Using Tax Free Allowance In Thailand And Uk

[Marvo]

I have a scenario that I am pondering and would like to run it by you "experts" .

Say I wholly own a small UK Ltd company. This UK company makes an acceptable profit after paying my salary of £6,000 per year. This £6000 per year just uses up my UK tax-free allowance.

Now let's say a Thai company which employs me, and of which I have control, invoices the UK company for "services" to the tune of £10,000

The Thai company now has the funds to pay me 50,000 Baht a month gross (allowing me to more than satisfy conditions for a work permit on Non-Imm "O"). With the Thai tax-free allowances etc. on this income I pay approx 40,200 Baht tax for the year (£650) to the Thai tax revenue authorities.

Now, I am officially tax resident in the UK so how does this work with receiving "tax-free allowances" relating to wages for employment in Thailand and to tax paid in Thailand?

Am I right to assume that on my UK tax return I have to declare "income earned abroad"? I understand UK and Thailand have a dual tax treaty so would that mean paying additional tax (additional, up to UK tax liabilities according to allowances) to UK HMRC ? And is there such a thing as a Thai tax return form that Thai company directors need to fill in by law?

Not that they're likely to own up to it, I can't help wondering if there is anyone "living" here in LOS (tax resident in UK) who works here but gets away with not declaring on the UK tax return . I'm sure that that is likely to be suggested to me too.

I'm asking these questions here to get clued up before talking to someone "Thai/local". I want to be knowledgeable enough to be able to judge their expertise on the matter.

Many thanks in advance for taking the time to advise me.

//Edit//for clarity.

Edited March 24, 2008 by Marvo

[PattayaParent]

Why not just become non-resident for tax purposes in UK so you don't have to overly complicate your situation?

[smilingjim]

I have a scenario that I am pondering and would like to run it by you "experts" .

Say I wholly own a small UK Ltd company. This UK company makes an acceptable profit after paying my salary of £6,000 per year. This £6000 per year just uses up my UK tax-free allowance.

Now let's say a Thai company which employs me, and of which I have control, invoices the UK company for "services" to the tune of £10,000

The Thai company now has the funds to pay me 50,000 Baht a month gross (allowing me to more than satisfy conditions for a work permit on Non-Imm "O"). With the Thai tax-free allowances etc. on this income I pay approx 40,200 Baht tax for the year (£650) to the Thai tax revenue authorities.

Now, I am officially tax resident in the UK so how does this work with receiving "tax-free allowances" relating to wages for employment in Thailand and to tax paid in Thailand?

Am I right to assume that on my UK tax return I have to declare "income earned abroad"? I understand UK and Thailand have a dual tax treaty so would that mean paying additional tax (additional, up to UK tax liabilities according to allowances) to UK HMRC ? And is there such a thing as a Thai tax return form that Thai company directors need to fill in by law?

Not that they're likely to own up to it, I can't help wondering if there is anyone "living" here in LOS (tax resident in UK) who works here but gets away with not declaring on the UK tax return . I'm sure that that is likely to be suggested to me too.

I'm asking these questions here to get clued up before talking to someone "Thai/local". I want to be knowledgeable enough to be able to judge their expertise on the matter.

Many thanks in advance for taking the time to advise me.

//Edit//for clarity.

Before giving any accurate advice you need to tell us more facts:

1 Where are you living now?

2) How many days per year do you spend in the UK?

3) How many days per year do you spend in Thailand?

4) What are your future plans for time in the UK/Thailand?

If you are resident in the UK for tax purposes then you will have to declare world-wide income

If you live/work in Thailand for any length of time then you need to complete a Thai Tax Return. They have a self-assessment system that is very similar to the UK.

It is expensive to maintain a UK limited Company just for the sake of setting things up so you can get a Thai salary through a Thai Company for visa purposes!

Jim

[RAZZELL]

Why not just become non-resident for tax purposes in UK so you don't have to overly complicate your situation?

I believe to become non-resident for tax purpose takes at least 3 years. Plus is complicated if you own assets in the UK, property your rent out etc

RAZZ

[PattayaParent]

Why not just become non-resident for tax purposes in UK so you don't have to overly complicate your situation?

I believe to become non-resident for tax purpose takes at least 3 years. Plus is complicated if you own assets in the UK, property your rent out etc

RAZZ

You're thinking of non-domiciled which is only applicable to Ineritence Tax.

I'm not up with the current non-resident rules as I've been out for 20+ years and they've changed in that time but I think you have to be out of UK for a tax year (April 5 to April 4) during which time you're allowed only 60 days back in UK in the first year and 90 days thereafter, subject to the 1/6th rule (if that is still applicable??)

[RAZZELL]

I have a scenario that I am pondering and would like to run it by you "experts" .

