Flat-Rate vs Actual Expenses: Which Deduction Method is Right for You?

Understanding Your Options

Thai tax law allows self-employed individuals and freelancers to choose between two expense deduction methods. Choosing wisely can significantly reduce your tax bill.

Flat-Rate Deduction

How It Works

The government allows a fixed percentage deduction based on your income type, no questions asked.

Flat-Rate Percentages by Income Type

Income Type	Section	Flat Rate
Liberal Professions (medical, legal)	40(6)	60%
Liberal Professions (other)	40(6)	30%
Contractors	40(7)	40%
Business/Trading	40(8)	60%
Rental Income	40(5)	30%

Pros:

• Simple, no documentation needed
• Guaranteed deduction percentage
• Less administrative burden

Cons:

• May be lower than actual expenses
• One-size-fits-all approach
• Can't claim specific high expenses

Actual Expense Deduction

How It Works

Deduct your real business expenses with proper documentation.

Eligible Expenses:

• Office rent and utilities
• Equipment and supplies
• Professional services (accounting, legal)
• Travel for business purposes
• Marketing and advertising
• Software and subscriptions
• Internet and phone (business portion)

Pros:

• Potentially higher deductions
• Reflects true business costs
• Fair for high-expense businesses

Cons:

• Requires meticulous record-keeping
• Subject to audit scrutiny
• More time-consuming

How to Choose

Use Flat-Rate When:

• Your actual expenses are below the flat rate
• You have poor expense documentation
• You want simplicity over optimization
• You're just starting out

Use Actual Expenses When:

• Your expenses exceed the flat rate
• You have good accounting systems
• You have significant equipment costs
• You rent expensive office space

Example Comparison

Scenario: Consultant earning 1,000,000 THB with 450,000 THB actual expenses

Method	Deduction	Taxable Income
Flat-Rate (40%)	400,000 THB	600,000 THB
Actual Expenses	450,000 THB	550,000 THB

Winner: Actual expenses saves approximately 7,500 THB in tax.

Our Calculator's Auto-Compare Feature

Our calculator automatically computes both methods and shows you which option results in lower taxes, taking the guesswork out of the decision.