What is the best way to be tax legal and have a business income in Thailand in 2021?

[ericdk]

What I mean by this, is that I want to move to Thailand, but it is very important, that I become tax registered in Thailand. If I do not become tax registered, I think my own country would try to tax me on personal income, because I run a business there.

Which means I need to live legally in Thailand on something else than a tourist visa and I need to be pay taxes so I will not be classified as a long term tourist by my own government (and thus likely taxed more).

As far as business goes, I know that it is easy to register a company in Hong Kong, which I could invoice from, and provided I could find an online bank which accepts HK businesses, that would be fine.

But how would I pay tax in Thailand on the income I either pay myself as salary or capital gains?

The new Smart Visa underway seems like a good option, but also doesn't seem like the "freelancer" visa that it has been claimed to be.

[foreverlomsak]

First off check on the taxation agreement between Thailand and your home country.

The UK will tax you for all income generated in the UK irrespective of where you live.

Thailand will tax you based on all income generated in Thailand, if you are a resident of Thailand (e.g. live here more than 180 days in a tax year).

Registering for Tax in Thailand is relatively easy, just visit the local Tax Office where you will be staying.

[tomazbodner]

Read the laws of Denmark? first. I'm also from EU country and the only way to avoid taxes there (learned that after I already got it) was a list of about 10 things that I wasn't allowed to tick any. It was stuff like spending more than 6 months in the country, owning any property there, having a permanent address there, supporting any family members or being supported by any family members, etc. As I ticked none of them, I got a letter from revenue department that I am not meeting criteria of being a tax resident there, but must inform them of any changes within 7 days.

To become tax resident in Thailand, you'd need to spend 6 months in a year in Thailand and register a tax number. Generally if you work in Thailand, with work permit, employer will arrange that for you but you could as well do it by yourself. You are then subject to Thai tax laws, meaning you need to get paperwork on income and declare it, fill out por ngor dor 91, and such.

But just being Thai tax resident does possibly not excuse you from paying taxes in your home country. If you are still obligated to pay taxes there, you would need to declare all you global income, and taxes already paid in other countries, then pay the difference in tax rates; say if Thailand taxed you 30% but your country of citizenship taxed you 40%, and you already paid 30% to Thailand, you'd need to pay remaining 10% of tax on Thai income to your citizenship country unless you get that "tax non-resident" status there.

Hence - it is easy to become tax resident of another country. It's possibly harder to no longer be in your own country. So check that part in home country first and plan accordingly.

[Peterw42]

Maybe mention your home country as the people will be familiar with the tax laws and tax treaties between your country and Thailand, and can advise.

Why cant you just continue to earn money as you do, pay tax in home country etc, then transfer money (already taxed) to live on in Thailand. Not sure why you would need a business in Thailand to send yourself your own savings.

Its only business income if you call it business income, otherwise you are just transferring money that you earned years ago and already paid tax on.

Why would the visa you are on in Thailand have any relationship to how you are taxed in your home country ?

How would your home country even know you are living in Thailand, unless you tell them.

 

 

 

 

 

[ericdk]

I live in Denmark.

I obviously don't want to pay some of the world's highest taxes, if I am not living in that country.

I understand the laws about tax residency ok, which is what is mentioned by @tomazbodner, stuff like not owning property, not spending more than 180 days etc, but the laws are quite strict, so if you're visiting and working a couple of hours a day, they will ask you to pay tax for those months, despite not living there.

The definition is "life interest". If the tax authorities say your life interests are in Denmark, then it doesn't matter if you actually live in Thailand.

Which is why it is all the more necessary to prove that your life interests are where you live, in which case, not having a local business, but a foreign, and being registered to pay tax somewhere else, is a pretty good idea.

Otherwise, with a local business in Denmark, and not paying tax in Thailand, the case for your "life interest" being in Thailand are not so convincing. 

Edited March 16, 2021 by ericdk

[thanaka]

On 3/16/2021 at 9:14 AM, ericdk said:

I obviously don't want to pay some of the world's highest taxes, if I am not living in that country.

You obviously don't want to pay some of the world's highest taxes while still profiting from the infrastructure that those taxes create. You can't have the one without the other so of course you have to pay where you earn that money. 

[ericdk]

7 hours ago, thanaka said:

You obviously don't want to pay some of the world's highest taxes while still profiting from the infrastructure that those taxes create. You can't have the one without the other so of course you have to pay where you earn that money. 

