Work Permit For The Self-Employed Foreigner

[Indo-Siam]

In the 7+ years that I have been active on this discussion forum, I have on many occasions seen posts by individuals who were frustrated by a situation in which they wished to live and work legally in Thailand, but were not in need of creating a Thai company - along with all the associated burdens (maintaining an office address, paying for monthly bookkeeping and annual audits, paying for "X" number of Thai employees to be carried on the books, etc).

Well - there is an answer to that situation: That being to arrange for appropriate permit "cover" with an existing Thai company that is qualified to support an additional foreigner with a work permit and extended entry permit. It is pretty obvious that there are many large Thai companies that could support such permits - but the actual process of establishing a relationship with such a qualified Thai employer is beyond the means of most foreigners who might benefit from such a situation.

Well - it is August 2010 - and there are probably some folks out there right now who have just such a need. And - at this time - I can refer anyone with such needs to a Thai employer who is interested in "sponsoring" such a foreigner - in return for a monthly contribution to the employing company, for providing trouble-free infrastructure support. If interested, please send me a PM.

Typical candidates for such support might be:

1. Someone who is married to a Thai, receives income independent of any Thai employer, but does not wish to "freeze" 400,000 baht in a Thai bank account somewhere for months at a time. So - that individual needs to show that they are paying personal income tax on a legal Thai monthly employment income of at least 40,000 baht.

2. Someone who is an employee of an overseas company that does not wish to set up an office in Thailand, but wishes (or is at willing) to have its employee in Thailand be in full compliance with Thai labor law.

3. Someone who has his/her own business overseas, but who wishes to live in Thailand, with costs to support presence in Thailand able to be reimbursed by his/her overseas business.

4. Someone who lives and "works" in Thailand - independently - without a legal support structure, but who now needs to be able to legitimately invoice Thai customers, in a way that provides those customers with a valid tax receipt - with the resulting income stream being paid out to the foreigner as salary, by an employer of record.

5. Someone who wants to work for a significantly profitable Thai SME company that wishes to employ that foreigner, but cannot do so without raising registered capital above the 5,000,000 baht level, which results in 250,000 baht additional corporate income tax on the first 3,000,000 baht in annual profits.

These are the five scenarios that I have seen come up again and again over the years. For any of those scenarios, I can currently arrange for a solution - most likely for up to two individuals.

This will not be a dodgy arrangement - it will be completely legal, and fully transparent.

Right now, I have one qualifying employer offering such support. If any other Thai employers out there are qualified to provide a work permit and extended entry permit to a foreigner under a mutually agreed upon arrangement, let me know, and I can - as a service to the board - perhaps serve as a matchmaker - if any candidates make themselves known. What do I hope to get in return? I would hope that perhaps employers might engage my company to prepare and process the permit applications for such candidates.

For individuals seeking to make use of such an "employer of record" - what you have to be able to do is provide a source of income that the employer can invoice each month, within Thailand or overseas, to bring in each month sufficient gross income to pay:

a. Your gross salary (whatever you choose it to be - 40,000 baht is minimum if you are married to an Thai, otherwise, 50,000 is minimum, for most nationalities).

b. 750 baht monthly employer Social Fund contribution.

c. Monthly contribution to sponsoring company - assume somewhat lower than the average monthly cost of running a "bare-bones" Thai company that was still sufficient to qualify for an Immigration extension, based on your visa status.

d. Direct costs of obtaining your work and Immigration permits (government fees, preparation and processing costs).

e. Any taxes or bank fees that may apply, depending on the source of the income.

Again, over seven years, I have seen the five "need" scenarios recur on this forum many, many times - I'm thinking several dozen times. I don't recall seeing a good solution. Well, here's a solution.

Cheers!

Steve

Indo-Siam

[WarpSpeed]

Except how do you get around the spot checks by Thai Immigration who visit to see you at your desk where the photo was taken from which was necessary to apply for the work permit.. Seems a bit sticky to me on several levels.. I'd call this far from a "solution" it is an avoidance that can backfire heavily on both the employee and the employer..

I'm curious if you think this hasn't been done before or if it hasn't run up against legal issues before?

Edited August 8, 2010 by WarpSpeed

[Indo-Siam]

The company that will sponsor employment is about six years old, and has at various times employed about six foreigners, off and on. There has never been a problem satisfying Work Permit Office, Immigration, or Revenue Department.

This is a mature company, with Thai employees that have been there a long time, and with significant annual revenue. My company will handle all permit processing - and the lady handling permits has been doing that work for seven years, and has handled many hundreds (maybe > 1,000?) work permit and Immigration permit processes.

A foreigner signing up for this program will have to show up and be photographed in the office with Thai employees, and could conceivably be summoned to the office (In Huay Kwang area) from home (or wherever) at a later date, to show his face to an Immigration inspector. This has not happened with the last three foreign employees that were sponsored - but it could happen. This would be routine, and would not be remarkable.

This arrangement can withstand total disclosure to Thai authorities - there is nothing dodgy about it.

Steve

Indo-Siam

[scorecard]

I would need to see something from the labour ministry or the regulations which indicates very specifically that this is all legal.

Personally I wouldn't get into something (in regard to work permits etc.,) which is a 'system' to get around the law. Could also perhaps be personal taxation / payroll tax implications etc.

Sorry not yet convinced.

[scorecard]

The company that will sponsor employment is about six years old, and has at various times employed about six foreigners, off and on. There has never been a problem satisfying Work Permit Office, Immigration, or Revenue Department.

This is a mature company, with Thai employees that have been there a long time, and with significant annual revenue. My company will handle all permit processing - and the lady handling permits has been doing that work for seven years, and has handled many hundreds (maybe > 1,000?) work permit and Immigration permit processes.

A foreigner signing up for this program will have to show up and be photographed in the office with Thai employees, and could conceivably be summoned to the office (In Huay Kwang area) from home (or wherever) at a later date, to show his face to an Immigration inspector. This has not happened with the last three foreign employees that were sponsored - but it could happen. This would be routine, and would not be remarkable.

This arrangement can withstand total disclosure to Thai authorities - there is nothing dodgy about it.

Steve

Indo-Siam

"Nothing dodgy". From my understanding a work permit states the full address of thye place of employment, also meaning the actual specific address of the place of the actual work. If the acual work is being carried out at home or in another business premises, then surely this is breaking the law.

How can you say "nothing dodgy"?

[scorecard]

The company that will sponsor employment is about six years old, and has at various times employed about six foreigners, off and on. There has never been a problem satisfying Work Permit Office, Immigration, or Revenue Department.

This is a mature company, with Thai employees that have been there a long time, and with significant annual revenue. My company will handle all permit processing - and the lady handling permits has been doing that work for seven years, and has handled many hundreds (maybe > 1,000?) work permit and Immigration permit processes.

A foreigner signing up for this program will have to show up and be photographed in the office with Thai employees, and could conceivably be summoned to the office (In Huay Kwang area) from home (or wherever) at a later date, to show his face to an Immigration inspector. This has not happened with the last three foreign employees that were sponsored - but it could happen. This would be routine, and would not be remarkable.

This arrangement can withstand total disclosure to Thai authorities - there is nothing dodgy about it.

Steve

Indo-Siam

"Nothing dodgy". From my understanding a work permit states the full address of thye place of employment, also meaning the actual specific address of the place of the actual work. If the acual work is being carried out at home or in another business premises, then surely this is breaking the law.

How can you say "nothing dodgy"?

I wonder whether this whole thread is breaking ThaiVisa policies:

- Advertisiing a service for reward (and not within the places on ThaiVisa where paid advertisements are allowed).

