Thailand Permanent Establishment and LTR Visa

[MicroB]

I'm thinking of relocating to Thailand in 2024 under the Long Term Resident Visa.

 

From my understanding, I meet the requirements of this visa. I am a Director of Research for a UK Public company, and been with them for over 10 years. While my salary doesn't quite reach $80,000 based on current Sterling rates (but its close), I have a PhD, so exceeding the Masters requirement. The company posted nearly £190m in revenue in 2021, and nearly £180m in 2020. I'm expecting double digit revenue growth in 2022.

 

The company is in favour, in principle, of allowing me to relocate to Thailand (subject to me working legally etc). However, I've come to aware of "Permanent Establishment" and the possible implications that might have for  my employer, possibly making them liable to Thai corporation tax. Obviously, they might not be happy with that.

 

Maybe someone can shed light on this. In my role, I am not directly involved in revenue generation. I basically lead the teams that create our product. Its sales who go out and sell, and get contracts signed. I might be involved in the selling process, but I derive no commission or bonus from sales. In our consultacy business, I might be involved in production of a deliverable, but never with the actual signing of contracts.

 

Can anyone provide an opinion whether my company would be liable to "Permanent Establishment" in Thailand? I have a feeling this might put the kibosh, for now, of a move to Thailand. A lot seems to be determined by how much authority I have (I don't have any) and my involvement in generation of revenue arising from business with Thai companies (my company probably does do business with Thai entities such as King Power, or even the Thai government, but I don't think in my part of the company, we do any business in Thailand (but I'd hate to think that my presence in Thailand might impede business with Thai companies in my sector).

 

Maybe someone can share experiences of working from Thailand, for a non-Thai company.

[MicroB]

Additional information; my employer has a subsidiary in Bangkok, following acquisition of a UK company in 2021, but not operating in the same sector as me. The Bangkok company is 49% owned by my employer. Not sure of the significance of this.

[Misty]

2 hours ago, MicroB said:

Additional information; my employer has a subsidiary in Bangkok, following acquisition of a UK company in 2021, but not operating in the same sector as me. The Bangkok company is 49% owned by my employer. Not sure of the significance of this.

Hi, I'd suggest posting your question to this thread:  https://aseannow.com/topic/1265383-ltr-visa-is-now-available-for-long-term-residency/

 

I think a couple of the people on that thread have already applied for and received the type of LTR visa you're considering (Work from Thailand).  They should be able to help. 

 

 

[Srikcir]

Work-from-Thailand-Professionals

Remote workers working for well-established companies overseas

Current Employer - Public company on a stock exchange or; Private company in operation
for at least three years with combined revenue at least USD 150 million in the last three years.

Contact BOI @

Ph. +66 2209 1100 ext. 1109-1110

The two Thais on these extensions speak English.

M-F 8:30am-4:30pm (Bangkok time)

I don't see any requirement for the above category that the company has to be Thai.

LTRbrochure_EN.pdf

[DjChris28]

Speak to a tax accountant on this. 

[Wombo1]

This is the exact same reason why my company decided not to pursue the LTR, and are taking the path of a contract via our parent companies local subsidiary.

 

I had some discussion with the LTR team and it seems that their would be PE status, but I think they need to formally come out and make this public before my company would accept that it is true

[F Groenen]

I have a LTR-WFT visa, but my employer is not alowing me to work from Thailand, until their PE and tax questions have been clarified in official publications.
I had a conversation with one of the LTR employees yesterday and he stated 'with an employee using the LTR-WFT visa to work from Thailand, there is no liability for the employer for PE or taxes.'. He said this was already published.
He promised he would send me the document that states this, but so far I have not heard from him again. I will call him again tomorrow.

My employer also has contracts with a distributor in Thailand, to sell and support our products. However, I cannot work under this distributor, since I would be a contractor to my employer and the 1st one out the door in the next reorg. MicroB, I would be careful working for a subsidiary as it becomes so much easier to get laid off.

[MicroB]

8 hours ago, F Groenen said:

I have a LTR-WFT visa, but my employer is not alowing me to work from Thailand, until their PE and tax questions have been clarified in official publications.
I had a conversation with one of the LTR employees yesterday and he stated 'with an employee using the LTR-WFT visa to work from Thailand, there is no liability for the employer for PE or taxes.'. He said this was already published.
He promised he would send me the document that states this, but so far I have not heard from him again. I will call him again tomorrow.

My employer also has contracts with a distributor in Thailand, to sell and support our products. However, I cannot work under this distributor, since I would be a contractor to my employer and the 1st one out the door in the next reorg. MicroB, I would be careful working for a subsidiary as it becomes so much easier to get laid off.

Interesting.

 

 

Point noted on the subsidiary. However, for UK companies, the express territorial limits of the Employment Rights Act 1996 were repealed in 1999, meaning employees of UK companies overseas do retain employment rights....maybe. It is a subsidiary, not a distributor. Though to be fair, I wouldn't be surprised if it is shuttered and the functions moved to India.

