Vat Certificate - Advice Please

[MHM]

My partner and I are 49 % shareholders in a Thai company. The business has been operational for 6 months. Through the company we get our visas and work permits. The VAT certificate was a requirement for the work permit or visa - I can't quite remember, so we got one. What I didn't fully understand was the 100,000 Baht a month income requirement that comes with the certificate. The company is currently not reaching this target. What are the implications of this? Read: How much is this going to cost us?

Is there anything we could or should do?

Sorry if there are spelling mistakes. Is there a spell check feature on TV?

[Digger]

If your not reaching 100,000 baht a month in sales, how can your company be affording to pay you the minimum salary required for the work permit. Thats the bit I would be worried about.

[EVO]

But its not the question that was asked fella.

It would depend on how short you are of the 100,000 THB limit.

You will need to pay your VAT on at least 100,000THB. Thats how much it will cost you. You will have to make up the shortfall.

This is where a good accountant comes in.

[~G~]

Digger - as far as i understand the salary can be paid from the capital of the company, no need to actually have the company make that money. So the shareholders invest and the employees take the money, more then was actually earned by the company. Just like many companies with bad reports or directors who are also main shareholders....

But the vat is a different story - I don't understand whether does he have a problem with a minimum vat requirement or with the minimum salary he needs to paid as a foreign director?

[Digger]

Digger - as far as i understand the salary can be paid from the capital of the company, no need to actually have the company make that money. So the shareholders invest and the employees take the money, more then was actually earned by the company. Just like many companies with bad reports or directors who are also main shareholders....

But the vat is a different story - I don't understand whether does he have a problem with a minimum vat requirement or with the minimum salary he needs to paid as a foreign director?

<{POST_SNAPBACK}>

Yes, the money could come from capital to pay salaries, unless of course its spent already and actually been paid in. Also it could come from director loans, however if the sales volume (not even considering gross profit) is less than 100,000 month then I suspect that come renewal time for the visa and work permit, things are going to get a bit sticky. Even more so if there are multiple work permits for foreigners which may be supported by 8 or so Thai staff. If thats the case, the company may be required to increase its paid up capital in order to show that it has capital on hand to meet its obligations.

[~G~]

My partner and I are 49 % shareholders in a Thai company. The business has been operational for 6 months. Through the company we get our visas and work permits. The VAT certificate was a requirement for the work permit or visa - I can't quite remember, so we got one. What I didn't fully understand was the 100,000 Baht a month income requirement that comes with the certificate. The company is currently not reaching this target. What are the implications of this? Read: How much is this going to cost us? 

Is there anything we could or should do?

Sorry if there are spelling mistakes. Is there a spell check feature on TV?

<{POST_SNAPBACK}>

The question here is what were your expenses (for which you have invoices).

[Indo-Siam]

This thread was a reaction to a posting I made in another thread. Long-term, it is basically true. But the rules are loosely applied early in a company's history, and are not applied evenly across different types of businesses.

If you run a nightlfe business that operates on a cash basis, once you file for VAT, you are telling the VAT office that you are now making at least 1.2 million in revenue each year. I have heard (unconfirmed) that this may be increased to 1.8 million baht soon.

One thing to be aware of - if your company is not earning significant income, and your burn rate is depleting your capital, the time will come when you will not be available to renew your work permit - unless you inject additional paid-in capital. They don't wait for you to go to zero - if you do not demonstrate reasonable revenue - based on VAT taxes paid - they can refuse to renew your work permit.

Good luck!

Steve

Indo-Siam

[MHM]

Thanks for your replies and comments.

He's a she, but that's a easy mistake to make

Steve, you did make a comment in another thread which prompted a lightbulb moment...

Our accountant has been talking about this magical 100,000 a month. This was explained firstly as a mistake by the lawyer who set up the business and then after a long discussion in Thai (much of which I didn't understand) we were told we had a period of 3 years to achieve this target.

However at our next meeting the accountant suggested we should make up any shortfall with fake income reciepts to bring our monthly income up to 100,000 and pay the VAT on the required amount. I was confused but maybe this has now been explained and she's thinking ahead to renewal of work permits and visas.

The business is not nightlife but traditional Thai massage and lifestyle (not spa - was told that put us in a higher tax bracket)

We have worked hard to set everything up correctly and legally, we plan to be in Thailand for the long term (if you can make any long term plans) and want to continue to play everything straight. If we have to pay the extra for tax well so be it - We're not looking for loopholes to avoid our obligations.