- Encouraging things which might well be against the law?

[Indo-Siam]

You need to grasp what is going on here. I am in the business of helping clients comply with Thai government rules and regulations. The audience to whom my proposal applies are people who will otherwise definitely be working here illegally - and not paying taxes on (at least) a specified minimum monthly income.

So - I am seeking to help illegals become legal.

You seem to be pushing for illegals to remain illegal, and be tax evaders. That makes you a promoter of illegal activity - exactly the opposite of what I am trying to do.

Nothing I propose should be of any interest to anyone who has an alternative of getting a well-paying job from a Thai employer who will give that individual work to do, in return for salary.

If you want to start your own post about whatever interests you - go ahead. I think you have already discredited yourself on this thread - by encouraging illegals to remain illegal.

Steve

Indo-Siam

[BWPattaya]

It is an interesting idea. I am sure that many people who wok legally in an office or other business do some work at home, even just answering email enquiries. So, the notion of a work permit giving someone permission to work in a nominated place of work could include other places where work must be done. For instance, the estate agent who takes someone in a car to view a house, or the sales rep who visits someone in their own office, hotel etc.

The stumbling block may be when the Thai employer has to declare on the work permit application what the foreign employee's tasks are. Wouldn't the actual work undertaken have to comply with those tasks permitted?

Edited August 8, 2010 by BWPattaya

[jazzbo]

I had some discussions a few years back with Mr. I-S on a similar arrangement -- I had the opportunity to do some contract work for a government agency but I had to supply my own work permit. I decided not to pursue the matter, but the conditions from I-S were that I had to re-imburse any out-of-pocket tax costs, etc., and live in the Bangkok Metro area. What is described above is a somewhat different arrangement.

At any rate, unless some of the posters have significant DIRECT experience with all and sundry matters regarding a large number of work permits and various employment and consulting / contract arrangements, as far as I-S goes, you are arguing with the wrong person.

[WarpSpeed]

It is an interesting idea. I am sure that many people who wok legally in an office or other business do some work at home, even just answering email enquiries. So, the notion of a work permit giving someone permission to work in a nominated place of work could include other places where work must be done. For instance, the estate agent who takes someone in a car to view a house, or the sales rep who visits someone in their own office, hotel etc.

The stumbling block may be when the Thai employer has to declare on the work permit application what the foreign employee's tasks are. Wouldn't the actual work undertaken have to comply with those tasks permitted?

Yeah these are all like minded concerns I have in my original post, it's nothing about seeking to circumvent the law currently to work illegally but there are specific regulations regarding working with a work permit as well, as far as the posters here are concerned but in fact for me anyway making certain that if I were to consider such a plan that I myself would not be skirting the law and knowing the labor laws as I do all of the concerns mentioned are valid..

So what if the actual job description doesn't even match the companies purview for example how does one explain that away?

Edited August 8, 2010 by WarpSpeed

[kandahar]

Steve, I think you looking to get a lot of people in trouble.

If this country was open to contractors just showing up willy nilly and "Buying" (wink, wink) a work permit, a lot of us would be doing so. They aren't.

I do not doubt that it is done a VERY small scale. I also don't doubt that once a company has your money, some of them will also quickly turn you in and probably collect a little reward for that. TIT. We, as foreigners, don't have the legal recourse in this country that most of us would have at home when someone tries to screw us.

What is the work that these "contractors" are doing? Is it on the list of "allowed" work or is it on the list of "dis-allowed" work?

This thing, if it takes off, looks to me like the type of thing that will hit the news in a year or so and make ALL of us look bad when they parade the offenders in front of the TV cameras after the big bust.

This just isn't the country for that nonsense. If someone needs to work and can't do it here, they need to go where they can. If you think you will pull the wool over the government's eyes and get away with it, you are probably right for about a year. Then, someone unhappy is going to spill the beans and a lot of people are going to be saying many bad words and wishing they would have had better sense. This government just isn't the government for foreigners to be screwing with.

And no, I am not trying to keep illegals, illegal. Nor are you trying to make illegals legal. You're trying to make a buck, help some of your cohorts make a buck and that is that. So, tell us- What is YOUR work permit based on? I suspect it is pretty shady and tied into a "real" Thai company. I'm hoping the gov. folks take a hard look at the thread and then a hard look at your IP address and then a hard look at you. Because, I think you're really trying to tempt people into parting with their money for your gain only; not to help anyone. And those people are going to lose, maybe a few years in jail and maybe, just lose their right to be in this country ever again. All for a buck for you.

[scorecard]

You need to grasp what is going on here. I am in the business of helping clients comply with Thai government rules and regulations. The audience to whom my proposal applies are people who will otherwise definitely be working here illegally - and not paying taxes on (at least) a specified minimum monthly income.

So - I am seeking to help illegals become legal.

You seem to be pushing for illegals to remain illegal, and be tax evaders. That makes you a promoter of illegal activity - exactly the opposite of what I am trying to do.

Nothing I propose should be of any interest to anyone who has an alternative of getting a well-paying job from a Thai employer who will give that individual work to do, in return for salary.

If you want to start your own post about whatever interests you - go ahead. I think you have already discredited yourself on this thread - by encouraging illegals to remain illegal.

Steve

Indo-Siam

You started the thread on a public webboard, so put up with whatever replies you get.

My idea of a lawyer is someone who continues the discussion with valid legal points rather than replying with abuse.

You were never on my potential lawyers list and now you never will be.

As for your comments about me encouraging illegals to be illegal, some lawyers are well known for spin - the ability to twist the comments into something completely different, how come the name amsterdam now comes to mind.

[kandahar]

Steve, I see now that you have started a different thread on this forum with this same subject three different times today. Looks like they deleted one of them. I wonder why not all three? This isn't Steve's free advertising board now, is it?

C'mon, man. Give up a little baht for George's ThaiVisa advertising branch and quit Bogarting the freebies for your personal gain. If you can do it, we all can.

[scorecard]

Can we have a comment from the appropriate moderator please.

[FritsSikkink]

It smells fishy to me

[Indo-Siam]

Steve, I see now that you have started a different thread on this forum with this same subject three different times today. Looks like they deleted one of them. I wonder why not all three? This isn't Steve's free advertising board now, is it?

C'mon, man. Give up a little baht for George's ThaiVisa advertising branch and quit Bogarting the freebies for your personal gain. If you can do it, we all can.

Let's just say I'm taking a bit of license in return for this: http://www.thaivisa.com/incorporation.html

What is that? That is the content that has been on the the parent website for this forum since that webpage was first published - probably in early 2003. It was copied from a now defunct discussion board thread at an unrelated website, and used without my knowledge or permission. The information at that link was valid in 2003 - but has not been valid since. Over the years I have received quite a few jeering messages criticizing me for the outdated information - but that has always given me chance to at least communicate with a new prospect. I am presently in communications with ThaVisa about resuming my status as a board sponsor (I used to be a paying sponsor) - if they agree to offset my fee for updating the content at that link to be current and correct. Any questions? Or do you think that unauthorized use of someone else's work is OK?

[kandahar]

Steve, I see now that you have started a different thread on this forum with this same subject three different times today. Looks like they deleted one of them. I wonder why not all three? This isn't Steve's free advertising board now, is it?

C'mon, man. Give up a little baht for George's ThaiVisa advertising branch and quit Bogarting the freebies for your personal gain. If you can do it, we all can.