It's productivity and not taxes that create wealth, in particular in Denmark, which has some of the world's highest productivity and would have even if the tax rate was 0%.

[SomchaiCNX]

He is still lucky to live in Denmark.  Some other people in Europe pay also high taxes but get almost nothing in return. They rather give it away to newcomers who did make no contribution at all.

[khunPer]

On 3/16/2021 at 2:31 AM, ericdk said:

But how would I pay tax in Thailand on the income I either pay myself as salary or capital gains?

I'm also from DK.

Firstly you need to be tax-resident in Thailand, i.e. live here fore than 180 days within a calendar year, provided you don't have a work permit and local income with tax withheld. You also need to be outside of Denmark for more than 180 days within any 12-month period (note, not calendar year).

In Denmark you need to go to "Folkeregister", preferably in the community you are registered with permanent address, and de-register, in Danish called "fraflytte", and preferable register a permanent foreign address in Thailand.

Your de-registering date, i.e. "fraflyttet dato", will be the cutting date for being fully taxable in Denmark, and by that date you need to fulfill a tax-statement, i.e. "selvangivelse", and pay all due taxes to Denmark, including any capital gain after the stok-principle (Danish: lageprincippet).

After that, then you are legally de-registered, i.e. "fraflyttet", and only due to pay taxes from physical Danish work income, i.e. "A-indkomst"; any income from property (in Danish: fremleje eller lejeindtægt for sommerhus); and any retirement pension payouts, except "Aldersopsparing"; and withheld tax on dividends from stocks, typically the 27 percent so-called "udbytteskat" on stock-exchange registered stocks.

Non-taxed Danish income as "fraflyttet", will be any interest income, including interest from bonds; any capital gains from for example stock market; any B-income that could fee board-member fees, or fees from periodical work, which might even be performed online from abroad.

Running a Danish company other than a registered company with limitations – i.e. A/S, ApS, P/S – you can have what in Danish is called "udenlandsk anden virksomhed i Danmark" that in practice is like a single person's private owned business (Danish: enkeltmandsvirksomhed). I quote the next information, which are my conclusion notes, in Danish language, as it's only relevant for Danes...

Quote

Konklusioner / Sammendrag af svar fra myndigheder:

Kan ikke oprette en enkeltmandsvirksomhed i Danmark, da dette kræver at ejer har adresse i landet.

Kan oprette det som hedder en udenlandsk anden virksomhed i Danmark. I praksis fungerer driftsformen ligesom en enkeltmandsvirksomhed, og I vil skulle afregne moms m.m. som I ville skulle i en enkeltmandsvirksomhed.
Opretter virksomheden ved at indsende en blanket der findes på hjemmesiden www.virk.dk ved i søgefeltet at skrive 40110.
Ved registreringen indsendes kopi af pas samt oplysninger om bopæl i udlandet.
Der er ingen krav om offentliggørelse af regnskaber, men virksomheden skal lave selvangivelse til Skat en gang årligt.

Svar til mig fra SKAT:

Hvis du etablerer en personlig drevet virksomhed, så vil denne blive beskattet i Danmark hvis der er et fast driftssted i Danmark, dvs. hvis der er lager, forretningslokale, server eller lignende. Er der ikke fast driftssted skal der ikke betales skat i Danmark af evt. indkomst.

Tax-conclusion is that if you don't have a fixed "place of business" (Danish: driftssted), you are not taxable in Denmark, but you shall be registered for v.a.t. (Danish: moms) and pay that. You don't need to be paid monthly salary in a single-person operation, if you are not physically operating in Denmark (including a web-server), but just cash profits.

If you are having a limited company, you are a shareholder, but you might be eligible for fees that are so-called B-indkomst. If you are operating a P/S (limited partnership, before in Danish called "kommanditselskab, K/S") and is the liable owner/partner, you are not income taxable in Denmark, when living abroad (a by some used method for tax-planning of international earnings).

I've never been asked for TIN-number in relation to de-register fixed address, i.e. "fraflyttet", and my partial tax-status to Denmark.

To obtain a TIN (Tax Identification Number) in Thailand, you need to register by the Revenue Office. In some areas it can be little complex if you don't have a work income, but if you politely insist that you might be taxable in Thailand of either foreign or domestic income, you should be able to succeed (only about 6 percent of the Thai population is registered as income tax payers, and only around 4 percent pay income tax, according to various news articles in Thaivisa).

