Labour law

Is severance pay taxed in Thailand, and how?

Facts checked against the sources on 20 October 2026 · Updated 22 October 2026 · Sources

Severance pay an employee receives under the Labour Protection Act because the employer ended the employment is exempt from tax up to the wages of the last 400 days of work and at most 600,000 baht, for income from 1 January 2566 (2023), under Ministerial Regulation No. 394 (B.E. 2567). The rest, and any other pay made once because the employee leaves, can be taxed apart from other income under s.48(5) of the Revenue Code after at least 5 years of service: deduct 7,000 baht for each year of service, then half of what remains, and tax the result on the progressive rates without the 0% band of the first 150,000 baht.

Severance under s.118#

When the employer dismisses an employee, it pays severance by the length of service (s.118 of the Labour Protection Act): from 30 days' wages for an employee with 120 days of continuous work, on probation or not (Supreme Court judgment 2420/2557), up to 400 days' wages for the longest service, a tier added by Labour Protection Act No. 7 B.E. 2562, in force from 5 May 2562 (2019). The tiers in between are in s.118 of the Act (see the sources).

No severance is owed for a dismissal on a ground of s.119, such as abandoning duty for 3 consecutive working days without a reasonable cause (s.119(5)).
Poor performance is not a ground of s.119: a dismissal for it still owes severance.
Money paid after a resignation, or under a voluntary leaving programme, is not s.118 severance in the Revenue Department's rulings, so the exemption below does not apply to it.

The exempt part#

Ministerial Regulation No. 394 (B.E. 2567) replaced item 2 (51) of Ministerial Regulation No. 126 to exempt "severance pay an employee receives under the law on labour protection … but not severance received because of retirement or the end of the employment contract, and only the part not exceeding the wages of the last four hundred days of work, and not exceeding six hundred thousand baht".

Condition	Detail
It must be	Severance under the Labour Protection Act, because the employer ended the employment
It excludes	Severance on retirement or at the end of a fixed-term contract
Exempt up to	The wages of the last 400 days of work, and at most 600,000 baht, whichever is less
It applies to	Income received from 1 January 2566 (before: 300 days and 300,000 baht)

Severance on retirement or at the end of a contract is not exempt, but it still counts in full in the separate computation below.

The taxable part: taxed apart under s.48(5)#

The severance above its exemption, and other pay made once because the employee leaves (such as an ex gratia payment), may be taxed apart from other income when all of these hold (Director-General's Announcement on income tax No. 45):

At least 5 years of service, in whole years: 4 years and 319 days is not 5.
Paid in the first tax year in which pay on leaving that job is paid, by any payer. Pay of a later tax year cannot be taxed apart (as replaced by Announcement No. 303, for income from 2560 (2017)).
All of it. The payment cannot be split between separate and ordinary taxation.

With fewer than 5 years of service, the pay is taxed with the year's other s.40(1) and 40(2) income.

The computation#

Step	How
1. Taxable pay	The severance above its exemption + the other pay on leaving
2. The base for the expenses	The taxable severance in full + the other pay, up to the final monthly salary × the years of service
3. The expenses	7,000 baht × the years of service (at most the base), then 50% of what remains of the base
4. Net income	Step 1 − step 3
5. The tax	The progressive rates from the first baht, without the 150,000 exemption

The final salary is a full month's salary, at most the average monthly salary of the 12 months before leaving plus 10% of that average (Announcement No. 45 item 3(4), as amended by No. 73). It is the base salary, not allowances.
The years of service: a part year of 183 days or more counts as a year.
Taxing apart is not limited to once in a lifetime (ruling กค 0702/6442).

The rates (no 0% band for the first 150,000):

Net income (baht)	Rate
0 – 300,000	5%
300,001 – 500,000	10%
500,001 – 750,000	15%
750,001 – 1,000,000	20%
1,000,001 – 2,000,000	25%
2,000,001 – 5,000,000	30%
over 5,000,000	35%

The employer withholds the tax computed this way and reports it on ภ.ง.ด.1 (PND.1) under income code 3, pay made once because of leaving employment. When filing ภ.ง.ด.90 or 91, the employee chooses whether to tax it apart or with their other income.

Worked example#

An employee leaves after 20 years on a final salary of 60,000 baht, dismissed by the employer. The statutory severance is 400 days' wages: 60,000 ÷ 30 × 400 = 800,000 baht. The employer also pays 1,500,000 baht of other pay on leaving.

Step	Computation	Baht
The exempt severance	400 days' wages of 800,000, at most 600,000	600,000
1. Taxable pay	The remaining severance 200,000 + other pay 1,500,000	1,700,000
2. The base	200,000 in full + other pay up to 60,000 × 20 = 1,200,000	1,400,000
3. The expenses	7,000 × 20 = 140,000, and 50% of (1,400,000 − 140,000) = 630,000	770,000
4. Net income	1,700,000 − 770,000	930,000
5. The tax	300,000 × 5% = 15,000; 200,000 × 10% = 20,000; 250,000 × 15% = 37,500; 180,000 × 20% = 36,000	108,500

The employer withholds 108,500 baht and reports it on the month's ภ.ง.ด.1 under code 3.

In Panya#

On an employee's last payroll run, Panya has a Statutory severance column with its exempt part (at most 400 days' wages and 600,000 baht) and an Other pay on leaving column. It checks the 5 whole years of service and the first tax year, computes the s.48(5) tax and puts it on ภ.ง.ด.1 under code 3; otherwise it taxes the pay with the month's salary and says why. See payroll in Panya and the manual on pay on leaving.

FAQ#

How much severance pay is tax-free?#

The part up to the wages of the last 400 days of work and at most 600,000 baht, for income from 1 January 2566. The rest is taxed, and can be taxed apart under s.48(5) after 5 years of service.

Is severance on retirement tax-free?#

No. The exemption covers severance on dismissal, not severance on retirement or at the end of a contract. After 5 years of service it can still be taxed apart, in full.

Is money paid when an employee resigns exempt?#

Not as severance: the Revenue Department rules that money paid after a resignation or a voluntary leaving programme is not s.118 severance, so the 400-day and 600,000-baht exemption does not apply to it.

How is pay on leaving taxed with less than 5 years of service?#

It is added to the year's salary and other s.40(1) and 40(2) income and taxed in the ordinary way; it cannot be taxed apart under s.48(5).

Can an employee choose to tax it apart more than once?#

Yes, the choice is not limited to once in a lifetime. But service with an earlier employer whose pay on leaving was already taxed apart does not count again.

Sources#

This guide is general information from the sources above, as they read on the day they were checked. It is not legal or tax advice: rules change, so check the sources, or ask an accountant, before you rely on it.