Hi all,

I seem to be in the middle of a frustrating and (to me) complicated tax problem.

If anyone is up on Thai tax laws or can recommend a course of action I'd be eternally grateful...

Bear with me as I try to explain what's happened.

I began working at a school in Bangkok in August 2007. For a variety of reasons I did not end up getting a work permit until January 2008. During this 5 month period I paid the lower tax rate for temporary employees or whatever it's called of 3%. I have payslips and bank deposit records that show this.

I worked all through 2008 at the same school, paying regular taxes that had been calculated by the new accountant. Now it's time to file taxes for the 2008 tax period. I received a notice from the accountants that I would have to pay an additional 42,000 baht in taxes.

I was shocked to say the least. Then I looked at the document more closely. It said that my taxable income was 300,000 baht more than it actually was. I refused to sign the document. The accountants looked into it a little more for me and it was discovered that the old accountant had decided to carry the first 5 months of no workpermit salary over to the next tax year.

Surely this isn't legal, is it? I told them that if they pay me the additional 300,000 baht they say I earned that I didn't actually earn that year, I'll pay them their 42,000 baht in taxes.

Then they showed me the pay slip records that the old accountant had created for taxes. It says I had no income for January or February, but then made 480,000 baht in March and then 66,000 baht from April onwards.

None of these documents are true!

Now I don't know what to do. The school is talking about seeing if they can separate the 5 months no workpermit income and put it back on the 2007 year, but then I figure I'll be taxed at the regular rate because I had income at the beginning of 2007 and the old accountant said to forget about it, no problem. I kept telling her it would be a problem, but then the next year there wasn't a problem. NOW it's a problem. If I was working without a work permit for those months while my paperwork was being processed and visas being changed and all that, will I be taxed at the regular rate? Can they actually split it up now and put it back a year?

Am I SOL? I don't want to have to pay for a mistake that was in no way my fault. I had faith that trained accountants can calculate simple tax payments. Is there any way that I could make the school pay for this?

I don't know what to do! And taxes have to be filed in 8 days so I'm starting to panic...

Do I need a lawyer? Can I go to the tax office myself with these documents and explain what's happened? Can I go to the Thai labour law people? The school said they will speak with their lawyers and try to help solve it, but I know full well that the school knows this could be a big problem for them (faking income statements and tax documents) and are looking to protect themselves right now. They'd push me over a cliff if it would help them.

Any advice? Is this going to be a battle or is there a simple solution?

Thanks for any help offered,

tt

sorry if i haven't done a good job of explaining this. but i'm flabbergasted as to how it could even have happened!

Don't know about tax-law, but you were not allowed to work without a WP. That is a criminal offence of both you and the school and you and the school should take that in consideration.

Which is maybe the reason why they transferred his 2007 earnings of 300000 to 2008.

I don’t know about Thai tax law but assuming the OP figures are correct and he has to pay 42000 tax on 300000 this works out to 14%. Since he paid already 3% I guess he owes only 11% or 33000.

Yes, you need a Lawyer. Good Luck!!

Get some professional advice or maybe just pay the tax. If you're going to make the case that you owe less because some income was from 2007 when you didn't have a work permit, what's to stop them from contacting the appropriate authorities on that? Would they do this? Maybe not, which is why you should ask a lawyer.

If there is a 3% rate for temporary work, getting the work permit and then staying might invalidate the temporary rate and make the regular rate due. Was someting filed for 2007 or did you just assume the 3% covered everything?

It looks like you would owe maybe 15,000 baht on that income for 2007 anyway, of which you paid maybe 3,000. The first 150,000 seems to be exempt, so 10% is due on the 150,000 above that. Is saving 27,000 worth the risk of admitting to working without a work permit? A lawyer could advise you. Although you have to then weigh their fee against the savings.

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

Tax rates of the Personal Income Tax

Taxable Income

(baht) arginal Taxable income

(baht) Tax Rate (%)

0 - 150,000 (2008 onwards) 150,000 Exempt

150,001 - 500,000 350,000 10%

500,001 - 1,000,000 500,000 20%

1,000,001 - 4,000,000 3,000,000 30%

4,000,001 and over 37%

Apparently it's very very complicated.

