Company Director Living Abroad

[ivowatson]

Need some confirmation.

My friend is a foreigner who lives in Europe and visits Thailand once a year.

Since a few years he is a director (with sole signature rights) in a Thai company.

Now, his lawyer says he needs a work permit if he wants to stay on as director in his company.

This lawyer told him before, he doesn't need a wp because he doesn't work or stay in Thailand.

Anyone knows about this?

Thanks.

[monty]

Being the sole director makes it a tad iffy, as the director actually has to work for the company, for example signing of the yearly audit. The simple act of signing as the director on behalf of the company is work!

Basically, as long as he does not put a single signature as the director while he physically is in Thailand, he should not need a WP.

In case of some dispute or problem, this would probably needed to get backed up by courier invoices/details and passport copies, clearly showing that the paperwork was sent to him abroad, signed abroad and returned by courier.

If he signs even one single paper during his yearly visit in Thailand, then yes, he needs a work permit.

[ivowatson]

Being the sole director makes it a tad iffy, as the director actually has to work for the company, for example signing of the yearly audit. The simple act of signing as the director on behalf of the company is work!

Basically, as long as he does not put a single signature as the director while he physically is in Thailand, he should not need a WP.

In case of some dispute or problem, this would probably needed to get backed up by courier invoices/details and passport copies, clearly showing that the paperwork was sent to him abroad, signed abroad and returned by courier.

If he signs even one single paper during his yearly visit in Thailand, then yes, he needs a work permit.

Thanks a lot. This is exactly the scenario; documents are sent by courier and signed and returned.

I just don't understand why this lawyer didn't say that in the first place.

Thanks again and enjoy your day.

[Rugbymad]

Sorry but Monty is not correct. Any Director of a Thai company requires a WP. At any one time there are several thousand foreigners who are directors of Thai companies both large and small who do not have WPs but technically they are breaking the law. It matters not whether they conduct all business outside or inside Thailand and if they come for a Board meeting here then it is clear.

[monty]

if they come for a Board meeting here then it is clear

What if they do not come to Thailand for a board meeting?

In this day and age with teleconferencing (for which one only needs skype) it can perfectly be possible to do all that while abroad. Being abroad does not stop anybody from running his company!

The law on alien labor clearly states that a WP is required for an alien if he does any work, paid for or not, while in Thailand.

What however is very well possible, is reluctance from the business registration department or any other official department to accept board meeting minutes signed by a foreign director without him holding a work permit, but I would guess that a good lawyer would punch that pretty easy with proper supporting documents, i.e. where the minutes of the meeting clearly state that the meeting was held through teleconference, along with all needed documents to support this.

Again, what legally should be possible might not always work out, as experience should have taught anybody in Thailand, that it is how the handling official sees the law, which will ultimately decide how anything should be handled.

In short, while he might legally be correct, his whole company and it's operations might grind to a halt because of the above situation.

[Rugbymad]

if they come for a Board meeting here then it is clear

What if they do not come to Thailand for a board meeting?

In this day and age with teleconferencing (for which one only needs skype) it can perfectly be possible to do all that while abroad. Being abroad does not stop anybody from running his company!

The law on alien labor clearly states that a WP is required for an alien if he does any work, paid for or not, while in Thailand.

What however is very well possible, is reluctance from the business registration department or any other official department to accept board meeting minutes signed by a foreign director without him holding a work permit, but I would guess that a good lawyer would punch that pretty easy with proper supporting documents, i.e. where the minutes of the meeting clearly state that the meeting was held through teleconference, along with all needed documents to support this.

Again, what legally should be possible might not always work out, as experience should have taught anybody in Thailand, that it is how the handling official sees the law, which will ultimately decide how anything should be handled.

In short, while he might legally be correct, his whole company and it's operations might grind to a halt because of the above situation.

Monty, if he doesn't come here then no problem cos he won't get caught. I speak from experience as one who fell foul of this rather strange rule. But that said Thailand is full of them.

[monty]

I speak from experience as one who fell foul of this rather strange rule. But that said Thailand is full of them.

You're sure right on that one

There are other things to think about, or at least make sure you have the back up paperwork.

