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GURU SPEAK

Tax concerns - Employer withholding tax requirement

By Ted Spevick

An employer is required to withhold tax on employee compensation, either in cash or kind, at the time of payment, calculated according to the formula specified under tax law.

The taxation of restricted stock units (RSUs) for employees arises on vesting.

An employer is required to include the value of shares in employee income in the period the RSUs are vested.

The withholding tax obligation relates to Thai source RSU income only.

In the case where there is a dividend equivalent paid to the employee, the employer must include this dividend equivalent as the income of the employee for withholding tax purposes, as it should be considered as income from employment in Thailand.

Any reserve set aside, including the reserve related to the RSUs, is non-deductible for Thai tax purposes.

The value of the RSUs will be deductible in the period the RSUs' vest, provided that the RSUs are granted to employees as compensation for work performed in the business of the employer.

The above is just the general tax implications for RSU's.

Prior to issuing RSU's as compensation for the employees, the company may need to consider the conditions of the plan together with the potential tax implications which may be different for each RSU's plan.

This will help the company in arranging the most beneficial equity-based compensation plan to its employees and to prepare for the tax requirements from the implementation of the plan to avoid any adverse tax exposure from the Thai tax authority.

Also, it is important to remember that employees who are given stock-based compensation have all the rights and access to information as any shareholder, and essentially they become partners of the business.

This might be more difficult for the owner of a non-public company to accept.

This information is intended as a general guide only.

Tax law is complex and professional advice should be taken before acting on the information provided.

Ted Spevick is a partner at Kanokwan Lerdcharoenporn and manager at KPMG Phoomchai Tax Ltd.

-- The Nation 2010-06-14

[somchaismith]

I'm in need of an employer payroll witholding tax scale. Can a poster submit a link please?