Say I wholly own a small UK Ltd company. This UK company makes an acceptable profit after paying my salary of £6,000 per year. This £6000 per year just uses up my UK tax-free allowance.

Now let's say a Thai company which employs me, and of which I have control, invoices the UK company for "services" to the tune of £10,000

The Thai company now has the funds to pay me 50,000 Baht a month gross (allowing me to more than satisfy conditions for a work permit on Non-Imm "O"). With the Thai tax-free allowances etc. on this income I pay approx 40,200 Baht tax for the year (£650) to the Thai tax revenue authorities.

Now, I am officially tax resident in the UK so how does this work with receiving "tax-free allowances" relating to wages for employment in Thailand and to tax paid in Thailand?

Am I right to assume that on my UK tax return I have to declare "income earned abroad"? I understand UK and Thailand have a dual tax treaty so would that mean paying additional tax (additional, up to UK tax liabilities according to allowances) to UK HMRC ? And is there such a thing as a Thai tax return form that Thai company directors need to fill in by law?

Not that they're likely to own up to it, I can't help wondering if there is anyone "living" here in LOS (tax resident in UK) who works here but gets away with not declaring on the UK tax return . I'm sure that that is likely to be suggested to me too.

I'm asking these questions here to get clued up before talking to someone "Thai/local". I want to be knowledgeable enough to be able to judge their expertise on the matter.

Many thanks in advance for taking the time to advise me.

//Edit//for clarity.

Very interesting post. I'm thinking of doing something similar. But why a Ltd Co in the UK? Can't you be

self-employed for the same effect? (ie paying yourself from the UK in order to fulfill the visa requirements?)

This page might be of help:

http://www.hmrc.gov.uk/pdfs/ir20.htm#leaving

RAZZ

Edited March 24, 2008 by RAZZELL

[Marvo]

Why not just become non-resident for tax purposes in UK so you don't have to overly complicate your situation?

I'm looking at that now to see if it's a vaible option for me but I do spend some time (maybe too much) working in the UK.

Before giving any accurate advice you need to tell us more facts:

1 Where are you living now?

2) How many days per year do you spend in the UK?

3) How many days per year do you spend in Thailand?

4) What are your future plans for time in the UK/Thailand? See below:

Ans 1-4: Living in Thailand March-Oct (245 days), living in UK Nov-Feb (120 days)

If you are resident in the UK for tax purposes then you will have to declare world-wide income

If you live/work in Thailand for any length of time then you need to complete a Thai Tax Return. They have a self-assessment system that is very similar to the UK.

It is expensive to maintain a UK limited Company just for the sake of setting things up so you can get a Thai salary through a Thai Company for visa purposes!

Had the UK Co. for twenty years now. Downscaled in the last 2-3 years so now it's just me employed, working 3-4 months of the year in UK for one client (Nov-Feb). Suppose I could close UK Co. and get the Thai Co. to invoice my UK client??? That would open up some new possibilities I guess but a bit nervous about putting all my eggs in Thailand.

Very interesting post. I'm thinking of doing something similar. But why a Ltd Co in the UK? Can't you be

self-employed for the same effect? (ie paying yourself from the UK in order to fulfill the visa requirements?)

This page might be of help:

http://www.hmrc.gov.uk/pdfs/ir20.htm#leaving

RAZZ

Thanks for the link Razz, that's another couple of pieces to the puzzel. I used to be self employed but changed to Ltd Co. when the nice Mr Brown gave us a loophole for first £10,000 proft tax free, but he then closed it again and I never changed everthing back to Sole Trader for whatever reasons (I did have some at the time, I'm sure).

[smilingjim]

Ans 1-4: Living in Thailand March-Oct (245 days), living in UK Nov-Feb (120 days)[/color][/b]

Had the UK Co. for twenty years now. Downscaled in the last 2-3 years so now it's just me employed, working 3-4 months of the year in UK for one client (Nov-Feb). Suppose I could close UK Co. and get the Thai Co. to invoice my UK client??? That would open up some new possibilities I guess but a bit nervous about putting all my eggs in Thailand.

So - are you doing any work in Thailand or is it work in the UK Nov- Feb and holiday in Thailand rest of the year?

Do you need your Ltd Co for commercial reasons? if net profit is less than £25,000 probably not worth having it and better off and switching to sole trader.

Jim

Edited March 25, 2008 by smilingjim

[RAZZELL]

Now let's say a Thai company which employs me, and of which I have control, invoices the UK company for "services" to the tune of £10,000

The Thai company now has the funds to pay me 50,000 Baht a month gross (allowing me to more than satisfy conditions for a work permit on Non-Imm "O"). With the Thai tax-free allowances etc. on this income I pay approx 40,200 Baht tax for the year (£650) to the Thai tax revenue authorities.

Could you tell me how you arrived at this figure?