As an example, a friend once took out first class insurance on his (own) company owned car. This car later on got totaled by another driver (employee).

Insurance company quickly agreed to pay out the claim, but just before issuing the cheque they asked to supply copies of my friends WP, with the relevant pages showing it was valid at the time he took out the policy.

Which luckily he had, but they did say that if he hadn't, they would not have paid based on the fact that without WP, he would not have had the legal authority to take out the policy on behalf of his company (as director).

[BWPattaya]

What the OP didn't mention is if the company actually trades or employs anyone. I know many people who have a company for housing purposes who do not hold work permits.

[ivowatson]

What the OP didn't mention is if the company actually trades or employs anyone. I know many people who have a company for housing purposes who do not hold work permits.

The company employs several people and I'm interested in working for them too but according to the lawyer, it's not possible to make a wp for me

because the only wp should go to the director.

So, in order to make a wp for me, they'll have to 'upgrade' to 4 million in capital first, which i guess must be fully paid and that's a problem.

Thank you all for the replies.

[monty]

What the OP didn't mention is if the company actually trades or employs anyone. I know many people who have a company for housing purposes who do not hold work permits.

The company employs several people and I'm interested in working for them too but according to the lawyer, it's not possible to make a wp for me

because the only wp should go to the director.

So, in order to make a wp for me, they'll have to 'upgrade' to 4 million in capital first, which i guess must be fully paid and that's a problem.

Thank you all for the replies.

This gives a bit of a new twist to the case. Indeed I could understand labor department questioning what is going one, with the director having no WP and the a new employee applying for one.

Additionally, it is the existing director who has to apply for your work permit (he has to sign of the board meeting minutes and all the application paperwork), which would be heaps of paperwork going back and forth.

Although if you are planning to become a director, labor dep. would likely agree, basically to the fact that there is a need to have a director present in Thailand.

The registered capital does not have to be paid up in most cases, it is merely an update done at the business registration department. This is assuming that the company is actually trading and has some healthy cash flow going through its accounts (so it can actually pay you!).

[Indo-Siam]

There is no Thai law that states "all foreign directors of a Thai company must have work permits in Thailand."

Directorship of a company is not "heritable." If a director dies, and he is also a shareholder, his shares may pass to his heirs - but the heirs do not automatically "inherit" the directorship. Directors must be appointed by a meeting of the shareholders, as specified by either the Civil and Commercial Code of Thailand, or (if more restrictive) in accordance with the company bylaws, as expressed in the articles of incorporation.

So - in a company whose principal owner is a foreigner, and if he is the only director - and if he wishes to ensure that if he dies, his heirs can exercise some control over the disposition of the company - and if the shareholders of the company agree with the practice - then an heir (family member) can be appointed originally as a director - off in the background, and having never set foot in Thailand. If the principal dies, then this "background" director can step up, travel to Thailand, obtain a work permit, and then function as executor of the "company" part of the estate of the deceased - in accordance with the company's articles of incorporation.

Nothing in Thai law prevents this practice, nor does it require or even imply that the "background" director must have a work permit.

A few ways to shoot down an argument that "all company directors must have a work permit" are:

1. There is no restriction in number of foreign directors that may be appointed, in relation to the amount of a company's registered capital. If the above assertion was true, a company would only be allowed to have as many foreign directors as its registered capital would support for work permits.

2. There is no restriction on foreign directors having residence addresses outside Thailand, and no requirement that a foreign director ever set foot in Thailand. If a director is not a shareholder (and there is no requirement that a director own shares), then he need not even participate in shareholder meetings. Since obtaining a work permit requires presence in Thailand, it is specifically and routinely possible for someone to be a company director, but not a work permit holder - based upon ineligibility for work permit - because of location.

3. Directorships come into being when the company registration summary page emerges from the Ministry of Commerce printer, on the day of incorporation. At that time - and for a minimum of at least ten days following incorporation, it is physically impossible for listed foreign directors to have a work permit for the company. In many cases, the process of obtaining a non-immigrant visa - which is a prerequisite for applying for a work permit and which must be obtained at a Thai diplomatic post outside Thailand - cannot begin until after company is created. So - in many, if not most cases - foreign directors might typically be able to obtain a work permit within 30 days following initial legal appointment as a company director. If the assertion was true, then Thai law would place a time limit upon how long foreign directors had to obtain a work permit. There is no such law. And Thai laws are not structured so that all subjects to such law MUST be in violation of that law, by definition, in every case, when they first become subject to that law.