I officially made about 800,000 baht in 2008 and actually overpaid my required taxes by 8000 baht. On the papers they want me to sign to submit to the tax office it says I made 1.1 million baht and therefore owe more tax money.

I never made this money. I am moving house next month and don't have an extra 42,000 baht to give to the government.

In my opinion the school pissed around with their creative accounting and they should fess up to the mistake and pay it for me, or take the extra income off the forms and let me collect my 8000 baht refund.

I just talked to my HR manager who said the no work permit thing shouldn't be too much of an issue because my papers were being processed within two months of starting work and the fact that I work on a non-O visa makes everything very complicated and takes longer than a regular B visa work permit application. I dunno....

Anyway, I'll wait and see what the school's lawyer says. CAn't do much else til then I suppose.

Thanks for the advice and comments.

Cheers,

tt

I'm not going to try to compute taxes in a specific case, but I will outline the general situation involved:

With an employee, an employer is required to withhold appropriate personal income tax, based on a projection of that particular employee's annual calendar year earnings.

With a contractor, an "employing" company is simply required to withhold a flat 3% of the gross amount - without consideration of what the contractor's own annual personal income tax liability will be.

So - if you were paid as a contractor, it is up to you to set aside enough extra cash to pay your full actual personal income tax liability.

On the employer's books, they needed to account for the total contractor payout, as a business expense. Why they would do this accounting transaction after 1 January of a given year, for funds disbursed during the previous calendar year, is something that I cannot explain. This is especially painful for you, because the amount of personal income tax you need to pay on that 300,000 baht is now elevated, because this marginal income are will now fall into a higher marginal income tax bracket, as part of a larger cumulative total.

You did not mention whether you had any other reportable income in tax year 2007 - which would determine what the marginal tax rate would have been on 300,000 baht paid at the end of 2007.

You do have a valid gripe against the employer - but at this point, based on how they have reported corporate income and expenses for 2007 and 2008, you don't have much choice in regards to paying your taxes for 2008. If you worked in 2007 as a contractor, but did not have your own company with work permit, then you are not in a position to take this issue to a court.

You basically paid for an education.

Good luck.

Steve Sykes

Indo-Siam Group

Edited March 23, 200917 yr by Indo-Siam

I'm not going to try to compute taxes in a specific case, but I will outline the general situation involved:

With an employee, an employer is required to withhold appropriate personal income tax, based on a projection of that particular employee's annual calendar year earnings.

With a contractor, an "employing" company is simply required to withhold a flat 3% of the gross amount - without consideration of what the contractor's own annual personal income tax liability will be.

So - if you were paid as a contractor, it is up to you to set aside enough extra cash to pay your full actual personal income tax liability.

On the employer's books, they needed to account for the total contractor payout, as a business expense. Why they would do this accounting transaction after 1 January of a given year, for funds disbursed during the previous calendar year, is something that I cannot explain. This is especially painful for you, because the amount of personal income tax you need to pay on that 300,000 baht is now elevated, because this marginal income are will now fall into a higher marginal income tax bracket, as part of a larger cumulative total.

You did not mention whether you had any other reportable income in tax year 2007 - which would determine what the marginal tax rate would have been on 300,000 baht paid at the end of 2007.

You do have a valid gripe against the employer - but at this point, based on how they have reported corporate income and expenses for 2007 and 2008, you don't have much choice in regards to paying your taxes for 2008. If you worked in 2007 as a contractor, but did not have your own company with work permit, then you are not in a position to take this issue to a court.

You basically paid for an education.

Good luck.

Steve Sykes

Indo-Siam Group

Steve,

Thanks very very much for your reply, even though it's definitely NOT what I want to hear.

Surely it must still be illegal to report more than one tax year's earnings in that period. Isn't that tax fraud? I could conceivable do that, couldn't I, if I wanted to keep myself in a lower tax bracket?