Let's just say I'm taking a bit of license in return for this: http://www.thaivisa....orporation.html

What is that? That is the content that has been on the the parent website for this forum since that webpage was first published - probably in early 2003. It was copied from a now defunct discussion board thread at an unrelated website, and used without my knowledge or permission. The information at that link was valid in 2003 - but has not been valid since. Over the years I have received quite a few jeering messages criticizing me for the outdated information - but that has always given me chance to at least communicate with a new prospect. I am presently in communications with ThaVisa about resuming my status as a board sponsor (I used to be a paying sponsor) - if they agree to offset my fee for updating the content at that link to be current and correct. Any questions? Or do you think that unauthorized use of someone else's work is OK?

Okay. They owe you, you're collecting. No problem. But your idea sucks.

Edit. And truly, I see it as dangerous. There must be something different you can do. Again, if a guy is doing legitimate work, he doesn't need your scheme. If he isn't doing legitimate work, he doesn't need to be working at all.

Edited August 8, 2010 by kandahar

[scorecard]

Steve, I see now that you have started a different thread on this forum with this same subject three different times today. Looks like they deleted one of them. I wonder why not all three? This isn't Steve's free advertising board now, is it?

C'mon, man. Give up a little baht for George's ThaiVisa advertising branch and quit Bogarting the freebies for your personal gain. If you can do it, we all can.

Let's just say I'm taking a bit of license in return for this: http://www.thaivisa....orporation.html

What is that? That is the content that has been on the the parent website for this forum since that webpage was first published - probably in early 2003. It was copied from a now defunct discussion board thread at an unrelated website, and used without my knowledge or permission. The information at that link was valid in 2003 - but has not been valid since. Over the years I have received quite a few jeering messages criticizing me for the outdated information - but that has always given me chance to at least communicate with a new prospect. I am presently in communications with ThaVisa about resuming my status as a board sponsor (I used to be a paying sponsor) - if they agree to offset my fee for updating the content at that link to be current and correct. Any questions? Or do you think that unauthorized use of someone else's work is OK?

Okay. They owe you, you're collecting. No problem. But your idea sucks.

Edit. And truly, I see it as dangerous. There must be something different you can do. Again, if a guy is doing legitimate work, he doesn't need your scheme. If he isn't doing legitimate work, he doesn't need to be working at all.

So in your eyes Thaivisa 'owes you'. So you decide you'll get ahead by trying some free advertising, which breaks the ThaivVisa rules, which are there for good reasons.

Nice ethics for a lawyer!

You won't be getting the chance to give me any legal advice.

[Indo-Siam]

OK - I am primed and game to take on all comers. You are on my turf - my field of expertise - and I have literally about 15,000 hours of direct supervisory experience in Bangkok, handling both routine permit and company operations issues - and also handling and mitigating problems - for well over 150 clients/companies in Thailand.

So - let's take just one of the five scenarios - and I did not make these up, out of my imagination - I have previously dealt with assisting customers with every one of these scenarios - most of them several times.

Scenario #5:

5. Someone who wants to work for a significantly profitable Thai SME company that wishes to employ that foreigner, but cannot do so without raising registered capital above the 5,000,000 baht level, which results in 250,000 baht additional corporate income tax on the first 3,000,000 baht in annual profits.

What does that mean? Let me explain:

If you are the foreign manager of a Thai company that has 4,000,000 baht registered capital, and which sponsors two foreigners (not married to Thai spouse) with work permit - and if that company earns 3,500,000 baht per year in profits - here are the corporate taxes you pay:

15% on the first 1,000,00 baht in annual profit = 150,000 baht tax

25% tax on the next 2,000,000 baht in annual profit = 500,000 baht tax

30% tax on all annual profit above 3,000,000 baht = 150,000 baht tax

Total tax owed/paid: 800,000 baht

Now, if that company wishes to employ another foreigner (not married to a Thai), it must increase its registered capital to 6,000,000 baht. But - as soon as registered capital exceeds 5,000,000 baht, the corporate tax rates that apply to company profits go up - to flat rate of 30%:

30% on the first 1,000,00 baht in annual profit = 300,000 baht tax

30% tax on the next 2,000,000 baht in annual profit = 600,000 baht tax

30% tax on all annual profit above 3,000,000 baht = 150,000 baht tax

Total tax owed/paid: 1,050,000 baht

So - adding that third foreigner increases net loss to corporate taxes by 250,000 baht per year.

So - let's imagine that you could magically sit down with representatives of Work Permit offivce, and Revenue Office - and you posed to them this line of inquiry:

"I know that if I raise company capital to hire a third foreigner, I must pay the extra tax. Could I instead employ a foreign worker - but as a contractor, working for another Thai company - and thereby get the work accomplished, but without increasing my corporate taxes?"

What do you think those Thai officials would say?

I think they would say: "Yes, you could. A Thai company can employ contractors, without affecting the company's tax status. Your company just must withhold normal corporate tax withholding of 3%, from all invoice payments to the contractor company that actually employs the contractor."

So - the company manager then arranges to receive the services of the chosen foreigner - but as an outside contractor, employed by my company. I employ that person - and designate in his work permit that his full time role at my company is to provide on-site support to the "client" company - keeping the client happy. Each month, we invoice the client company for an amount equal to the sum of: employee's salary, plus 750 baht company social fund matching payment, plus a profit increment - let's say 17,500 baht. There is nothing sinister here - my company is simply a contractor that has proposed a total fee that gives the client company a positive outcome, but also gives my company an acceptable profit.

17,500 baht x 12 = 210,000 baht - compared to additional annual corporate taxes of 250,000 baht, if they directly employ the worker.

Now - you tell me what problem the Thai government would have with this arrangement? Every single aspect is completely proper and legal. The Thai government is receiving personal income tax from the employee for his full salary - and is receiving 3% of gross amount of monthly invoices as corporate services withholding against my company, and is also receiving 7% VAT paid by the client company (collected and paid in by my company). The Thai government would consider this situation to be absolutely routine.

That is one example - for one of the five scenarios. I can give a similar back-story for each situation.

If your thinking is so two-dimensional that you cannot grasp the lack of issue here, then that is not my problem. My job is to find ways to solve client challenges, in ways that fully comply with the letter of Thai law, but end up with a win-win-win-win outcome:

Employee is happy - he's got employment at his agreed-upon salary

Client company is happy - and achieved a net cost savings

Thai Government is happy - it is collecting at least as much tax as it could under any alternative scenario

My company is happy - we made a bit of profit

I don't pursue any directions that fail to make all parties happy - because there is no need to do so.

The only real issue is the size of my company's profit increment as the contractor. Well, that is for me to negotiate. And - I negotiate against whatever the next best available option is for the client. Most businessmen - if given the choice between a 210,000 baht expense, and a 250,000 baht expense - will agree to the lower expense.

Most nameless, unimaginative, two-dimensional malcontents who like to snipe at others, but who have never had to meet meet a payroll, and have never been tasked to find cost-saving solutions for customers, while sill making a profit themselves - well, they will just throw a tantrum, and snivel that this cannot possibly be correct (because they didn't think of it). Hey - man up! I paid my dues to gain the experience that I have - and to fill my "toolbox" with tools that others have not been forced to develop.

To prospective clients: I'm pretty hard on anonymous detractors - whom I consider one step removed from being trolls - who are just out to wind-up anyone who dares to think "outside the box." I and my Thai staff go to great lengths to take care of those clients who put their faith in us - and we defend clients against injustices just as fiercely.

There is never a traffic jam on "the extra mile".

Cheers!

Steve

Indo-Siam

[Sunny Valentine]

Lets see if i get this right.