So - reality pushes back against anyone who insists that "all foreign directors of a Thai company must have a work permit."

Once a company director is on the ground in Thailand, and wishes to exercise authority as a director - or if he wishes to receive compensation from the company for his services - or if he wishes to have his business expenses be deductible - in these situations, he needs to get a work permit.

It is routinely possible for a newly incorporated business to accomplish government processing tasks under signature of a foreign director WHO DOES NOT HAVE A WORK PERMIT - such as: obtaining tax and VAT registrations, and signing company portion of work permit application - because all of these tasks MUST be accomplished before work permit can be issued to the director who is signing - if he is the company's only director at that time.

Cheers!

Steve

Indo-Siam

[Sunny Valentine]

Once a company director is on the ground in Thailand, and wishes to exercise authority as a director - or if he wishes to receive compensation from the company for his services - or if he wishes to have his business expenses be deductible - in these situations, he needs to get a work permit.

Cheers!

Steve

Indo-Siam

Just curious: Would it be possible that a director living and working abroad, communicating with the Thai Co he presides by means of phone, Internet and courier services, receives a salary and expenses, without setting foot on Thai soil and without a Work Permit?

[Indo-Siam]

Just curious: Would it be possible that a director living and working abroad, communicating with the Thai Co he presides by means of phone, Internet and courier services, receives a salary and expenses, without setting foot on Thai soil and without a Work Permit?

No. But he can invoice the company for management consulting, as an overseas, outside vendor - with 15% foreign remittance tax withheld in Thailand. This is completely legal.

He could also receive payment as a "local" contractor - against just a copy of his passport photo page - with the company required to withhold 3%. In practice, this would work fine, and would be unlikely to be questioned. But it would be shaky, if ever examined closely. If amount earned annually exceeded about 200,000 baht, then personal income taxes would be due - even without a work permit - and it would be difficult to actually pay, without getting in trouble.

A foreign director who comes here, gets a work permit, and then return overseas can receive salary as if he lived in Thailand - the work permit system assumes local residence, but does not track time spent in or out of Thailand.

In general, travel expenses are only deductible if the locations where travel receipts originate (or air trips involve) are also locations to which invoices are sent, and from which income is received. This precludes going on globe-trotting vacations, and claiming them as business expenses.

Cheers!

Steve

Indo-Siam

[Sunny Valentine]

In general, travel expenses are only deductible if the locations where travel receipts originate (or air trips involve) are also locations to which invoices are sent, and from which income is received. This precludes going on globe-trotting vacations, and claiming them as business expenses.

Cheers!

Steve

Indo-Siam

Thanks for the info.

ow to the travel expenses: Does that mean that a business trip to meet an discuss possible business will not be deductible, in case no business is generated. Lets assume I run a company here, and another company in lets say Chile expresses interest in my services. I fly over to discuss details, but the project falls through. I should have correspondence and all to show as proof of genuine business interest though. Would that mean that all travel expenses would be considered borne out of my pocket by tax? I find this strange.

[Indo-Siam]

The Thai Revenue Department is quite tight on anything other than proper tax invoice (receipts) issued within Thailand.

They know that if they were not tight on international travel expenses, they would lose massive tax income due to all leisure travel being chalked up as business expenses. And - they place great pressure upon auditors to not give easy "passes" in this area.

Showing company income derived from an overseas location is the easiest, cleanest way to validate an expense as being business-related. There are other ways - i.e. showing (documenting) that your company was an exhibitor at an overseas trade exhibition; or documenting that you were a featured speaker at an industry seminar somewhere, related to your business. Maybe even documentation that you were presenting a proposal that failed to earn business.

But - the key work is "document" - with written evidence that overcomes suspicion. They want clear, documented evidence that establishes a business reason for the travel. Travel to and from Thailand for overseas-based director WITH WORK PERMIT is OK. Similar travel for director without work permit does not work - because his lack of work permit refutes a business purpose.

