Tax With holding by Employers

[chiang mai]

I want to understand the rules and circumstances by which employers in Thailand are required to withhold income tax from employees wages and forward them to the TRD. I understand the rules vary based on the employment contract and status of the employee, the type and size of business involved and whether the employee holds a Work Permit or not. If anyone can shed light on the above, it will be most appreciated. The reason I want to understand this is in order to understand why so few people are registered for and/or pay income tax.

 

My current understand from previous discussions, is this:

 

1) All Work Permit holders must have tax deducted by the employer who also files a tax return on their behalf.

 

2) Only businesses that are legal entities can with hold tax from employees. If the business is NOT a public or private limited company, or a partnership, it cannot.

 

3) Any business that wants to with hold tax from an employee, must register with the Revenue and establish an account.

 

4) Self Employed employees manage their own tax.

 

5) Hourly paid employees who work a full week, also can be required to manage their own tax.

 

I don’t want to second guess the answer but I think we may find that many/most small/medium business are run by the self employed who don’t have to deduct tax and who employee hourly workers on weekly contracts. Self employed status is very inexpensive to operate, has almost no administrative overhead and comes with lots of great tax breaks. This is pretty close to working cash in hand and helps explain why the informal labour market is so huge.

 

[chiang mai]

Gosh, nobody knows, not even a single guess, that's a first.

[chiang mai]

Since nobody knows anything about this subject, I'm going with the following, unless I hear differently:

 

Self employment is the cheapest and easiest method of doing business in Thailand, it doesn't require an accountant, a legal company name and the tax breaks are excellent. Over 50% of people work using this method which requires the individual to file a tax return, and pay taxes, twice a year.

 

The TRD Standard Deduction doesn't require receipts and allows the tax payer to deduct 60% of the cost of sales as input costs. That means they can hire people and pay them, without having to deduct tax. It also means the people who are hired can work in the same way. 

 

This system means the TRD never knows the person has hired workers and paid them hence they don't know that tax is due. And since the self employed person never has to disclose details about their employees (because of the standard deduction), none of those payments are ever seen in a tax audit. 

 

"Self-employed workers make up over half (roughly 53 per cent) of all workers in Thailand. As figure 1 shows, own-account work is the most common form of self- employment, comprising roughly 34 per cent of all employment, followed by contributing family workers (17 per cent) and employers (2 per cent)".

 

https://www.wiego.org/sites/default/files/publications/file/wiego-policy-brief-n31-bangkok.pdf