We have a foreigner, who is doing some work here. Currently illegal, as there are no fully legal ways to do work here which has no income trail in Thailand, and does not need (and/or can't afford the requirements of maintaining an office, staff, and the like). For instance, a novel writer, programmer, translator, web designer doing business with clients abroad, over the Internet, without the need and without the means to maintain a corporate structure here in Thailand.

The only way he/she (and as I see it, this includes many people, probably also Administrators as well as Moderators of Thailand related Web Boards, whether they work for free or not, as, as we all know, this is not an issue when considering the crime of "working" legally or illegally.) could do is by creating a bogus "Company" structure, and possibly also create bogus income in order to appease the bureaucracy.

So, this person has no choice but to either break the law one way or the other, or maybe get an employment to do whatever he is doing.

By running all his bills (and in a lot of cases there are none, as his business is fully legally registered in his home country) through a Thai Company, that sponsors him a WP, and in return bills him for services rendered, I still see a smell of questionable legality here, but miles and miles below any other solution, apart from leaving this country altogether.

Its the details that separate such a scheme from a fraudulent attempt to circumvent existing laws, and these have to be looked into for sure.

If all is done transparent, the salary is paid as well as the contribution to the company, and some details like location and workplace can be sorted, I see no harm from the start.

The devil might be in the details, or not. But the laws of foreigners working with all the incongruity and schizophrenia involved deserves a creative solution, in cases where fully legal solutions are not available, for reasons beyond the applicant's means.

[kandahar]

OK - I am primed and game to take on all comers. You are on my turf - my field of expertise - and I have literally about 15,000 hours of direct supervisory experience in Bangkok, handling both routine permit and company operations issues - and also handling and mitigating problems - for well over 150 clients/companies in Thailand.

So - let's take just one of the five scenarios - and I did not make these up, out of my imagination - I have previously dealt with assisting customers with every one of these scenarios - most of them several times.

Scenario #5:

5. Someone who wants to work for a significantly profitable Thai SME company that wishes to employ that foreigner, but cannot do so without raising registered capital above the 5,000,000 baht level, which results in 250,000 baht additional corporate income tax on the first 3,000,000 baht in annual profits.

What does that mean? Let me explain:

If you are the foreign manager of a Thai company that has 4,000,000 baht registered capital, and which sponsors two foreigners (not married to Thai spouse) with work permit - and if that company earns 3,500,000 baht per year in profits - here are the corporate taxes you pay:

15% on the first 1,000,00 baht in annual profit = 150,000 baht tax

25% tax on the next 2,000,000 baht in annual profit = 500,000 baht tax

30% tax on all annual profit above 3,000,000 baht = 150,000 baht tax

Total tax owed/paid: 800,000 baht

Now, if that company wishes to employ another foreigner (not married to a Thai), it must increase its registered capital to 6,000,000 baht. But - as soon as registered capital exceeds 5,000,000 baht, the corporate tax rates that apply to company profits go up - to flat rate of 30%:

30% on the first 1,000,00 baht in annual profit = 300,000 baht tax

30% tax on the next 2,000,000 baht in annual profit = 600,000 baht tax

30% tax on all annual profit above 3,000,000 baht = 150,000 baht tax

Total tax owed/paid: 1,050,000 baht

So - adding that third foreigner increases net loss to corporate taxes by 250,000 baht per year.

So - let's imagine that you could magically sit down with representatives of Work Permit offivce, and Revenue Office - and you posed to them this line of inquiry:

"I know that if I raise company capital to hire a third foreigner, I must pay the extra tax. Could I instead employ a foreign worker - but as a contractor, working for another Thai company - and thereby get the work accomplished, but without increasing my corporate taxes?"

What do you think those Thai officials would say?

I think they would say: "Yes, you could. A Thai company can employ contractors, without affecting the company's tax status. Your company just must withhold normal corporate tax withholding of 3%, from all invoice payments to the contractor company that actually employs the contractor."

So - the company manager then arranges to receive the services of the chosen foreigner - but as an outside contractor, employed by my company. I employ that person - and designate in his work permit that his full time role at my company is to provide on-site support to the "client" company - keeping the client happy. Each month, we invoice the client company for an amount equal to the sum of: employee's salary, plus 750 baht company social fund matching payment, plus a profit increment - let's say 17,500 baht. There is nothing sinister here - my company is simply a contractor that has proposed a total fee that gives the client company a positive outcome, but also gives my company an acceptable profit.

17,500 baht x 12 = 210,000 baht - compared to additional annual corporate taxes of 250,000 baht, if they directly employ the worker.

Now - you tell me what problem the Thai government would have with this arrangement? Every single aspect is completely proper and legal. The Thai government is receiving personal income tax from the employee for his full salary - and is receiving 3% of gross amount of monthly invoices as corporate services withholding against my company, and is also receiving 7% VAT paid by the client company (collected and paid in by my company). The Thai government would consider this situation to be absolutely routine.

That is one example - for one of the five scenarios. I can give a similar back-story for each situation.

If your thinking is so two-dimensional that you cannot grasp the lack of issue here, then that is not my problem. My job is to find ways to solve client challenges, in ways that fully comply with the letter of Thai law, but end up with a win-win-win-win outcome:

Employee is happy - he's got employment at his agreed-upon salary

Client company is happy - and achieved a net cost savings

Thai Government is happy - it is collecting at least as much tax as it could under any alternative scenario

My company is happy - we made a bit of profit

I don't pursue any directions that fail to make all parties happy - because there is no need to do so.

The only real issue is the size of my company's profit increment as the contractor. Well, that is for me to negotiate. And - I negotiate against whatever the next best available option is for the client. Most businessmen - if given the choice between a 210,000 baht expense, and a 250,000 baht expense - will agree to the lower expense.

Most nameless, unimaginative, two-dimensional malcontents who like to snipe at others, but who have never had to meet meet a payroll, and have never been tasked to find cost-saving solutions for customers, while sill making a profit themselves - well, they will just throw a tantrum, and snivel that this cannot possibly be correct (because they didn't think of it). Hey - man up! I paid my dues to gain the experience that I have - and to fill my "toolbox" with tools that others have not been forced to develop.

To prospective clients: I'm pretty hard on anonymous detractors - whom I consider one step removed from being trolls - who are just out to wind-up anyone who dares to think "outside the box." I and my Thai staff go to great lengths to take care of those clients who put their faith in us - and we defend clients against injustices just as fiercely.

There is never a traffic jam on "the extra mile".

Cheers!

Steve

Indo-Siam

Okay Brainiac. It's your idea, you have a box of tools. You're a genius.

We'll see you on TV next year in the line-up. And don't be one of those that hang their heads down so we can't get a good look at the face. Man up and take credit for your idea. Remember me and wave at me through the camera. I want to be able to tell my friends, "Hey! That's the guy! He looks good in bracelets!"

Good night. I've got real work to do tomorrow. And it is legal.

[Indo-Siam]

I'm going to add a sixth scenario:

You are an entrepreneur - or are the manager of a business outside Thailand - who has an idea about launching a business (or a Thailand office for an overseas company) - but you have a great deal of uncertainty about whether the business will work out in Thailand. Or - whether the timing is right, for your idea. You know that if you start a company, you will have a significant initial cost for incorporation, and then - if the business does not work out - you will need to close or otherwise dispose of the "failed" company - and this will likely entail a significant cost.

Additionally, at the outset, you only need a couple of employees - maybe including one foreigner, or maybe just Thais. You don't have any use for four Thais.

Now - you are provided an option to set up another way - by having your initial (two?) employees be formally employed by a Thai employer of record. You have no incorporation start-up costs, and - if the venture fails - you have no liquidation costs - other than severance pay for any terminated employees. The monthly carrying costs (including a profit increment collected by the employer of record, as part of monthly invoice payments) - and also any permit costs - are the same or less than the similar costs of operating your own company - and you have no need to "carry" any phony employees needed to qualify a company to sponsor work permit or long-term Immigration permit.