 

https://www.internationalworkplace.com/about-us/news-and-insight/do-you-know-employment-rights-employees-working-abroad

 

This document, from when they were drafting the LTR regulations flags up PE; almost sounds like they hadn't thought of this, and were looking to address it (maybe):

 

https://resolution.soc.go.th/PDF_UPLOAD/2565/P_406340_25.pdf

 

 

[DjChris28]

If there is a DTA in place between your country and Thailand, this will be the rules that apply under "Permanent establishment". Typically, they will need to prove you have a "fixed base". I'll be staying in an Airbnb when I do my work which is hardly a "fixed base".

 

Just make sure the company doesn't pay for your expenses in Thailand or gets involved. etc paying accommodation, flights. It needs to be clear that it is funded and organized on your own personal expense. and that the company did not require you to be in thailand to do the work.

 

 

I found this section for another country (Canada) that describes about PE:

https://djb.com/2022/08/home-office-and-permanent-establishment-for-non-resident-corporations/

 

The rules are similar for Thailand and any other country.

 

Non-resident corporations may not be considered to have a permanent establishment in Canada in the following situations:

 

1. Non-resident corporations do not bear any costs relating to the Canadian employees’ home offices in Canada;

2. Non-resident corporations do not use the Canadian employees’ home offices for any advertisement, business address, or on their website and,  

3. Non-resident corporations provide an office space or hoteling work arrangements in the non-resident corporation’s principal jurisdiction (e.g., the US) to conduct their official duties. The employees may choose to work from their home offices in Canada.

Edited January 26, 2023 by DjChris28

[MicroB]

4 hours ago, DjChris28 said:

If there is a DTA in place between your country and Thailand, this will be the rules that apply under "Permanent establishment". Typically, they will need to prove you have a "fixed base". I'll be staying in an Airbnb when I do my work which is hardly a "fixed base".

 

Just make sure the company doesn't pay for your expenses in Thailand or gets involved. etc paying accommodation, flights. It needs to be clear that it is funded and organized on your own personal expense. and that the company did not require you to be in thailand to do the work.

 

 

I found this section for another country (Canada) that describes about PE:

https://djb.com/2022/08/home-office-and-permanent-establishment-for-non-resident-corporations/

 

The rules are similar for Thailand and any other country.

 

Non-resident corporations may not be considered to have a permanent establishment in Canada in the following situations:

 

1. Non-resident corporations do not bear any costs relating to the Canadian employees’ home offices in Canada;

2. Non-resident corporations do not use the Canadian employees’ home offices for any advertisement, business address, or on their website and,  

3. Non-resident corporations provide an office space or hoteling work arrangements in the non-resident corporation’s principal jurisdiction (e.g., the US) to conduct their official duties. The employees may choose to work from their home offices in Canada.

I'm in the UK. UK-Thailand Tax Treaty

 

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/507424/uk-thailand-dtc180281_-_in_force.pdf

 

Quote

3. The term "permanent establishment" shall not be deemed to include:
(a) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;
(b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;
(c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;
(d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or for collecting information, for the enterprise;
(e) the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research or for similar activities which have a preparatory or auxiliary character, for the enterprise.

On the face of it, point 3e is me, and to an extent 3d. But there is clearly a restriction on what I can do or what I will be able to do.

On the

[Wombo1]

On 1/25/2023 at 8:43 PM, F Groenen said:

I have a LTR-WFT visa, but my employer is not alowing me to work from Thailand, until their PE and tax questions have been clarified in official publications.
I had a conversation with one of the LTR employees yesterday and he stated 'with an employee using the LTR-WFT visa to work from Thailand, there is no liability for the employer for PE or taxes.'. He said this was already published.
He promised he would send me the document that states this, but so far I have not heard from him again. I will call him again tomorrow.

My employer also has contracts with a distributor in Thailand, to sell and support our products. However, I cannot work under this distributor, since I would be a contractor to my employer and the 1st one out the door in the next reorg. MicroB, I would be careful working for a subsidiary as it becomes so much easier to get laid off.

I'm really curious to hear the results, your situation is an exact mirror is mine

[F Groenen]

Response received today from BOI:

For details/laws about Permanent Establishment (PE) in Thailand, please click https://nam02.safelinks.protection.outlook.com/?url=https%3A%2F%2Flibrary.siam-legal.com%2Fthai-law%2Fu-s-thai-tax-treaty-permanent-establishment-article-5%2F&data=05%7C01%7CFrank.Groenen%40Teradata.com%7C14d6a87ae40943e69fb408db00654d05%7C9151cbaafc6b4f4889bb8c4a71982138%7C0%7C0%7C638104207378532083%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=c6hmVAm8N4ZjG2mGiBRwUID6h8po0jf%2Fs2DSLuy2wGM%3D&reserved=0

Generally, the nature of the working activity of Work-From-Thailand Professionals should not be considered an activity relating to Permanent Establishment if it does not fall in one of the activities and the term specified in an article from the abovementioned link.
_______________________________
Kind regards, LTR Visa Unit

