Paying Uk Tax On A Thai Business Venture.

[Tigs]

If someone were to invest with me in a business enterprise in Thailand, and they transfer money from the UK, and the business is successful and earns money on which tax is paid here in Thailand. If I then pay the money back to the investor in 1 or two years with a return, will the investor back in the UK have to pay more tax in the UK on the return he has made (having paid tax already over here)? If so are there any legal ways around paying tax twice? Thanks

[joskydive]

Tell him to open an Offshore Account and then pay the return into that.

[JohnC]

As I understand the tax law in Uk, if he earns income abroad and pays tax abroad, he declares the income plus tax paid to the UK tax authorities and is then taxed on the difference between UK tax rate and the country in which he has paid tax. For example assuming he is a basic rate taxpayer in the UK, his investment income in Thailand is taxed at 10% ( more complicated than that but just for example) he then does a tax return in the UK where the basic rate is 20% meaning he would be liable for a tax rate of a further 10% on his income from Thailand. There are of course various variables like his personal allowance in the UK plus allowances in Thailand.

That as I understand it is the legal position, what he actually does in the way of offshore accounts (loopholes currently being closed) is of course something different.

[AjarnChan]

Tell him to open an Offshore Account and then pay the return into that.

There is a Double Taxation Agreement, between Thailand and the UK [and many other countries], though a new version is due to be signed in January next year. I would talk to the Tax people in both countries direct if you want a full answer.

UK Government Website

http://www.hmrc.gov.uk/manuals/dtmanual/DT18650+.htm

Thai based 'tax advisor'

http://www.uktaxadvisor.com/thailand.htm

[Motoon]

No expert in UK tax law but I believe that the principle is the same everywhere:

- Profit on the investment is income and taxes are levied on that

- The fact that the company pays tax in Thailand has no impact as this is a corporate tax and no individual tax

- For a double tax treaty to work your investor has to declare income tax in Thailand, would therefore need a position and work permit in the Thai company, and payments would be done as salary (not a very clever solution given the tax brackets in Thailand).

- The offshore solution can be very viable provided done proper and legal. The income can for example be taxed flat rate in a recognised offshore location with double tax treaty with the UK (Labuan f.e.).

Cheers

Mo

[Thormaturge]

There are so many unknowns and variables that nobody could give a definite answer to this.

It depends upon the initial investor's domicile (primarily where he was born) and residency (there are big fat books on the residency issue).

If the investor is UK domiciled and UK resident then he is taxable in the UK on any overseas profits. He shouldn't be paying Thai income tax if he is not resident here.

[Orac]

I would read it that you are talking about a capital gain rather than income and as such, if it is a UK resident, would be liable to capital gains tax in the UK.

To have it paid into a personal offshore account would not be legal unless the same tax was paid in the UK anyway. If a company was set up offshore to hold the money then tax would only be liable when the money was withdrawn from the company account.

The rules on capital gains for non residents is different from that for income tax and depends on how long a person has been non resident.

Either way, depending on the amounts involved, professional advice would be recommended.

[bankei]

There are 2 aspects of the investing - which one your friend is doing is not clear.

Is he lending money to your/a company or

Is he buying a share of the company.

I think if it is 1, then he will pay tax on the profit (interest). It won't matter whether the company or business pays tax in Thailand. The interest paid to your friend would be a tax deduction to the company in Thailand.

If it is 2, then he would probably have to pay tax on the profit in England, but would be given a credit for tax paid in Thailand.

He might even be doing both, and may need to consider both aspects.

Bankei