Unregistered Ordinary Partnership Query

[silentnine]

Hi All

can a farang be a buisness partner with a thai on a unregistered ordinary partnership. ie via a partnership agreement

i'm sure i read somewhere that farangs could only do buisness via ltd companys and could not directly be a partner otherwise ..

anyone know ?

[silentnine]

maybee an idea to explain better..

i would be in the buisness as a sleeping partner .. so not working.

my query tho relates to how would tax liabilies work.. the thai part is easy they use there ID card number..

but i'm quite sure that a farang would have issues were he to try and pay thai tax on any profits dividend just quoteing a passport number

woudl the fact that as a partner even if your not doign any work mean that by the nature of a partnerhip and its liabilties that a WP would needed regardless.

and thats even if WP can be gained from a partnership as opposed to a ltd co. thens theres the regs about number of employees in a to gain a WP and all documention for that related to ltd. co's

it could well be the answer is yes a frang can be a non working partner in a partnership . . although then is the fact it becomes investment in some way that generates income creat more issues..

is it so complicated , are there reasons all farangs are in buisness either a emplyeees or co. directors of ltd companies ..

oh dear my head hurts ..

anyone . put me out of my misery lol //.

[Sunbelt Asia]

While a ordinary partnership would not be required to be registered with the Ministry of Commerce, it would be required to be registered with the Revenue Department. Such registration requires all partners to be Thai and the liability is unlimited.

And while a foreigner can be a partner in a Limited Partnership, a work permit is not likely as the Labor Office does not grant work permits for either a Ltd Partnership or a Sole Proprietorship in most cases. The Managing Partner (similar to the Managing Director of Ltd company) would have unlimited liability.

Sunbelt Asia does not recommend to our customers to get involved in this kind of business arrangement as there is very little protection for the partners. A Limited Company provides much more protection to the investor and is a much safer route to do business.

[Arkady]

The Revenue Dept doesn't like this type of structure as it is used by highly paid individuals to reduce tax liability by setting up spurious partnerships. They have already stopped doctors from doing this and the structure may be phased out completely in future. For those who can't easily hide their income, like doctors, the structure is only good for reducing tax liability for a fairly narrow range of situations. However, it is quite effective for small cash businesses that have the ability to declare only a small proportion of their revenue for VAT and income tax. They can avoid a lot of the burdensome paperwork involved with a limited company or a registered partnership because they can opt not to file audited tax accounts and be taxed based on a flat rate of deductions set by the RD for each type of business. Thus an unregistered partnership that operates a restaurant business and reports revenues of B1 million in a year will be tax on profits of B700k, as the RD will allow deductions for expenses of 30%. Of course the costs of restaurants are much more than 30% but, if the partnership has only reported, say 20%, of its actual revenues, this is not a problem and a huge amount of income tax and VAT has been saved as well as the cost and trouble of keeping proper accounts. Most unregistered partnerships fall into this category, which is another reason why the RD wants to phase them out. Apart from facilitated outright tax evasion, unregistered partnerships, which are taxed like personal income, allow partners to have full personal tax allowances for each partnership and they can set up multiple partnerships to avoid ever getting into the higher progressive rates of personal income tax.

I think that Immigration and the Labour Ministry don't accept the concept of a passive partners. Therefore they assume that foreign partners are working and require a work permit which they are reluctant to provide, due to the nebulous nature and lack of formal documentation of the unregistered partnership structure, even though it is not prohibited. Apart from the unlimited liability risk mentioned by Sunbelt there can be huge difficulties in unwinding partnerships when one of the partners wants to get out or dies. The structure is best left to small Thai family business operators who can keep under the RD's radar.

Edited June 7, 2011 by Arkady

[Kon Kaoli]

On 6/7/2011 at 10:49 AM, Arkady said:

The Revenue Dept doesn't like this type of structure as it is used by highly paid individuals to reduce tax liability by setting up spurious partnerships. They have already stopped doctors from doing this and the structure may be phased out completely in future. For those who can't easily hide their income, like doctors, the structure is only good for reducing tax liability for a fairly narrow range of situations. However, it is quite effective for small cash businesses that have the ability to declare only a small proportion of their revenue for VAT and income tax. They can avoid a lot of the burdensome paperwork involved with a limited company or a registered partnership because they can opt not to file audited tax accounts and be taxed based on a flat rate of deductions set by the RD for each type of business. Thus an unregistered partnership that operates a restaurant business and reports revenues of B1 million in a year will be tax on profits of B700k, as the RD will allow deductions for expenses of 30%. Of course the costs of restaurants are much more than 30% but, if the partnership has only reported, say 20%, of its actual revenues, this is not a problem and a huge amount of income tax and VAT has been saved as well as the cost and trouble of keeping proper accounts. Most unregistered partnerships fall into this category, which is another reason why the RD wants to phase them out. Apart from facilitated outright tax evasion, unregistered partnerships, which are taxed like personal income, allow partners to have full personal tax allowances for each partnership and they can set up multiple partnerships to avoid ever getting into the higher progressive rates of personal income tax.

I think that Immigration and the Labour Ministry don't accept the concept of a passive partners. Therefore they assume that foreign partners are working and require a work permit which they are reluctant to provide, due to the nebulous nature and lack of formal documentation of the unregistered partnership structure, even though it is not prohibited. Apart from the unlimited liability risk mentioned by Sunbelt there can be huge difficulties in unwinding partnerships when one of the partners wants to get out or dies. The structure is best left to small Thai family business operators who can keep under the RD's radar.

I don't know if you will be able to read my query or not. I am going to open up a small Korean restaurant with my Thai wife. As I heard from many postings that foreigner married to Thai spouse can operate a restaurant business like sole proprietorship, I have searched over internet and assumed now it is a form of "un-registered ordinary partnership"-with my Thai spouse. 

 

Is it possible to apply WP for myself under non-register ordinary partnership? And what is condition to obtain?

 

Thank you very much in advance