law, and the Revenue Department, treat these differently depending on which side of the transaction you are on, and what kind of deposit it actually is. I want to walk you through what the law says, where I see the real gaps in practice, and what I think you should be doing differently, whether you are the one holding the cash or the one who handed it over.

The legal baseline: มัดจำ under the Civil and Commercial Code

Almost everything I am about to tell you rests on one short piece of law, Sections 377 and 378 of the Civil and Commercial Code. This is what governs a มัดจำ, an earnest or security deposit.

Handing over a deposit when a contract is signed is treated as proof that the contract exists, and as security that it will be carried out. Unless you agree otherwise, the default rules are simple:

• If the deal completes as agreed, the deposit is returned or credited against the price
• If the party who gave the deposit fails to perform, or the deal falls through for a reason that party caused, the deposit is forfeited
• If the party who received the deposit fails to perform, or the deal falls through for a reason they caused, the deposit must be returned

Courts can also reduce a forfeited amount under the Unfair Contract Terms Act if it is far more than the actual loss suffered.

This is the fallback position when a contract is silent or poorly written. On its own, I do not think it is enough protection for either side, which is why the specific rules below matter, and why writing a clear contract matters even more.

When you become a “business operator”: the three-unit trap

This is the section I see catching out a lot of people, because the threshold is lower than most realise.

Under the Notification of the Contract Committee Re: The Stipulation of Residential Property Leasing as a Contract-Controlled Business B.E. 2568 (2025), effective 4 September 2025, anyone who rents out three or more residential units is now classed as a business operator under the Consumer Protection Act. That is down from the previous threshold of five units under the 2018 and 2019 rules. I regularly meet people who bought a second and third condo purely as an investment, and who still think of themselves as a private individual with a spare property to rent out. Many of them are now caught by this regime without realising the law changed under them.

Once you are a business operator, the rules are specific and backed by criminal penalties, not just civil ones:

• Combined security deposit and advance rent is capped at three months’ rent for short-term or monthly leases, or one year’s rent for long-term leases paid annually
• The deposit must be returned within seven working days of the tenant moving out, whether or not there is damage to account for
• You cannot deduct money for normal wear and tear
• You cannot keep the deposit, or end the contract, when the tenant has not broken the contract or any important term
• The lease must be written in Thai, in clear language, and must clearly state the rent, deposit terms, and utility charges

Any contract clause that falls short of these rules is not just unenforceable, it is automatically treated as corrected to match the law, under Sections 35 ter and 35 quater of the Consumer Protection Act. Getting this wrong is a criminal matter, up to one year in prison, a fine of up to 200,000 THB, or both, not simply an unpaid debt.

The same pattern now applies to vehicle rental. From 30 December 2025, the Announcement of the Contract Committee on Prescribing Car and Motorcycle Rental Services as a Controlled Contract Business B.E. 2568 brings car and motorcycle rental operators under an equal set of rules for the first time. If you run, or are thinking of running, any kind of vehicle rental business, even a small one, the same restrictions on unfair deposit forfeiture and one-sided changes to terms now apply to you too. This is a new rule and I don’t think it is widely known yet, so it is worth checking even if you only run a handful of vehicles.

If you are unsure whether your property portfolio or your rental operation crosses these thresholds, I would check properly rather than assume, since the classification depends on the number of units or the type of service, not on how you personally think of your own business.

Tax and accounting treatment: get the distinction right

This is where I see businesses lose money through simple misclassification, not bad faith.

Thai tax practice draws a clear line between two things that both get called “deposit” in everyday English:

เงินมัดจำ, a refundable deposit. Book this as a liability if you received it, or an asset if you paid it, not as income or expense. No VAT and no withholding tax at the point the money changes hands. Tax only comes into play later, and only on whichever part actually turns into real income, when it is used against the price of goods or services delivered, or when it is forfeited. At that point it becomes taxable income and a tax invoice must be issued for that amount.

เงินรับล่วงหน้า, a non-refundable advance payment. Treat this as income right away on receipt. A tax invoice is due at that point, and normal VAT and withholding tax rules apply, as if it were a part-payment for the goods or service.

Get this classification wrong and you either under-report income, if you treat an advance payment as a deposit, or issue unnecessary tax invoices and create VAT problems for yourself, if you treat a genuine refundable deposit as revenue.

Rental deposits on real estate have their own long-standing exemption, under Revenue Department Instruction Paw. 73/2541. A rental deposit is treated as non-taxable capital, exempt from corporate income tax, VAT, and withholding tax, but only if all four conditions are met:

• It follows normal business custom
• It is returned right away at the end of the lease, minus any damage deduction
• It does not exceed three to six times the monthly rent
• The lease term is no longer than three years

Fall outside any one of these conditions, and the Revenue Department can reclassify the deposit as rent instead. That brings 5% withholding tax and VAT into play, applied retroactively. I see this mistake often, and it is entirely avoidable.

No legal duty to safeguard the cash, so the discipline has to be yours

Here is the finding that I think should shape how every business thinks about the deposits it holds. Thai law does not require you to keep deposit funds separate, hold them in escrow, or keep them anywhere apart from your normal operating account. Unlike a lawyer’s client account, or certain licensed financial businesses, there is no legal system requiring safe custody for ordinary landlords, rental operators, or businesses that take customer deposits. The money simply sits in your account, mixed in with everything else, unless you choose to do something different.

This is exactly why so many deposit disputes end with “the landlord spent it and cannot pay it back.” This is not usually illegal in itself, it is simply what happens when there is no law stopping it.

