Overview: Rights-Based Approach to Software Payment
Classification
The Thai Revenue Department (TRD) has issued a private tax
ruling no. Gor Kor 0702/16261, dated March 19, 2025,
addressing the tax treatment of outbound payments for software and
related services. This ruling is noteworthy as it reflects a shift
towards a rights-based approach when characterizing payments as
'royalties' versus 'business profits.'
This development provides greater clarity to taxpayers engaging
in cross-border technology transactions, especially in the context
of cloud computing and custom software development.
Facts
In order to develop its application, Company K,
a Thai company operating in the application development business,
engaged three foreign service providers. The scope of services,
billing arrangements, and contractual terms governing intellectual
property (IP) rights differed across the providers.