I had a look here:

http://www.rd.go.th/publish/6045.0.html

But got a bit confused

RAZZ

[Marvo]

So - are you doing any work in Thailand or is it work in the UK Nov- Feb and holiday in Thailand rest of the year?

Do you need your Ltd Co for commercial reasons? if net profit is less than £25,000 probably not worth having it and better off and switching to sole trader.

Jim

I (for my company) work in UK Nov-Feb and for the foreseable future will be spending March-October in Thailand. Over the next year or so I will be trying to get a small business in Thailand off the ground, to suplement my income earned in the UK. Yes, profit in the UK is less than £25,000

The plus side of the UK business is that I have minimal reclaimable VAT on purchases so am on the flat rate scheme. I charge VAT at 17.5% but only send HMRC 9.5% deep joy. All UK accountancy and book keeping fees are £700 though.

Tell me if I've got this right....

Say I kept my annual UK visit down to 90 days and I did away with the UK company altogether and worked soley for the Thai company, I could go Thai tax-resident, and put down the genuine 3-month business trip to the UK and all it's relevant expenses against the Thai business' profit. Yes or no?

Corporation tax payable by Thai companies is only 3% over the UK rate now AFAIK.

I guess some of the above would make a quick hop back to Blighty to make use of the NHS a little more tricky though?

[Marvo]

Now let's say a Thai company which employs me, and of which I have control, invoices the UK company for "services" to the tune of £10,000

The Thai company now has the funds to pay me 50,000 Baht a month gross (allowing me to more than satisfy conditions for a work permit on Non-Imm "O"). With the Thai tax-free allowances etc. on this income I pay approx 40,200 Baht tax for the year (£650) to the Thai tax revenue authorities.

Could you tell me how you arrived at this figure?

I had a look here:

http://www.rd.go.th/publish/6045.0.html

But got a bit confused

RAZZ

Link here to Samran's tax calculator:

Thai_Personal_income_tax_Calculator_v2.xls

[CaptainNemo]

It sounds awfully complicated! If you really want to live tax free, the best bet is to become a pirate OO-ARR!

Just sail into port every now and then to stock up on freshwater and tins of spinach.

Hows about reading this? http://www.hmrc.gov.uk/cnr/

[Marvo]

It sounds awfully complicated! If you really want to live tax free, the best bet is to become a pirate OO-ARR!

Just sail into port every now and then to stock up on freshwater and tins of spinach.

Hows about reading this? http://www.hmrc.gov.uk/cnr/

Good link Nemo, thanks. I'll save swatting up it's contents until I'm tucked away below in me hammock with a bottle of rum and a bar of Old Jamaicee ha harrr Jim lad!

[smilingjim]

I (for my company) work in UK Nov-Feb and for the foreseable future will be spending March-October in Thailand. Over the next year or so I will be trying to get a small business in Thailand off the ground, to suplement my income earned in the UK. Yes, profit in the UK is less than £25,000

The plus side of the UK business is that I have minimal reclaimable VAT on purchases so am on the flat rate scheme. I charge VAT at 17.5% but only send HMRC 9.5% deep joy. All UK accountancy and book keeping fees are £700 though.

Tell me if I've got this right....

Say I kept my annual UK visit down to 90 days and I did away with the UK company altogether and worked soley for the Thai company, I could go Thai tax-resident, and put down the genuine 3-month business trip to the UK and all it's relevant expenses against the Thai business' profit. Yes or no?

Corporation tax payable by Thai companies is only 3% over the UK rate now AFAIK.

I guess some of the above would make a quick hop back to Blighty to make use of the NHS a little more tricky though?

You're not working in Thailand so why have a Thai co? Is it for a visa?

Why not switch to being a sole trader in the UK until you are more sure of what will happen in Thailand.

You can always apply for a 1 year non imm b multi-entry visa at Hull to explore business opportunities in Thailand(unless the rules have changed recently).

Once you are more sure about the future then make a decision.

[Marvo]

You're not working in Thailand so why have a Thai co? Is it for a visa?

Why not switch to being a sole trader in the UK until you are more sure of what will happen in Thailand.

You can always apply for a 1 year non imm b multi-entry visa at Hull to explore business opportunities in Thailand(unless the rules have changed recently).

Once you are more sure about the future then make a decision.

I am going to be following some business activities over here in Thailand, spending the next year or so setting things up (photography, graphic design and setting up a web based business). I'd love to just spend 3 months a year working back in the UK and semi-retire over here for the remainder, but the truth is I haven't earned enough yet to retire or keep me in the manor to which I'd like to grow accustomed.

So ultimately, the income from the Thai company will be just as important as what I bring over from the UK. The cost of living advantages (for my lifestyle anyway) of spending 8 or so months of the year in Thailand can be as atractive as the myriad of other reasons to be here.