[Wombo1]

On 1/28/2023 at 6:24 PM, F Groenen said:

Response received today from BOI:

For details/laws about Permanent Establishment (PE) in Thailand, please click https://nam02.safelinks.protection.outlook.com/?url=https%3A%2F%2Flibrary.siam-legal.com%2Fthai-law%2Fu-s-thai-tax-treaty-permanent-establishment-article-5%2F&data=05%7C01%7CFrank.Groenen%40Teradata.com%7C14d6a87ae40943e69fb408db00654d05%7C9151cbaafc6b4f4889bb8c4a71982138%7C0%7C0%7C638104207378532083%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=c6hmVAm8N4ZjG2mGiBRwUID6h8po0jf%2Fs2DSLuy2wGM%3D&reserved=0

Generally, the nature of the working activity of Work-From-Thailand Professionals should not be considered an activity relating to Permanent Establishment if it does not fall in one of the activities and the term specified in an article from the abovementioned link.
_______________________________
Kind regards, LTR Visa Unit

Yeah I expected something like this, that is not clear enough for my company.

To many ways for the Thai government to read it and way they want

[K2938]

8 hours ago, Wombo1 said:

Yeah I expected something like this, that is not clear enough for my company.

To many ways for the Thai government to read it and way they want

Yes, the written statement certainly sounds much different from the prior verbal statement somebody reported above that 'with an employee using the LTR-WFT visa to work from Thailand, there is no liability for the employer for PE or taxes.' 

Edited January 30, 2023 by K2938

[CMBob]

Given your position, you come to this message board to ask for tax advice for you and your company?  DJChris above has the proper answer....get advice from a Thai tax attorney.

[Dogmatix]

On 1/25/2023 at 8:43 PM, F Groenen said:

I have a LTR-WFT visa, but my employer is not alowing me to work from Thailand, until their PE and tax questions have been clarified in official publications.
I had a conversation with one of the LTR employees yesterday and he stated 'with an employee using the LTR-WFT visa to work from Thailand, there is no liability for the employer for PE or taxes.'. He said this was already published.
He promised he would send me the document that states this, but so far I have not heard from him again. I will call him again tomorrow.

My employer also has contracts with a distributor in Thailand, to sell and support our products. However, I cannot work under this distributor, since I would be a contractor to my employer and the 1st one out the door in the next reorg. MicroB, I would be careful working for a subsidiary as it becomes so much easier to get laid off.

Is that so?  I would have thought the opposite.  If you are working abroad for a UK company, you are no longer covered by UK employment law and would have no protection under Thai law either, as you would be a free lancer, as as far as they are concerned. But if you work for a Thai subsidiary or affiliate, you are at least covered by Thai employment law which has provisions against unfair dismissal and for redundancy payments.

[Dogmatix]

I would think that companies are right to be cautious regarding the PE issue since the LTR visas are new and no cases have been tested.  The BOI is doing a good job of promoting the LTR visas but is not in a position to speak for the Revenue Department which is a venal and corrupt organisation that loves the chance to shake down foreign companies for cash - ask Philip Morris how good their tax advice from internationally renowned tax advisors turned out to be when the RD went after them.  It may all turn out well but no one can guarantee that at this stage. 

 

My own personal choice for someone planning to stay long term would be to get the UK employer to do a deal with a Thai subsidiary to act as the employer.  Get a normal non-B visa and work permit which will be a breeze with a substantial Thai employer. After 3 full calendar years apply for permanent residence.  5 years after getting PR apply for citizenship (with a Thai wife you can skip PR). 

 

I can see the instant gratification attraction of the LTR visas but after 10 years you got nothing and have to renew.  In that time you could be a PR and on the way to becoming a citizen.  Perhaps you can still apply for PR and/or citizenship on an LTR visa but without a Thai employer I suspect this would be difficult or impossible.

Edited January 31, 2023 by Dogmatix

[MicroB]

The LTR people at the BOI came back to me with a simple response:

 

Quote

LTR visa is for personal use only. It does not provide any benefit for the applicant employer company.

Its not even a 10 year visa. They issue it for 5 years, then you renew. In that time, the Thai government could withdraw the visa, change the conditions. As ment.ioned, its superficially attractive

 

I guess the work permit route is best. The subsidiary isn't fully integrated into the company (its registered name is still the original trading name). I'm not even sure it has much of a future in Thailand (its just one part of an acquisition). And my company reserves the right to put me on a Thai wage, which might be anywhere from about the same as now, to less than half my current salary (if I can trust the various estimates of Thai director salaries), though my own manager would be happy paying me the same (it might be sterling converted into Baht at the time of a move, better hope Sterling doesn't strengthen....).

[Wombo1]

My company checked into this on my behalf (over many weeks), including using their external tax and legal advisors. These advisors are experts and support all our final expats in various expats.

In short their is zero clarity on PE, and as such we should expect that all normal PE risks will still apply.