They use some sort of "thumbnail planning factors" to decide whether to dig into an expense category. It is something like: "As long as 'questionable' expenses in year do not exceed 0.03% of total annual revenues, they don't dig". It may even vary by size of annual turnover.

It does help to have an overseas issuer of a receipt put the Thai company's name and address on the receipt - in a borderline case, this may tilt a ruling in your favor.

Many companies never get a close look - because their income/expense profile is so unremarkable and "average" that they get passed by. Other companies get intensely scrutinized. Generally, if most of your company revenue involves VAT collection, your company's employee salaries are all well above minimums (i.e: not four Thais earning 6,118.00 baht each, and one foreigner earning 50,000.00 baht - exactly hitting all minimums), and all your submissions are in good order, and on-time - you get treated better.

Cheers!

Steve

Indo-Siam

[Gulfsailor]

I think there is one other thing with the OP's friend's situation, which could be an issue . That is how the country he is residing in, is seeing his business in Thailand. Many Euopean revenue departments assess foreign business activities as (partly) taxable in their country when the business is run from their country. Where a business is 'run' from is highly debatable in many cases, but a sole director residence is a good reason for the country to (at least partly) tax the foriegn company's income. I have this issue the other way around. I am the sole director of a Dutch company (not the owner) and cannot officially relocate to Thailand (where I spend most of my time) as that would likely mean that Dutch reveue department will act as if the Dutch company is no longer Dutch, with me running it from Thailand. They would still tax on the money generated from sales in The Netherlands, but getiing specific business permits and import permits would be more difficult for a 'foreign' company. And I have no idea what this would mean in regards to be taxed personally in Thailand...

[Arkady]

I was the sole director of a

Thai company for several years without a work permit. The lawyer that set it up warned that I might encounter problems with a government dept at some point, if they refused to accept my signature without a copy of a WP. I signed docs with the Revenue Dept and the Commerce Ministry for several years and was never asked about a WP. I guess things might have changed or, more likely, it just depends on the individual officers. The Immigration Dept certainly rejects applications for PR, if they find out the applicant is a director of a company that is not listed in his WP. I think that technically the situation described by the OP should not require a WP but I can believe that the Labour Ministry might not accept an application for a Wp for another employer signed by the first director with no WP. I had some involvement once with a foreign controlled company that had two authorized directors who both resided overseas and hardly ever came to Thailand. In that case, they managed to get two work permits for the expats on the spot without any problem but possibly because they employed 50 or 60 Thai staff. As usual the law is left deliberately vague and left open to interpretation by government officials according to them whims.

[asiawatcher]

As a Director of a Thai company I was required to hold a Work Permit and still do - but I live here. I found later the prejudice in so many areas against foreign directorships, it was not worth while. Whilst I still maintain a work permit under my own company, all shares and the new MD are Thai. It made life more bearable and cleared up a lot of the grey stuff! Now I am simply on a salary and everyone else signs off on me not the other way around. It also takes the Farang name from the spotlight!

[IMA_FARANG]

If I were you or that director I would get a Thai law firm to give you a written opinion on whether or not he requires a Work Permit...before the company commits itself to either side. I know it seems silly, but under my understanding of Thai law (and I am NOT a lawyer or pretend to be one)anyone who has the authority as a director of a Thai company, and who signs papers regarding the business affairs of that Thai company, whether or not they actually WORK in Thailand requires a Work Permit...at least according to the Thai government interpretation of the law. As I say, that may seem silly to you, but please understand...the Thai government and the Labor board will be the ones that interpret the law AS THEY WANT TO UNDERSTAND IT. The law is not for the company's benefit, it is for the governemnt's benefit...and they can interpret the law as they feel like doing.

For that reason, because there is money involved and possible financial liability to the Thai company....I wouldn't even consider trying to operate with a foriegn director who had no Thai Work Permit until I had a WRITTEN OPINION regarding it's legality from a Thai lawyer or Thai law firm to at least cover yourself in the event that the Thai governemnt suddenly decided to crack down on foriegn directors without Work Permits.

But as I say, I'm not a lawyer, I'm just a person who likes to have all my T's crossed and I's dotted before I would commit myself and my hard earned money.