Any commenst on the accountant proposal?

Cheers

[~G~]

We have worked hard to set everything up correctly and legally, we plan to be in Thailand for the long term (if you can make any long term plans) and want to continue to play everything straight. If we have to pay the extra for tax well so be it - We're not looking for loopholes to avoid our obligations.

Any commenst on the accountant proposal?

Cheers

<{POST_SNAPBACK}>

So in order to stay legal you want to start fabricating documents?

Why not just have your accountant ask the revenue department what happens in case your income is less than 100,000? If it means just paying 7% of 100,000 then here you have the answer. Or do they just fine you? Or do they let you operate a year or two first?

And why not ask the labour department what they require in order to renew a work permit? If it's to increase capital, so be it.

You want to know what's really required? Ask those who require it. Otherwise, every lawyer will have another opinion, every accountant will have a different standard.

I've had bad experience listening to lawyers who told me of extra requirements that don't really exist, and telling me that things are not possible when actually they are VERY possible, and 100% legal.

Edited April 1, 2005 by ~G~

[MHM]

Thanks for the advice, I don't want to fabricate any documents and have not done so, this was her advice last month which has not been acted upon. I'm meeting her in the next few days and want to go through this again and a visit to the revenue office seems like a very good place to start. It's really helpful getting second/third opinions. Thanks again.

[Digger]

Hmm A cash, non receipt type business and your considering to falsify your tax returns to meet the 100,000 baht VAT threshold. If your not grossing 3,300 baht a day your going bankrupt quicktime with 8 staff for your work permits.

Somehow I cant see this business operating in 6 months let alone a year. Might be proved wrong but I doubt it.

Good luck in getting your finances in order, I think you need it.

[Sunny Valentine]

Does anybody know if you can add the 100000 a month VAT requirment over a longer term, maybe a Year?

Example:

Monthly gross takings for a Company in its first or 2nd Year vary from say 70000 to 150000 Bt, but reach 100000 a month on average on a longer period. Would you still have to pay 7000 Bt (minus VAT credits) a month Minimum on those month where you don't reach the 100000 figure?

Sunny

[~G~]

Hmm A cash, non receipt type business and your considering to falsify your tax returns to meet the 100,000 baht VAT threshold.  If your not grossing 3,300 baht a day your going bankrupt quicktime with 8 staff for your work permits.

  Somehow I cant see this business operating in 6 months let alone a year.          Might be proved wrong but I doubt it.

Good luck in getting your finances in order, I think you need it.

<{POST_SNAPBACK}>

Digger, he doesn't need 8 staff for the 2 work permits. Just 4,000,000 capital level.

Edited April 2, 2005 by ~G~

[Indo-Siam]

If a company has reasonable paid-in capital - meaning that it has asseets on its balance sheet - the Revenue Department does not pay much attention to most conventional start-up businesses for first two years. You do not have to be earning revenue, or paying in much VAT.

But - if you are a cash business like a bar, with a foreign work permit granted based on having obtained VAT registration - they expect you to be paying your VAT each month.

If a conventional business has not paid in capital, and has earned no significant revenue - and is just persisting out there to sponsor a work permit - it is just a matter of time until you get told to either pay in capital, or start earning money and paying taxes, or lose your tax registration - and your work permit.

By year three, you must be earning a profit - or at lesat paying taxes on a faicticious profit.

Cheers!

Steve

Indo-Siam

[~G~]

If a company has reasonable paid-in capital - meaning that it has asseets on its balance sheet - the Revenue Department does not pay much attention to most conventional start-up businesses for first two years.  You do not have to be earning revenue, or paying in much VAT.

But - if you are a cash business like a bar, with a foreign work permit granted based on having obtained VAT registration - they expect you to be paying your VAT each month.

If a conventional business has not paid in capital, and has earned no significant revenue - and is just persisting out there to sponsor a work permit - it is just a matter of time until you get told to either pay in capital, or start earning money and paying taxes, or lose your tax registration - and your work permit.

By year three, you must be earning a profit - or at lesat paying taxes on a faicticious profit.

Cheers!

Steve

Indo-Siam

<{POST_SNAPBACK}>

Thanks, Steve, for the explanation. Good to hear that there is some flexibility in this matter, which allows business owners to focus on the development of the business in its early stages rather than wrestle with tax regulations...