If your start-up venture does work out, the "employer of record" is fully cooperative in supporting your "spin off" to become your own company - and when your company is created, you "hit the ground running" - you already have customers lined up.

There is nothing "dodgy" here - there just has to be a source of income for the employer of record to invoice each month, to obtain funds to pay all obligations of the "incubator" program.

If employment of a foreigner is involved, the foreigner's work permit specifies that his job is to pursue whatever business he needs to do, wherever he needs to do it. If he wants (and pays for it), employer of record can set incubator team up with office space, work stations, etc - all of which can migrate with the team, if it spins off into its own company.

The Thai government is happy - everyone is employed, and doing what their papers say they are doing. It is completely routine for employees working together in a company to decide to team up, and break away and from their employer to launch their own company. In "conventional" situations, the one tension that occurs is that the losing employer is often (invariably?) alarmed to have employees spin off and take customers with them - to the point of initiating legal challenges. But - under this incubator concept - this is not an issue - and losing employer is supportive of the transition. It just needs to fill the vacancy created with a new incubator "client" - pursuing a new and unrelated business.

If this "smells funny", then you just don't understand how things really work here. This is completely unremarkable. We have already executed this program several times - with outcomes falling both ways (successful spin offs, or "throw in the towel").

As a businessman - does this alternate way to get started offer any compelling advantages? I think it does - to the point that a LOT more people ought to be looking into this approach. For one thing - under this approach, the client launching a fragile, embryonic start-up concept can devote 100% of his effort to making his risky business mission succeed - without being distracted by the burden of handling unfamiliar company administration. Dealing with those responsibilities can wait until the client has established a proven business penetration, and has customer relations well-established, and well in hand.

I wish that I had originally started out this way. It would have saved me a lot of expense, and a lot of anguish. The SARS mess in 2003 hurt my young company badly - and I had to carry way too much overhead during a very lean period.

The one dagger that has not yet been unsheathed by critics is "How do we know that sponsor company will not take the money and run - i.e. not pass the agreed-upon amounts on to the incubator program employees?" That's actually a fair question. Somehow, the first few clients we had for this sort of program manged to overcome their terror, and proceed. Those past clients are now available to serve as references - including several whose monthly invoices were north of 300,000 baht per month.

Cheers!

Steve

Indo-Siam

[Indo-Siam]

"Nothing dodgy". From my understanding a work permit states the full address of thye place of employment, also meaning the actual specific address of the place of the actual work. If the acual work is being carried out at home or in another business premises, then surely this is breaking the law.

How can you say "nothing dodgy"?

You seem to be under the impression that a foreigner with a work permit must sit, chained to a specific desk in a company office, 9-5, Monday to Friday. That is not the case. The job description on a work permit can specify any work locations(s) that are consistent with the description of the business, as is also listed in the work permit booklet. Two foreigners working for one company need not have designated work locations that are the same - nor need they be dealing with the same activities of a company. The only thing that is required is that the foreign worker needs to be capable of coming in to the company office if he is summoned there by a Government official. In eight years, with my main Thai company having had registered addresses at seven locations, and having at one time or another employed five different foreigners, there has only ever been one Thai official show up and ask to see the foreigner - and that was an Immigration inspector, to see me, in 2002, at my first company office on Silom Road. I was not in the office at the time (I was at home) - and I had to go to my office to be part of a photo of me and my Thai staff. I think the inspector read a newspaper while waiting the 45 minutes it to for me to show up. He was earning salary while sitting/reading - and could care less. I just had to show up.

My other Thai company has employed four foreigners - all under the employer of record program - and none of them were ever "inspected" - and none of them ever spent any time at the office - except once per year, to be photographed with the Thai staff. That is a firm requirement - even for work permits for a foreigner with Permanent Residence status, serving as Managing Director of a company with 600,000,000 baht registered capital.

Cheers!

Steve

Indo-Siam

[Rama]

This is not legal. This discussion thread should be stopped.

[BWPattaya]

Have we exhausted the free advertising for Steve now?

[Indo-Siam]

This is not legal. This discussion thread should be stopped.

What is not legal? A company hiring a foreigner, and then assigning that foreigner to tasks that help the employing company earn a profit? You seem to think that the Thai government or Thai law are concerned about the internal business models and motivations of Thai companies, and that the only way that a foreigner can work for a Thai employer is in a situation where that employer unilaterally creates work that needs to be done, runs a recruiting campaign, interviews a bunch of candidates, selects one, trains that person, and then assigns that person to go do the work. And - that the employer is responsible for going out and finding customers to create work for the foreign employee - and that this search for customer work MUST occur after the employee is hired.

If that is what you believe , then that idea is total delusional fantasy.

Here's a routine (albeit unconventional) approach to pursuing a business services business model:

I want to expand my company's B-2-B business, to earn more profit.

My chosen method of finding customers is to recruit candidates who know of a customer that needs work accomplished in Thailand, and the customer wishes to secure the services of that candidate but - for whatever reason - that customer is not able or willing to directly hire that foreigner.

Once such a candidate presents himself (or herself) to me, it is up to me to contact whomever makes decisions for the end customer (and that may be the candidate himself/herself), and I need to create a mutual agreement with that end customer in regards to a commercial arrangement, and to the delivery of required services to that customer. Once I have that agreement, I hire the candidate, and assign that individual to fulfill my company's obligations to the end customer.

This is absolutely routine - and is of absolutely no interest to Thai officials. They care only that all aspects of clearly published laws are observed: in regards to work permits, Immigration permits, payment of taxes, etc.

Now - if you want to talk about legality, let's talk about slander. This is public discussion forum, and you have publicly accused me of promoting illegal activity - to effectively bring scorn upon me. You are evidently located in Chiang Mai (which is where the business office for ThaiVisa is, according to the invoices they issue) - and I'm sure that your IP address can be recovered from Thai Visa by legal challenge. I'm calling you out, and I am accusing you of publicly defaming me with false claims. Here is the Thai law on "defamation" (they do not use the English word slander in their translation):

Criminal Code of Thailand

Section 326. Whoever, imputes anything to the other person before a third person in a manner likely to impair the reputation of such other person or to expose such other person to be hated or scorned, is said to commit defamation, and shall be punished with imprisonment not exceeding one year or fined not exceeding twenty thousand Baht, or both.

You seem to think that I don't know what I'm doing. Would you like to face me in Thai court, with the referenced penalties in play? For all the other anonymous trolls, it will be entertainment. For you - it will be educational, and expensive. And - if you lose, and are convicted - I can also file a civil claim for damages. I have my own lawyer on staff - and we can do this.

“The person who says something cannot be done should never interrupt the person who is already doing it” - Chinese Proverb

Molon labe - Leonidas

“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly; who errs and comes short again and again; because there is not effort without error and shortcomings; but who does actually strive to do the deed; who knows the great enthusiasm, the great devotion, who spends himself in a worthy cause, who at the best knows in the end the triumph of high achievement and who at the worst, if he fails, at least he fails while daring greatly. So that his place shall never be with those cold and timid souls who know neither victory nor defeat.” - Theodore Roosevelt

Think about it.

Steve

Indo-Siam

Edited August 9, 2010 by Indo-Siam

[exlaw]

Ok. Just joined, so i have no seniority on the member status. However, I have been in thailand over a decade and been involved with legal advice, and account audits and the Thai tax folks. As we all know the idea of "legal" in Thailand is a moving target. Prostitution is illegal. So is bribery. So is paying cash to the police in lieu of a ticket. What is legal and what is reasonable sometimes conflict. What seems to hold true is, the spirit of the law, and the idea behind it do tend to come thru.