The only real discipline that does exist is accounting discipline. TFRS and TFRS for NPAE both require a refundable deposit you received to sit as a current liability, and a deposit you paid out to sit as a current asset, not an expense, until it is used, forfeited, or returned. Annual audit then checks whether the recorded balances actually match bank confirmations and other supporting records. If you have spent deposit money that should still be sitting as a liability on your books, that gap shows up at audit time, or worse, when a tenant or customer actually asks for their money back and you cannot produce it.

Since no law will force this discipline on you, my advice is to build it into your own routine: a dedicated deposit ledger, ideally a genuinely separate bank account even though it is not required by law, and honest reconciliation every quarter between what your books say you owe in deposits and what is actually sitting in the account. This is cheap insurance against a much more expensive problem later, both financially and to your reputation.

Contract drafting as risk management

Most of the deposit disputes I see trace back to the same handful of gaps in the contract, no matter which side you are on. A well-written deposit clause should cover all five of these points, and most templates I come across cover perhaps one or two.

A condition baseline. Dated photos and a signed inventory or condition report at handover, so that any later argument about damage has something to compare against, rather than one party’s word against the other’s.

A clearly stated purpose. What the deposit covers, damage, unpaid rent, early termination, and just as important, what it does not cover. A vague deposit clause can accidentally cancel out the Section 378 default rules without anyone meaning it to.

A return method and timeline, written into the contract even where the law already sets one, as it now does for covered residential landlords, and from December 2025, for vehicle rental operators, and especially where the law does not, since private landlords with one or two units, and most other deposit arrangements, sit outside any legal timeline at all.

Clarity on who holds the money. No law requires the money to be kept separate, but the contract can still say where it sits, whether it earns interest, and who actually holds it. This matters most when a third party, such as an agent or a platform, is involved in collecting or holding the funds on someone else’s behalf.

A way to resolve disagreements. An agreed process for settling disputes over damage, such as getting an independent repair quote or agreeing a capped deductible amount, rather than leaving both sides stuck in a standoff that neither one thinks is worth pursuing further.

When you are the one paying a deposit out

Everything I have said so far assumes you are the one holding the money. Many businesses are just as often on the other side, paying a deposit for a leased office, a fleet vehicle, or equipment. What you can do about it if that money is not returned depends heavily on who you paid it to.

If the other party is a registered Thai company, you have real options if they later cannot or will not pay you back. Under the Civil and Commercial Code’s rules on company liquidation, once a company decides to close down, the person managing the liquidation must notify known creditors by registered letter within fourteen days. If a creditor’s claim is not settled right away, the law requires the liquidator to set the amount aside formally rather than simply keep it or spend it. If the company’s assets still are not enough to cover its debts even after collecting everything owed by shareholders, the liquidator must apply to have the company declared bankrupt. In practice, this means getting your claim on record with the liquidator early, and in writing, matters a great deal. Liquidation runs on strict legal deadlines, and a business that does not get involved early risks being forgotten in the process.

If the other party is an individual, or an unregistered operator, you do not have any of these protections. You are limited to normal civil enforcement, meaning a court judgment followed by trying to identify and seize whatever assets that person actually has. If there is nothing to seize, a judgment is just a piece of paper. Personal bankruptcy is only available where total debts are more than one million THB and real insolvency can be shown, and even then you are just one unsecured creditor among others, not first in line.

This difference has a direct, practical lesson for how I think your own business should operate: before you pay a deposit to anyone, confirm you are dealing with a properly registered company, not an individual or an informal operator, and confirm that whoever is physically receiving the money actually has documented authority to do so on the other party’s behalf.

That last point matters more than it sounds. I have seen a case where a deposit was paid to a rental agent who never passed the money on to the actual property owner, and then disappeared. The owner, who genuinely never received the money, at first refused to get involved at all. The right first move there was a police report, since this is a case of alleged misappropriation or fraud rather than an ordinary civil dispute over a deposit. It was the police involvement, not a civil claim, that eventually brought the agent to the table with a repayment plan. My advice to any business paying money through a middleman, whether an agent, a platform, or a manager, is to get written confirmation of that person’s authority to collect and pass on funds before you pay anything, not after something has already gone wrong.

A note for foreign landlords. If you are a foreign landlord on a retirement, marriage, or other non-working visa, this matters even more. Crossing the three-unit threshold that makes you an OCPB-regulated business operator can bring two further risks that have nothing to do with deposits directly. Personally managing your rentals, rather than just receiving the income, can count as work under Thai labour law, even if unpaid, and most non-working visas do not allow this. Separately, rental services are a restricted category of business under the Foreign Business Act, and this can, in principle, apply to an individual foreigner operating at a meaningful scale, not just companies. Paying tax on the income, which you must do regardless, does not resolve either of these issues. The safer path is to have a licensed Thai management company handle the day-to-day running of the properties. I think this is a big enough topic to deserve its own article, so I will come back to it separately.

Everything I have written here is from the point of view of the business, whether you are the one taking deposits or the one paying them out. The picture looks quite different for the individual tenant, tourist, or customer trying to get a deposit back. In practice, the amounts involved often are not large enough to make formal legal action worthwhile, and many people, short-term visitors and long-term residents alike, simply walk away rather than pursue what the law technically allows them to do. 

That side of the story, and what actually works for someone in that position, will be covered in a separate article.

If any of this sounds familiar, whether you are wondering if your rental income crosses one of these thresholds, unsure how a deposit should sit on your books, or dealing with a deposit dispute right now, get in touch. I would rather help you sort it out properly before it becomes a bigger problem than talk you through it after the fact. You can reach me and the team at LAN Business Consulting, and we will walk through your situation with you.