Freelance Employer Paying Income Tax Despite My Tourist Visa! Any Problems?

[Junglejumbo]

I have been helping out a Thai company on a small amount of freelance work however I just realized that the company intends to submit a measly amount of tax to the revenue department each month. I actually don't need to pay any tax as the total of my small payments for this year will be way below the tax allowance but the company says I should just reclaim it back again.

Next year I plan to work full time at another job and with a work permit, etc and I'm worried that this little piece of tax might cause a spanner in the works for me when I come to apply given that tax is being paid whilst I have a tourist visa, and therefore perhaps it's better to quit now.

I am thinking I can't be the first person to run into this especially given the amount of freelance work available around Thailand's media companies who need English language. Wondering if anyone knows anything about this?

I am not completely sure that the revenue department is linked on-line to the immigration police although when canceling the work permit they do seem to check something regarding the tax having been paid but not sure if it's just the documents prepared by the the former employer or not. Also, don't know if the revenue department ever care to look to see what visa I have but perhaps they would if I reclaimed any amount.

Thanks for any help in this.

[ubonjoe]

If you are caught working without a work permit that will have a far greater effect on you being able to get a work permit than just paying some taxes to the revenue department.

Their is no check by the labor department to see if you have paid taxes in the past. Nor does immigration check when you apply for an extension of stay.

[expatman]

...

Their is no check by the labor department to see if you have paid taxes in the past. Nor does immigration check when you apply for an extension of stay.

This is not quite true re Immigration Department

I'm working in Thailand, this year when extending my stay (for about the 5th time) Immigration Department requested a copy of the receipt you get when you file your income tax return, something they have never done before. This was in January, even though you have until end of April to file. Had to run around getting some receipts for deductions before I could file 2008 tax return and get extension of stay for another year

[thaiphoon]

Get yourself legal, and quickly. If you are caught working without a WP the consequences are severe. You will come under the Revenue Department's spotlight very quickly when the company sends in the monthly withholding tax return if you have no tax ID number. Yes the process is a pain in the ass, but if you choose to live here you also have to accept the law.

[junkofdavid2]

I know more than a few "consultants" who do on-and-off freelance work here for companies without a work permit for many years, and tax is withheld from them and submitted to the Revenue Dept. (and they're even given a withholding tax certificate from the company they serviced); and they've never had any problems at all.

Note however, that these aren't "teachers" in a school which could easily be raided and where the work schedule is regular (and easy to catch).

That being said, it's still much better to be fully legal and get a work permit. You never know when that "card" may be used against you (e.g. a business deal gone bad and your enemy tries to make a big deal out of your work-permit status, competitor is jealous of your income, a "friend" wants your job, or whatever...).

You also never know when the government will crackdown and/or suddenly change their "catching" procedures/policies, as is common here.

Get legal now, mate!

.

Edited August 20, 2009 by junkofdavid2

[CDB]

Let's clear this up a little.

The tax that is deducted is not income tax but withholding tax of 3%. Income tax is your responsibility to report, whereas withholding tax is the responsibility of the company to submit in various situations.

* If you have never filed any income tax with the Revenue Department, there would not be any issues.

* If you have changed your address; use a foreign address; or use a foreign bank; you'll also be completely under the radar.

The correct legal advice as always is to get a work permit. It's impossible to state with certainty that these is no risk, because laws and practice can change. However the answer to your concern is that you're very unlikely to have problems with tax filings, but you're more at risk if caught in an Immigration raid.

Some suggestions:

* Bill your company from an offshore account (e.g. Hong Kong)

* Bill your company with an overseas address (yet Thai bank account)

* Bill your company in the name of a Thai person/gf who does not have substantial personal income (assuming you trust them)

[thaiphoon]

Income tax on thai salaries is deducted at source by thai company and paid over to Revenue Department by 7th day of following month.

Withholding tax applies to certain bills paid by companies, where the full amount of the invoice is not paid to the service provider and the balance (withholding tax) is paid directly to the Revenue Department by the 7th day of the following month. Withholding tax rates vary; 3% on utility bills/professional services, 5% on rent etc.

[Arkady]

Let's clear this up a little.

The tax that is deducted is not income tax but withholding tax of 3%. Income tax is your responsibility to report, whereas withholding tax is the responsibility of the company to submit in various situations.

* If you have never filed any income tax with the Revenue Department, there would not be any issues.

* If you have changed your address; use a foreign address; or use a foreign bank; you'll also be completely under the radar.

The correct legal advice as always is to get a work permit. It's impossible to state with certainty that these is no risk, because laws and practice can change. However the answer to your concern is that you're very unlikely to have problems with tax filings, but you're more at risk if caught in an Immigration raid.

Some suggestions:

* Bill your company from an offshore account (e.g. Hong Kong)

* Bill your company with an overseas address (yet Thai bank account)

* Bill your company in the name of a Thai person/gf who does not have substantial personal income (assuming you trust them)

Yes, companies have to pay withholding tax of 3% from payments to independent contractors. If you don't have a WP, you don't want the company to put your name down for this as a locally based contractor. This is creating a paper trail that shows you have been working, even though the Revenue Dept doesn't routinely exchange information with the Labour Ministry or Immigration, and the Revenue Dept may pursue you later for income tax. There is no way you get a WP to work as an independent contractor, unless you are an American and go to the trouble of applying for an alien business licence as a sole trader under the Treaty of Amity and Economic Relations. Otherwise, you are supposed to be employed by a company which could then do the free lance work.

CDB's advice is quite sensible, if you can't easily set up a company to get you WP, except I wouldn't recommend billing the employer with an overseas address and getting paid to a Thai bank account. Getting them to pay a Thai friend with a low income tax liability is probably the easiest and attracts no attention in the company's books and no additional income tax or liability to submit a tax return if the amounts are low (total income under B150,000 a year. Getting paid offshore is OK but it must be work that could reasonably be done from offshore and the payments are subject to 15% withholding tax rather than 3% for a locally based contractor. The Revenue Dept could get suspicious if they thought the work was really being done in Thailand in case it was a local tax payer who was liable to a higher rate than 15%. They are unlikely to investigate, if the amounts are small, but you can never tell where a Revenue Dept investigation might end up once you get them started.

BTW tax receipts are not a statutory requirement for work permits and are obviously not requested for some one applying for their first WP. However, the requirement to submit personal tax receipts is normally written into a WP in handwriting in Thai as a condition for renewal. In this case you are normally asked for your Phor Ngor 90 or 91 year end tax receipt that you can now get online. You may be asked for year to date monthly tax receipts too. They are likely to ask for tax receipts from any one changing jobs and applying for a new WP too. Some companies naively put people on the books as full employees without WPs. Getting a tax ID and going into the tax net like this would be not be wise.

[Junglejumbo]

Thanks a lot for the advise.