Tax Deduction Based on Actual Expenses vs. Flat-Rate: Which Is Better for Thai Online Stores in 2026?

Why Online Sellers Need to Re-evaluate Expense Deductions in 2026

One of the most common mistakes online merchants make when filing taxes is choosing the 60% flat-rate deduction simply because it is easy and doesn't require keeping receipt evidence. However, this method can make you pay significantly more tax than necessary, especially in 2026, when competitive markets have squeezed online store profit margins down to 10% - 30% due to price wars and rising platform fees.

If your store generates 1 million Baht in sales but spends 800,000 Baht on inventory, advertising, and delivery (an actual cost of 80%), using the 60% flat-rate deduction means the system assumes you made a 400,000 Baht net profit. In reality, you only have 200,000 Baht in your pocket! Switching to "Tax Deduction based on Actual Expenses" is the most powerful legitimate tool to protect your cash flow and reduce tax liability.

Flat-Rate vs. Actual Expenses: The Critical Difference

For online retail income (under Category 40(8) of personal income tax in Thailand), you are allowed to deduct business expenses in two ways:

1. Flat-Rate Deduction (60%): No receipt documentation or detailed record-keeping is required. The Revenue Department allows a standard deduction of 60% of your gross sales. This is ideal for small stores, drop-shippers, or pre-order businesses with very low inventory stock and minimal business overhead.
2. Actual Expense Deduction: You deduct your real business expenses without any ceiling limits. If your actual costs represent 80% or 85% of your sales, you can deduct that entire amount. However, you must present proper tax invoices, invoices, and keep structured income-expense records. This is ideal for stores with high inventory costs, heavy advertising budgets, or high operational costs.

Case Study: The Tax Savings

Assume your online business generates 2,000,000 Baht in annual sales (below the VAT threshold) with actual costs (inventory, shipping, ads) totaling 1,500,000 Baht (75% cost). Assume a standard personal tax deduction of 60,000 Baht.

Option A: Using 60% Flat-Rate Deduction

• Gross Revenue: 2,000,000 Baht
• 60% Flat Deduction: 1,200,000 Baht
• Personal Allowance: 60,000 Baht
• Taxable Net Income: 740,000 Baht
• Estimated Tax Payable: ~63,000 Baht

Option B: Using Actual Expense Deduction

• Gross Revenue: 2,000,000 Baht
• Actual Expense Deduction: 1,500,000 Baht
• Personal Allowance: 60,000 Baht
• Taxable Net Income: 440,000 Baht
• Estimated Tax Payable: ~21,500 Baht

By keeping proper records and selecting Option B, the store saves 41,500 Baht in tax.

3 Key Document Types You Must Prepare

To successfully claim actual expenses, you must show clear proof that the expense was directly incurred for business purposes:

1. Daily Income and Expense Ledgers

Keep a chronological record of all incoming revenue per channel and outgoing expenses categorized by type (inventory, ads, delivery).

2. Inventory and Direct Cost Evidence

• Receipts / Tax Invoices: Issued by suppliers showing your name, address, or tax ID clearly.
• Customs Documents (if importing): Proof of import VAT and duties paid.
• Bank Transfer Slips: Matching the corresponding supplier invoices.

3. Operational Expenses Evidence

• Online Ad Invoices (Facebook, Google, TikTok): Downloaded directly from your business ads manager, issued in your registered name.
• Platform Fee Invoices: Monthly electronic tax invoices downloaded from Shopee, Lazada, or TikTok Shop.
• Shipping Receipts: Payment receipts from logistics providers (Flash Express, Thailand Post, etc.).

Common Mistakes to Avoid

• Invoices under another name: Invoices issued to family members or friends instead of the taxpayer are generally rejected by audits.
• Relying on bank statements alone: Simple bank transfer slips without supporting invoices or purchase contracts are not accepted as valid proof.
• Mixing personal and business expenses: Claiming personal fuel or home utility costs as business operations.

Frequently Asked Questions (FAQ)

Conclusion

Filing taxes based on actual expenses is not complex once you set up a simple bookkeeping routine. Taking the time to collect invoices and manage document folders can save your store substantial cash flow in 2026.

To evaluate your tax bracket and compare the two deduction methods, try Gumrai's free Tax Calculator. To check SKU profit margins, use the Profit Calculator. Both tools are available instantly on your browser!