You're right Jim, switching to Sole Trader has to be something I look at closely now. I know I used to have some good reasons to be a Ltd Co. in the past but my circumstances have now changed somewhat! I'd better swat up on the pros and cons again. Keeping tax residency and minimal NI contributions in the UK at least keeps the UK state pension option alive, for what it'll be worth - when I'll be allowed to claim (which will be at age 85 by then ).

[PattayaParent]

As far as I am aware you can keep your state pension option open by paying voluntary NI contributions, it has nothing to do with tax residency.

Edit: Typo

Edited March 28, 2008 by PattayaParent

[monty]

Am I right to assume that on my UK tax return I have to declare "income earned abroad"? I understand UK and Thailand have a dual tax treaty so would that mean paying additional tax (additional, up to UK tax liabilities according to allowances) to UK HMRC ? And is there such a thing as a Thai tax return form that Thai company directors need to fill in by law?

I was of the impression that a dual tax agreement means, that if you earn tax in one country, and pay the local applicable taxes on that income, that that income can't be taxed in the other country (basically avoiding double taxation). Even if the tax rates are different!

Basically you also have to declare any savings abroad, because they want to know where the money came from. Did you earn it in the UK and did you pay tax on it and then transferred it abroad? Or did you earn it abroad, and can you prove this by showing that you paid the local income tax on it? If you're unable to show either, they'll assume you're earning undeclared income in the UK and try to funnel it away, avoiding taxation (which they don't like )

I always thought that the one country requiring you to pay taxes on income, regardless of where you earned it and regardless whether you paid local taxes on it was the USA!

[Marvo]

As I understand it after a bit of Googling , but I'd love to be corrected if I'm wrong... regarding double taxation treaty between Thailand and UK...

If I am tax resident in the UK but also pay some "PAYE" so to speak or taxes on earnings in Thailand, then the UK look at my TOTAL gross earnings and total tax paid on these earnings. If I haven't paid enough tax in Thailand to bring tax paid on my total income up to what the UK liability would be on total earnings (as if it was all earned in the UK), then the UK Revenue will require me to make an additional tax payment to bring my total tax paid up to the amount it would have been had it all been earned in the UK.

It looks like I have answered my own OP with that info IF IT'S CORRECT. After recieving the Thai tax allowances on the income in Thailand, that will mean that I've paid less tax in Thailand and so will have to pay more in the UK after declaring my "worldwide" income.

Please put me straight if that is not how it works, there doesn't seem to be any way round paying the full UK tax liability.

But as I posted before, if my UK company contracts in the Thai company to do the UK company's work, the Thai company legitimately can put against its taxes annual travel to the UK, 3 months accommodation in UK, travel and subsistance while in UK etc. etc. This will substantially lower profit and therefore tax.

[bkk_mike]

As I understand it after a bit of Googling , but I'd love to be corrected if I'm wrong... regarding double taxation treaty between Thailand and UK...

If I am tax resident in the UK but also pay some "PAYE" so to speak or taxes on earnings in Thailand, then the UK look at my TOTAL gross earnings and total tax paid on these earnings. If I haven't paid enough tax in Thailand to bring tax paid on my total income up to what the UK liability would be on total earnings (as if it was all earned in the UK), then the UK Revenue will require me to make an additional tax payment to bring my total tax paid up to the amount it would have been had it all been earned in the UK.

Basically correct, except for a few minor cases - i.e. government pension, and I believe rental income from property, which would be solely taxed in the country in which they are earned.

But yes, so long as you are tax-resident in the UK, and you're UK-domiciled (were you born in the UK basically), you'll basically be taxed in the UK on global income. (You'll get to subtract tax paid in Thailand from the total, but won't actually save any money).

You need to get under the 90 day average (including the days you arrive/depart) so that you can be non-resident, so that the UK would only tax you on your UK-source income. Then it can become a lot more interesting. (i.e. Paying yourself in a 3rd country such as BVI or Belize, not taxed in the UK, or Thailand (so long as you keep the income out of Thailand)).

[CaptainNemo]

As far as I am aware you can keep your state pension option open by paying voluntary NI contributions, it has nothing to do with tax residency.

Edit: Typo

What? All three shillings and sixpence?! Isn't the writing on the wall that we all need private ones now (those of us nearer to birth than retirement, that is)

I tell you what, I'm not entirely convinced there'll still be a state pension by the middle of this century... it's barely worth having as it is now!

Re:"bkk_mike" and government pensions... does that include the "nuvos" thingies?

http://www.civilservice-pensions.gov.uk/pension_reform.aspx

I was under the impression, that sailors who spent <90 days a year on British soil (even RFA ones - who are MOD civil servants) pay no tax through the SED/FED schemes.

If they tax MOD pensions... then that would mean that the only way to avoid (UK) tax would be to work in the merchant navy, and take all but 90 days of your leave outside the EU (i.e. in Thailand)...