I did have other income in 2007 from some part time work, with work permit. When I add the earnings together and take out spouse deduction and children deductions, the total tax for that year is 35,500 baht. Including the tax I've already paid at both places, I only owe 10,800 baht extra. Can't I insist that the school take the extra income off the 2008 form and try to refile for the previous year? Could I not take the documents to the tax office and tell them that the company is trying to get me to sign papers that are not true, that they are trying to report two years of earnings in one year? What would happen then?

I am not comfortable signing official government papers that are clearly reporting false information.

This is all very frustrating!

Fuming,

tt

TT -

Unfortunately, it was YOUR responsibility to pay proper taxes on 2007 income - not your employer's responsibility. When you failed to register a complaint in real time - in conjunction with filing of your PND 91 (personal income tax filing) in early 2008 (for Tax Year 2007), you effectively gave up your right to cry "foul" for Tax Year 2008.

It will be pretty clear to all concerned that you happily accepted filing your 2007 PND 91 with income knowingly under-reported - and your protestations at this point about the income being improperly credited to your Tax Year 2008 are unlikely to receive much sympathy.

If both you AND the employer were jointly prepared to go make adjustments in both 2007 and 2008 tax filings - and pay the penalties and interest for all erroneous submissions - then it could probably be done. But - the total fines will probably be significant, in relation to your comparable loss - and I suspect that the school will not be interested in cooperating.

The Revenue Department is unlikely to show much interest - or sympathy - in regards to your case, as an individual. Do you really want to walk in and say: "Look, I tried to cheat on my 2007 income - because my employer failed to show that income, and I thought I could exploit that mistake. But - they caught their mistake, late in the game, and dumped the previously unreported balance into 2008. Now, this adjustment actually puts me at a disadvantage, compared to what I would have paid of all income had been properly reported in the correct years - so I now want to call "foul", and request a "re-do" of my 2007 and 2008 submissions." That is probably not a wise way to proceed.

Cheers!

Steve

Indo-Siam

Also remember...

That 3% tax you paid in 2007 was not the "final" amount of tax for 2007, but rather, was simply an "advance" you were giving the government... and that YOU (and not your employer) were still obliged to file and pay your 2007 income (form PND 90 for service or PND 91 for salary) after computing the whole amount at the end of the year; which it seems you didn't do; which is illegal and a criminal offense.

Note: It's not your employer's legal obligation either to tell you to file such PND 91.

You must settle this INTERNALLY with your employer and if you're still unhappy with their decision and you are prepared to "go further" and take this issue with the authorities, you should be prepared to possibly do jail time (for working without a work permit and/or not filing your 2007 income tax) and/or be deported, or skip the country pronto.

Would you actually trust the company's HR manager who says that your work permit thing wouldn't be an issue working illegally because work permit was eventually done within 2 months? Then you're shoving yourself down the same road (once again) that you took when you gave in to the old accountant who said "no problem"...

Well, met with school director and head accountant yesterday afternoon. Accountant had come up with solution with school lawyer that they would say I hadn't worked those 5 months in 2007, then transfer my income over to someone else and then pay an 8,000 baht penalty in late fees.

Still, though, it's not legal.

So then the accountant said that the fine for filing the ngor dor 91 (?) late is 2000 baht, whether it's a month late or a year late so we thought we could split the income up properly and submit this year's taxes on time and then shortly after we could get everything ready to submit from 2007. When I left my job in 2007 my employer never gave me my yellow paper that says how much I've made and the taxes I've paid in that year. So I'll pick that up and then we'll get started on 2007. And the school has agreed to pay fines and interest fees and I'll only be responsible for the original tax that was owed on the income.

Does that sound right? I should probably get it in writing....

I don't know if this is relevant or not, but last year, well after the time taxes should have been submitted, I went to the tax office because I needed a new tax card. Would they have had the information in their computer right there if I owed taxes? Just curious because they never said anything and just gave me my new tax card.

Also, of course it's no one's responsibility to file my taxes but myself. However, when the school has made it quite clear that they will file taxes for all employees and then they proceed to file everyone's taxes EXCEPT MINE, I believe I have the right to question why that decision was made and to what end.

Thanks for the advice you guys gave, though. I'll definitely be paying more attention this time next year.

Cheers,

tt