Company Employing Expat's Iilegally ?

[whatawonderfulday]

OK here is a question for the Thai legal eagles on this forum. My pal works for a BOI registered company that employs many expats. The company pays these people a salary locally upon which Thai tax has been paid etc. They also pay the majority of the salary through their Singapore company to any nominated bank account ( other than in Thailand ).

The question is - is it legal ? and who would be responsible for tax should either the Thai authrouties find out or the expats own countries as this salary is paid with no dedcutions whatsoever.

As the work is all undertaken in Thailand should this company even be paying parts of their salaries abroad. Clearly my friend is concerned owing to the potential tax implications so knowledgable answers please.

[thaihome]

It is illegal under Thai law as all salary received for services performed in Thailand are subject to Thai income tax. Nevertheless, it is a very common practice in Thailand and other high tax developing countries. As long as the company does not try to move money from Thailand to the offshore company actually making the offshore payments the chance of the Thai Revenue Dept finding it is very slim and a case can be made that the payments are not for work within Thailand and are therefore not subject to Thai Tax.

The employees should not hiding the offshore salary from their home countries, particularly if they are Americans.

In both cases of Thailand and home countries, the individual is responsible and would held accountable for the failure to pay taxes.

TH

[think_too_mut]

Other way round: Back in years 1997-2000 my then employer engaged many programmers from India to work in Australia.

The way it worked was: they were entitled to their Indian salary, my company did not care what it was. For work in Australia, they were paid by their company "allowance" that was just under 10K A$ a year and hence non-taxable in Australia (same money as the dole).

The contract was with that Indian company as a whole, not with individuals.

[whatawonderfulday]

It is illegal under Thai law as all salary received for services performed in Thailand are subject to Thai income tax. Nevertheless, it is a very common practice in Thailand and other high tax developing countries. As long as the company does not try to move money from Thailand to the offshore company actually making the offshore payments the chance of the Thai Revenue Dept finding it is very slim and a case can be made that the payments are not for work within Thailand and are therefore not subject to Thai Tax.

The employees should not hiding the offshore salary from their home countries, particularly if they are Americans.

In both cases of Thailand and home countries, the individual is responsible and would held accountable for the failure to pay taxes.

TH

Many thanks for reply but when the individual is working in Thailand 100%, on work for other Thai companies, how could it be justified that works was being undertaken for an offshore company. What do you think would happen ( to company and/or worker ) if theThai Rev. Dept found out ?

[Soutpeel]

Its called a double contract and is pretty common in Thailand for expats, Yes its illegal in Thailand. I would guess the BOI company has him down on THB 50,000 to THB 80,000 month salary on the books and his tax is being paid in Thailand on that.

Provided the remaining money is not being transferred from Thailand to the persons account, then there is little chance he will get sprung by the Thai tax department. Could they track it, possible, but will take a lot of leg work

Most companies doing this will transfer the balance of the salary via an offshore bank company account.

Would advise you pal not to worry about it and just keep quiet about his salary "arrangements".

But if he is American, I would advise to be careful with his dealing with the IRS, if he is doing this to an offshore account and not telling the IRS

[Soutpeel]

Many thanks for reply but when the individual is working in Thailand 100%, on work for other Thai companies, how could it be justified that works was being undertaken for an offshore company. What do you think would happen ( to company and/or worker ) if theThai Rev. Dept found out ?

It would be very difficult to justify this one, if they were caught, guess the company would be audited and fined and the individual would be given option to pay back taxes on the amount of tax owed to the Thai tax man...

Best solution, keep quiet about what he is doing and dont have a paper trail from Thailand to the persons offshore account, if there is no paper trail, the tax man will have a hard time proving 1. tax is due 2. what amount is due in back taxes.

Provided the Thai tax man gets something every month from the "Thai salary", dont think they will look too hard at a companies expat arrangements, unless the company or individual is shopped out by someone to the tax.