Schemes such as this that are entirely "legal", that use some laws to circumvent others can have a tendency to find their way back around. All in all, the spirit of a work permit is to work at a company for specified job. No, it doest mean you are chained to the same desk every day, but for sure, it doesnt mean you pay 2,000 baht to the tax office and sit in Kho Chang chasing chicks all day, or live off trust fund money and wander around the Kingdom doing as you please. Your scheme/scam may not break any laws, but it certainly doesnt abide by the spirt of the work permit and imigration rules. Period.

And in my experience. The Thai government officials dont take kindly to foreigners taking the piss on the spirit of the rules.

Good luck with your new service. Caveat Emptor.

1. Someone who is married to a Thai, receives income independent of any Thai employer, but does not wish to "freeze" 400,000 baht in a Thai bank account somewhere for months at a time. So - that individual needs to show that they are paying personal income tax on a legal Thai monthly employment income of at least 40,000 baht.

- Paying tax against a non salary does work. Greg Lang is notiorus for doing it his own staff at Sunbelt, which is why they advise doing it with the companies they set up. So yes, it probably would "work". But technically, it isnt legal. The minimum wage law doesnt state "Foreigners must pay a minimuym tax" it says they must make a minimum wage. So technicaly, this is NOT legal. But, I've personally never heard of a problem with this scam/scheme. So when Steve says this is "perfectly legal", it would depend on your interpretation of "perfect". And, after that, it certainly doesnt abide by the spirit of the work permit, unless the persion is actually working there doing legitimate work.

2. Someone who is an employee of an overseas company that does not wish to set up an office in Thailand, but wishes (or is at willing) to have its employee in Thailand be in full compliance with Thai labor law.

- If they are working at company A (with a work permit for company A) but working on items for company B, and company A has nothing at all to do with company B, this clearly violates the spirit of the work permit. I doubt many government officials would grant you the leeway of the definition "full compliance with Thai labor law"

3. Someone who has his/her own business overseas, but who wishes to live in Thailand, with costs to support presence in Thailand able to be reimbursed by his/her overseas business.

- This is quite vauge. Could be full of holes. The spirit of work permits isnt to shelter workers in foreign business from having to set up legitimate premisis, but allowing them to stay in a non related business. Same as #2. Wishing it to be in full compliance with Thai labor law is quite a stretch.

4. Someone who lives and "works" in Thailand - independently - without a legal support structure, but who now needs to be able to legitimately invoice Thai customers, in a way that provides those customers with a valid tax receipt - with the resulting income stream being paid out to the foreigner as salary, by an employer of record.

- Sure. As long as that employer of record is doing that business. Which, if the foreigner is doing it, and the work permit is valid, then yes. This is perfectly legal. But then, the foreigner is basically giving their business name to a third party, has no control over the bank accounts, name, or future of the company, and you would take on all he liability of that person's product or service. When they are selling table lamps full of heroin. Guess what, someone will want to talk to the shareholders, MD and others in the company. And guess who goes to jail. I wouldnt want to be the MD signing in bank statements of products or services I knew nothing about. Good luck with that. Wish you well.

5. Someone who wants to work for a significantly profitable Thai SME company that wishes to employ that foreigner, but cannot do so without raising registered capital above the 5,000,000 baht level, which results in 250,000 baht additional corporate income tax on the first 3,000,000 baht in annual profits.

- This is a blatant tax scam. If the auditors catch on to it, you could end up paying all the tax, plus penalty. I've personally seen it. Millions of baht in back taxes and penalities for circumventing the spirt of the tax system; no it wasnt on this exact scheme, but something very similar that moved SG&A around to avoid claiming profits. And it was "legal". No one went to jail, but it cost alot of money. Your scheme is legal, yes, but not audit proof. You're a lawyer, not the tax office. When the tax office comes knocking, they do as they please.

[Indo-Siam]

exlaw - you took the time to be specific, so your comments deserve respectful reply.

Scenario 1 - you wrote "Paying tax against a non salary does work."

In doing so, you ignored what was in my original post: "For individuals seeking to make use of such an "employer of record" - what you have to be able to do is provide a source of income that the employer can invoice each month, within Thailand or overseas, to bring in each month sufficient gross income to pay ....."

I am talking about supplying outsourced labor within Thailand, to perform tasks in support of an overseas business. If you wonder if Thailand can accept this, look at http://www.boi.go.th/english/about/section7.pdf - Section 7.16. BOI promotion of Business Process Outsourcing (BPO) is for large scale activity - but I can assure you that small scale BPO activity is perfectly acceptable here, as long as you declare and administer it properly.

Scenario 2 - Same issue. I am supply BPO services - and my company does not need to be doing the same basic activity as the customers I support. I used to have ten Thai employees providing BPO services to HP Thailand - providing data processing and customer service for their distributor rebate program. HP is a machinery company - my company is not. No problem.

Scenario 3 - You write "The spirit of work permits isn't to shelter workers in foreign business from having to set up legitimate premises, but allowing them to stay in a non related business."

Friend, there is no "spirit" to a work permit. It is authorization to do the job specified in the booklet, at the location(s) specified in the booklet, supporting the activities specified in the booklet, at the salary specified in the booklet. If the Work Permit office issues the permit - and the worker is doing what the work permit booklet specifies - and if the employing company is doing what it declares as its activity - and is paying all appropriate taxes - then the Thai government is content.

Scenario 4 - You are absolutely correct that bad things can happen. The employer has to use judgment, and be selective in who he will employ. But - every risk you list can also apply to any other employee, employed by any company. So - your argument is not more relevant to my scenarios than to any other employment situation.

Scenario 5 - It is not a tax scam. All over Thailand, there are contract employees working (effectively) full time at companies that are not their direct employer. Probably 85% of this company's employees work full time at the sites other companies: http://www.adecco.co.th/. The fact that Company A has a foreign employee working at Company B, as a contract employee, is unremarkable, and not a legal issue. I can't believe that you don't grasp how unremarkable this is.

What you and others may be "mis-remembering" is how Thai labor law treats severance pay for "contract employees" that are effectively full time "regular" employees. For purposes of severance, the contractor is entitled to the same severance as regular employees - if that "contractor" becomes unemployed, when the end-user customer terminates his contractor role. That is true, but - in the absence of a labor relations dispute - there is no Thai prejudice against the contract work arrangement itself. All papers are in order, all required taxes are being paid - and there is no "cross-ministries" (between Revenue Department and Labor Office) consideration that "Gee, instead of using the perpetual contractor, the 4,000,000 baht company COULD instead increase its registered capital to 6,000,000 baht, directly hire he contractor as an employee, and then pay higher corporate taxes on profits". That is not at all how the ministry officials think - it just does not happen.

I am not a lawyer. I am a businessman, who helps other businessmen. I employ lawyers. I also employ accountants. As I wrote in an earlier post, I work hard to figure out how to create win-win-win-win:

End user company wins

Employee with work permit wins

Thai government wins

My company wins

Almost every critic here is telling me that the Thai government would have problems with the arrangements that I have proposed, if they had full transparency, and could see all the pieces. My company's interactions with Work Permit Office, Immigration, and Revenue Department on a weekly basis for 400 consecutive weeks suggests to me that none of these offices would have any problem. Taxes are being paid on all work, and all papers are in order. They would not even be able grasp why anyone would suggest that anything was wrong.

