Split Income-- Home Country And Thailand

[kyb789]

I've noticed that a number of expats here on work assignment have a large portion of their salary paid in their home country, and they will also have a smaller portion paid directly here in Thailand.

Can someone tell me why they do this? I am sure it is for tax reasons, but I want to understand it better. I may opt for a similar approach with my company. How could it be an advantage anyway, doesn't Thailand want to tax foreign earned income as well?

Thanks in advance.

[Maestro]

... doesn't Thailand want to tax foreign earned income as well?

Yes, but who is to tell the revenue department?

--

Maestro

[thaihome]

The split income is indeed done to avoid Thai income tax. The declared onshore protion does not have to paid in Thailand, only paid by a Thai registered company. The actual payment can be in the home country in that currency. The offshore portion must be paid by a non-Thai registered company and therefore there is no evidence in Thailand of the payments. The Revenue Dept is actively looking for such practices, but they can only look at accounting books for Thai registered companies, so technically it is legal. Though the countries consider it transfer pricing and hate it.

This is a common practice for most MNC’s in high personal income tax countries, though many are getting away from it and use other practices to minimize the higher foreign income tax for employees, for which they compensate the employee.

This is different, though somewhat similar, then the practice used by many labor agencies here in Thailand of paying a small salary or housing allowance in Thai Baht (I think 100k a month is standard) and paying the rest of the salary into an offshore bank, often HK or Singapore. Again, there is a separate contract with a non-Thai company that is used to pay the offshore amount.TH

[kyb789]

The split income is indeed done to avoid Thai income tax. The declared onshore protion does not have to paid in Thailand, only paid by a Thai registered company. The actual payment can be in the home country in that currency. The offshore portion must be paid by a non-Thai registered company and therefore there is no evidence in Thailand of the payments. The Revenue Dept is actively looking for such practices, but they can only look at accounting books for Thai registered companies, so technically it is legal. Though the countries consider it transfer pricing and hate it.

This is a common practice for most MNC’s in high personal income tax countries, though many are getting away from it and use other practices to minimize the higher foreign income tax for employees, for which they compensate the employee.

This is different, though somewhat similar, then the practice used by many labor agencies here in Thailand of paying a small salary or housing allowance in Thai Baht (I think 100k a month is standard) and paying the rest of the salary into an offshore bank, often HK or Singapore. Again, there is a separate contract with a non-Thai company that is used to pay the offshore amount.TH

This is an excellent report. Thank you very much. I hope to find a way to make this work for me.