Your TIN is a tiny paper slip with a matrix printed number, take good care of it, it's your only official documentation.

Income from abroad is taxable in Thailand as personal income. However, only if you transfer the income into Thailand during the same calendar year as it's earned. If you wait to the following calendar year, or any later year, the money is considered savings, and savings are free from tax when transferred to Thailand. That also includes any interest payments and capital gains from abroad. I.e. if you for example are paid a fee, or make a capital gain from stocks, in December, leave the money in a Danish bank account, or other off-shore bank, until Januar, which will be the following calendar year, your income has become savings that legally can be transferred into Thailand free from income taxation.

In other words, legal tax-planning is to leave any foreign income abroad until the following calendar year.

Your TIN might however become handy if you have Danish stocks and receive dividends, as you in accordance with the Double Taxation Agreement between Denmark and Thailand is eligible to pay Thai dividend tax instead of Danish dividend tax; i.e. 10 percent tax instead of 27 percent tax. In practice you are going to apply for a repayment of the difference of withheld dividends tax, and for that purpose you need to prove that you are tax registered in Thailand (TIN); and that you have paid tax the income year in question, i.e. fulfilled a P.N.D.90 or P.N.D.91 tax-return statement, and based on the tax receipt, which can be 0 baht, apply for a R.O.21 "Income Tax Payment Certificate" and a R.O.22 "Certificate of Residence", which the Danish tax authorities need as documentation for reduce the dividend tax. The Danish part takes 18 month (or more) after application (probably due to a certain mister Shah in Dubai).

Your need to have transferred the dividends into Thailand during the same calendar year, as they have been paid out, as otherwise the dividends are not eligible for Thai income taxation. However, if you don't transfer the dividends you can apply for 15 percent dividend tax in accordance with "Kildeskattelovens §2", but you still need the R.O.21 and R.O.22 documentation to prove that you are tax-resident in Thailand.

If you have US-stocks in a Danish stock-portfolio you can apply for a reduction of dividend tax from 30 percent to 15 percent, your bank, or broker, will normally take care of that for you. It need to be renewed every three years. Similar might apply for other countries, but I'm only familiar with US.

Also, if you have any retirement savings, you can ask your bank or "pensionsselskab" for being freed from the so-called 15,3 percent PAL-tax.

Hope that this answers your questions; however, if in doubt it's always a good idea to ask the Danish tax-authorities directly, which can be done online inside your "SKAT"-profile; you also there can ask for legally binding tax-replies (Danish: bindende svar) for a small fee...☺️

[khunPer]

4 hours ago, SomchaiCNX said:

He is still lucky to live in Denmark.  Some other people in Europe pay also high taxes but get almost nothing in return. They rather give it away to newcomers who did make no contribution at all.

So do Denmark, and the long time citizens' benefits are getting reduced all the time...????

[ericdk]

@khunPer Thanks a lot, that was very helpful.

It's good to know I could simply keep a enkeltmandsvirksomhed. Doesn't solve the work permit issue though, but it makes it easier and cheaper to be legal in terms of "savings" as you explain it.

I think the best way for me is to join Shelter or someone like that for a work permit and then remit savings into Thailand once a year.

 

[khunPer]

13 hours ago, ericdk said:

@khunPer Thanks a lot, that was very helpful.

It's good to know I could simply keep a enkeltmandsvirksomhed. Doesn't solve the work permit issue though, but it makes it easier and cheaper to be legal in terms of "savings" as you explain it.

I think the best way for me is to join Shelter or someone like that for a work permit and then remit savings into Thailand once a year.

If you only have clients outside Thailand, if you work online, and all money is earned abroad, you might consider being a "digital nomad" – there are plenty of them, and even that having work permit or not is widely discussed, digital nomads are kind of tacitly accepted – don't talk too much, i.e. "under the radar", and officially live of your savings, which you can legally do...☺️

[ericdk]

3 hours ago, khunPer said:

If you only have clients outside Thailand, if you work online, and all money is earned abroad, you might consider being a "digital nomad" – there are plenty of them, and even that having work permit or not is widely discussed, digital nomads are kind of tacitly accepted – don't talk too much, i.e. "under the radar", and officially live of your savings, which you can legally do...☺️

I know about those digital nomads :) but I am getting too old for "går den så går den".

I would like to do everything/most according to the book and have security and selfrespect, even if it costs me 20%.