I have no problem with thoughtful Devil's Advocates. I am completely confident that the same processes that we have been using for years - time and again - will continue to work without any concern by Thai officials. We work hard to make sure that we comply with all of their expectations and requirements.

Steve

Indo-Siam

[exlaw]

Steve,

Thanks for the reply. If all your efforts are to support, as you suggest, exactly what is specified in the work permit, at the location in the work permit for the salary in the work permit and the job in the work permit, then yes, that is my meaning of the "spirit" of the work permit. I would kindly suggest that we agree on that point. That is exactly my meaning of the "spirit" of the work permit. I'll agree with you that it is quite exact, and not a strong suggestion. However, we both know, Thailand usually has leeway on things, so sometimes "close enough" is good enough.

Scenario 1. Not trying to ignore the original post. Lots of info here just missed it. If the salary is coming in, and actually being paid, and can be accounted for. Then, of course, it is legit. I know of many, many, many scenarios where people simply pay the tax to the labor dept and carry on. Not a bad idea. As mentioned, it does work and I've never known of a problem. However, technically, it is not legal. If it is as you suggest, then, yes, agreed. Legal.

Scenario 2. This is more down to the interpretation of the labor dept official than your broad swath of what your company does. If it is an honest effort to provide contract services: i.e. Consultants for Red Shirt Mob control, for example. Something which is a real need, performed by real people, who make a real salary for a 3rd party. Then sure. If the labor dept sees it that way.

Scenario 3. Agreed. As in the intro.

Scenario 4. Correct on the risks for you having the employee, however, a scenario as you outlined tends to draw more shady dealings than companies that employ people to do the work of that specific company. I would simply suggest that the risks are magnified in your model. Also, if the person is 100% legit, and they are running their invoicing thru your business, then they take, IMHO, outsized risks having to trust a 3rd party firm. Not trying to say either side is untrustworthy, just suggesting that the risks must be evaluated in the context of the business.

Scenario 5. It is a tax scam if the tax office says it is. If the company uses a contractor in lieu of raising their capital, and thereby their tax base, as you specifically suggested, it can be interpreted on either side of the fine line between "tax avoidance" (everyones right) and "tax fraud" which is illegal. It isnt up to me, or you, it is up to the tax office and who shows up on the day. They are the end judge. Agreed in your Adecco example. And if people are hiring one of those workers for the specific purpose of avoiding a higher tax bracket. The same could apply. It isnt about the contract worker, it is about how the tax office interprets the intention.

I think the main point of dispute on all the posts here, isnt about the exact legality of how to obtain official paperwork and official visas and official labor status etc. It is the fact that most of these services are used for the purpose of avoiding the need to travel out of the country, or the need to have 400,000 baht in the bank, or some other rule. The Thai visa and work permit system allows for just about every reasonable scenario of people staying in Thailand legitimately, and they do that without the need for 3rd party intervention.

The Chinese govt issued a legal, and inaccurate, passport to a 14 year old gymnist to say she was 16. Now, she can legally apply for a drivers license in most countries using that official legal document. And the driver's license would be valid and a legal ID and legal document. However, in reality, legally she really isnt allowed to drive. Most people see it for what is is, and know the real picture for what it portrays. I know a govt official who, for the right price, can issue a Thai passport to foreigners. It is a real, legal passport, which, in reality is only available to Thai citizens. The holder can go to Singapore and open a bank account under Thai citizenship etc. But, this legal document does not make the person Thai. They can not vote, receive an ID card, standard home loan, or a blue house registration book (well unless you know a different govt offical If your business is trying to mimic adecco and provide contract services for legit people in legit business, then sure, that is a business model. Thailand provides a way to do that.

And. If this model is used as a way to provide legal documents to undeserving people who wish to circumvent the system, as legal as it may be, there is always the danger that it goes pear shaped.

Im not calling you out on the legality of the service (except for the necessity for actual salary, which you concurred, by suggesting it would be accounted). Im more agreeing with most posters on this string saying that it appears to be, and could definitely be used as, a shield for people who wish to circumvent the system. And, if it is, then, it would most likely be interpreted by govt officials as not-legal.

However, if 100% of your clients are hardworking, honest candidates for work permits who find the simple system for applying for legit work permits tedious and overbearing to the point that they wish to pay you oversized amounts for potentially eyebrow raising papers, then, good luck to your endeavor. Maybe there is a market for that.

exlaw - you took the time to be specific, so your comments deserve respectful reply.

Scenario 1 - you wrote "Paying tax against a non salary does work."

In doing so, you ignored what was in my original post: "For individuals seeking to make use of such an "employer of record" - what you have to be able to do is provide a source of income that the employer can invoice each month, within Thailand or overseas, to bring in each month sufficient gross income to pay ....."

I am talking about supplying outsourced labor within Thailand, to perform tasks in support of an overseas business. If you wonder if Thailand can accept this, look at http://www.boi.go.th/english/about/section7.pdf - Section 7.16. BOI promotion of Business Process Outsourcing (BPO) is for large scale activity - but I can assure you that small scale BPO activity is perfectly acceptable here, as long as you declare and administer it properly.

Scenario 2 - Same issue. I am supply BPO services - and my company does not need to be doing the same basic activity as the customers I support. I used to have ten Thai employees providing BPO services to HP Thailand - providing data processing and customer service for their distributor rebate program. HP is a machinery company - my company is not. No problem.

Scenario 3 - You write "The spirit of work permits isn't to shelter workers in foreign business from having to set up legitimate premises, but allowing them to stay in a non related business."

Friend, there is no "spirit" to a work permit. It is authorization to do the job specified in the booklet, at the location(s) specified in the booklet, supporting the activities specified in the booklet, at the salary specified in the booklet. If the Work Permit office issues the permit - and the worker is doing what the work permit booklet specifies - and if the employing company is doing what it declares as its activity - and is paying all appropriate taxes - then the Thai government is content.

Scenario 4 - You are absolutely correct that bad things can happen. The employer has to use judgment, and be selective in who he will employ. But - every risk you list can also apply to any other employee, employed by any company. So - your argument is not more relevant to my scenarios than to any other employment situation.

Scenario 5 - It is not a tax scam. All over Thailand, there are contract employees working (effectively) full time at companies that are not their direct employer. Probably 85% of this company's employees work full time at the sites other companies: http://www.adecco.co.th/. The fact that Company A has a foreign employee working at Company B, as a contract employee, is unremarkable, and not a legal issue. I can't believe that you don't grasp how unremarkable this is.

What you and others may be "mis-remembering" is how Thai labor law treats severance pay for "contract employees" that are effectively full time "regular" employees. For purposes of severance, the contractor is entitled to the same severance as regular employees - if that "contractor" becomes unemployed, when the end-user customer terminates his contractor role. That is true, but - in the absence of a labor relations dispute - there is no Thai prejudice against the contract work arrangement itself. All papers are in order, all required taxes are being paid - and there is no "cross-ministries" (between Revenue Department and Labor Office) consideration that "Gee, instead of using the perpetual contractor, the 4,000,000 baht company COULD instead increase its registered capital to 6,000,000 baht, directly hire he contractor as an employee, and then pay higher corporate taxes on profits". That is not at all how the ministry officials think - it just does not happen.

I am not a lawyer. I am a businessman, who helps other businessmen. I employ lawyers. I also employ accountants. As I wrote in an earlier post, I work hard to figure out how to create win-win-win-win:

End user company wins

Employee with work permit wins

Thai government wins

My company wins

Almost every critic here is telling me that the Thai government would have problems with the arrangements that I have proposed, if they had full transparency, and could see all the pieces. My company's interactions with Work Permit Office, Immigration, and Revenue Department on a weekly basis for 400 consecutive weeks suggests to me that none of these offices would have any problem. Taxes are being paid on all work, and all papers are in order. They would not even be able grasp why anyone would suggest that anything was wrong.

