Withholding Tax Question

[shroomer]

Hello All. I will explain my situation first and then I am hoping someone can help explain how withholding tax would affect me.

I work offshore on an oil platform, and am currently (unfortunately) back working in the north sea. I have been in Thailand for 8 years, am a non UK resident.

However, any income generated in the UK is liable to UK tax, including most platforms in the north sea as they are designated Uk tax zones. I have been working as a Ltd UK company,

but was advised by a tax advisor it would be more beneficial to me to work through a Thai company as corporation tax was 15%. I could also write off some of the travel costs involved against tax.

My wife has a Thai company which i could work through, and as I am not a director and not working in Thailand, don't need a work permit.

However, when I went to see an accountant, she explained that there would also be a witholding tax of 15% applied on top of the corporation tax, and as a foreigner I would have to pay this- Thais can claim some back.

Her english was not that good and I did not understand her fully.

Can anyone explain? Would be much appreciated!

[richardt1808]

Hi,

Your accountant is correct. Thai companies making payments to foreign entities (companies or individuals) are required to deduct a 15% witholding Tax. It is a law aimed at encouraging Thai companies to give preference to local resources.

You could certainly minimise taxes by letting your wife's company pay directly for anything which is a legitimate business expense such as your travel, your home rental, equipment, entertainment etc. Then they can pay you a small token salary for your cash purchases. In this way the taxes should be applied only to your small salary and you would be able to enjoy a list of nice 'business-related benefits'.

It is tricky though and all revolves around how the Thai company would describe the income and how they would justify the associated expense (be it salary or otherwise). How would the Thai company word the invoice to the oil company ? If that invoice specifies 'labour' or something obvious and there was a matching or similar expense locally, then the Thai Revenue office would pick it up (and they are pretty thorough).

In this instance, your wife's Thai company will be receiving money from the oil company for 'services rendered', so neither VAT nor WHT applies on the first part. The problem occurs when her Thai company in turn pays you. Since you are a foreign entity, then, yes, WHT applies and they would deduct this from any amount paid to you and her company may also be liable for additional corporate tax. IF her company was paying you as a salaried employee on a local WP then there would be no WHT, but personal income tax would be applied at the rate of 30% (I assume that you would be on the top rung of the scale), so not really easy to get around the tax issue.

Maybe someone else has a better idea, but anyway, best of luck.

Edited June 2, 2010 by richardt1808

[fatfather]

Hi Shroomer,

I'am a German and I'm working worldwide. I'm now living seven years in Thailand and Thai tax authorities deny to give me a tax number because I'm not 180+ days in Thailand per year. I create my income out of Thailand and they don't care. I quit German residence years ago and clarified with German tax authorities my tax free status. They told me that the Thai administration will be informed about this because of the Thai-German double tax agreement. No response from Thailand till up now. But.... whenever I have to do a job in Germany as a German citizen/national I'll have to pay tax in Germany on a daly base. This mean that I'm not entiteled to claim back any income tax. I told my company to send me anywhere in the world but not to Germany. The rest is taxfree because Thailand not care.

So I think as an English citizen working on English territory you will have to pay tax, in England or through your wife's company.

Fatfather