I have no problem with thoughtful Devil's Advocates. I am completely confident that the same processes that we have been using for years - time and again - will continue to work without any concern by Thai officials. We work hard to make sure that we comply with all of their expectations and requirements.

Steve

Indo-Siam

[Indo-Siam]

I'd like to just generally clarify how the corporate tax system works in Thailand. For whatever reason, Thailand has selected 5,000,000 baht as the "magic number" of registered capital that marks the boundary between "large" business and "SME" (Small & Medium Enterprise).

Now - stop and think for a moment. To the business world, and to the Thai Revenue Department, "registered capital" conceptually represents two things:

1. The amount of start up capital needed, to enable a newly established company to survive, during the period from initiating operations, up until that company is bringing in enough monthly revenue to offset monthly costs - until it reaches "break even". If a company runs out of funds before it breaks even, it fails.

2. Capital can also represent the sum total of actual capital equipment - hard assets of the company. In this interpretation, the capital of the company represents the physical value of the property that could be acquired by someone who purchased the company, or the value that could be returned to the shareholders by liquidating the physical assets of the company.

In both cases, the conceptual reason for the SME tax break is in recognition of the fact that small businesses - those that start out with relatively low working capital, or a relatively small physical infrastructure - have a statistically high rate of failure. These companies have a relatively "shallow" depth of reserves, and can more easily be pushed into failure by even small delays in breaking even. Thus - a lower tax rate is imposed upon them, to give them a better chance of survival.

Now - in a world away from those practical considerations, over at the Labor Ministry, some mysterious forces came up with an arbitrary rule about how much registered capital is required at a company, per each foreign employee, in order to justify a work permit. This rule matters to the Work Permit office. This rule means absolutely nothing to the Revenue Department. It is not even vaguely present in their consciousness. To the Revenue Department, all Thai companies are equal - whether they have Thai employees, or foreign employees. There are no rules AT ALL within the Revenue Department that discriminate, and place different requirements upon companies, based on the presence of foreigners.

Now, a company with 4,000,000 baht and two work permits finds itself in a position where it wants to sponsor a third work permit. That company is highly profitable. It has no particular need for the SME tax break - but it still receives that benefit, because of its capital structure. It needs no more capital equipment, and is not weak on working capital - so it has no practical reason to need to increase registered capital. But - it now faces the artificial requirement - imposed by the Work Permit office - to increase its capital to 6,000,000 baht, in order to employ foreigner #3. This requirement is crystal clear to the Work Permit office. But it is totally illogical and unnecessary from the perspective of the Revenue Department.

I mean this LITERALLY - If you could walk into a Revenue Department office, get a Revenue Agent to sit down with you and look over your balance sheet, your income statement, your bank statements, and your most recent monthly tax filings - and you then asked the Revenue Agent: "We now wish employ one more worker - a foreigner - at 90,000 baht per monthly salary (or whatever). So - do you think that we need to increase our company's registered capital by another 2,000,000 baht?" If you did that, the Revenue Officer would laugh at you - and then point out that if you raised your company's registered capital to 6,000,000 baht, your company would have to pay higher corporate tax rates - and that would be stupid. Of course you don't want to raise your capital.

The key point: Adding one employee does not magically transform an SME into a large company. That is obvious - and that is the perspective that would exist at the Revenue Office. Their tax categories are based on the size of the business - not on the headcount of foreigners.

I am not making this up. Contrary to popular misconception (and unlike Revenue Departments in some other countries), the Thai Revenue Department is not at all predatory in regards to pressuring companies into doing things that have unfavorable tax consequences - and they cordially welcome any correct use of the existing tax code, to receive the most favorable tax treatment to which a company is legitimately entitled.

So - going back to my story of a mythical visit to the tax office for advice - if you now explained to the tax officer that a "silly rule" at the Work Permit office mandated that in order to hire a third foreign employee, the company had to increase registered capital to 6,000,000 baht - the revenue officer would probably shake his head in sympathy - and commiserate with you that this made no real sense, given your company's situation . If you then asked him for any creative but legal ideas about how to deal with this - I think that there is a really good chance that the officer would suggest that maybe - instead of hiring the employee with work permit - and having to increase registered capital - perhaps you could arrange to hire him as a contractor - so that you did no have to unnecessarily change your tax category. He would then add "That's what a Thai-managed company would do".

The real way to do this : send your Thai office manager and your Thai accountant to the revenue office to tell the same story.

Now - you can believe me or not. You can think that the Thai government is a monolithic entity, harmonious within itself, and with each part looking to enforce the rules of the other parts. And you can think that government offices go out of their way to prey on companies - particularly foreign-managed companies. But - this is simply not true. Each part of the government wants you to comply the rules of their department - but they have no problem whatsoever with you taking advantage of every beak and benefit that can legitimately be extracted from the rules of that office. They know that Thai-managed companies routinely stretch rules to and beyond the breaking point - and most officials probably chuckle quietly to themselves about how many potential benefits and cost savings are lost by foreign-managed companies, simply because they don't know any better.

It has been my experience that if you sit in front of a Thai official, and describe the application process that you are about to undertake at that office - and you ask for "tips, techniques, short cuts, and any other good ideas" about how to proceed, the official will IN EVERY CASE proceed to tell you every good idea that they can think of.

In each and every one of the following cases, this has been true:

At Thai FDA, in planning for processing import approval for an imported cosmetic

At Ministry of Education, in planning for processing registration of a language school

At BOI, preparing to process an application for a Regional Operating Headquarters

At the SEC, preparing to process an application for a financial adviser's license

At the IEAT, seeking to arrange duty-free imports of raw materials for a factory

At work permit office, preparing to arrange a non-BOI work permit in one jurisdiction, for someone who already had a One-Stop BOI work permit, from another jurisdiction

At Revenue Department, seeking guidance on how to handle contract losses associated with the death of a client who died in an airplane crash in Phuket, and who ran a construction business.

At Tourism Authority of Thailand, preparing to process TAT licenses

I will not go so far as to say that Thai Government Offices will enthusiastically and spontaneously volunteer good ideas as soon as you walk in the door - or will automatically go out of their way to ensure that you get the best possible deal for which you eligible. But if you use the correct approach, I have never encountered a failure.

The correct approach is: "I have the following problem/situation/challenge, to be processed through your office. We are new to this, but you have processed many similar situations. You must be an expert on this - so we'd like to benefit from the lessons you have learned. We'd also like to know how to make our application as easy as possible for your office to process. What expert advice can you give us?"

I've never known any office here to hold back on information, if you approach them this way.

The Revenue Department would have no problem with a company outsourcing work - to a contract webmaster (or IT manager), to a contract consulting engineer, to a contract salesman from a manufacturer's representative firm, to a contract financial advisory firm, to a contract human resources manager, to a contract product designer, or to a contract manufacturer - or just about anything else. 'Just make sure that you do the proper tax withholding.

Cheers!

Steve

“Fight one more round.

When your feet are so tired that you have to shuffle back to the center of the ring, fight one more round.

When your arms are so tired that you can hardly lift your hands to come on guard, fight one more round.

When your nose is bleeding and your eyes are black and you are so tired that you wish that your opponent would crack you one on the jaw and put you to sleep, fight one more round – remembering that the man who always fights one more round is never whipped.” - "Gentleman" Jim Corbett

Edited August 10, 2010 by Indo-Siam