Salary Packaging A Vehicle

[monty1412]

Work for thai based company. Looking to salary sacrifice a monthly amount into a lease which company takes out on vehicle. Believe this is term novated lease.

Does company have an extra costs based on this type of arrangement.. what are pitfalls / areas of caution and how effective is this to do if you have significant portion of salary at highest tax bracket

Rgds

[Swiss1960]

I think it depends on who is the actual leasing party in the contract:

If it is your company who is on the contract, then they will give you the car for business use (and maybe have a provision for private use in the contract between you and them) and thus, they will deduct their expenses from your salary before tax and you would have same tax relieve.

If however, the lease is in your name and the company mainly acts as guarantoor for your lease towards the leasing company (which might give you preferential leasing terms), then they (your company) will deduct their expenses (assuming they pay the lease in your name) from your salary after tax and you don't profit from tax relieve

So basic question is WHO is taking the lease?

[p_brownstone]

If the Thai Revenue Department become aware of this arrangement they will add their own valuation of the use of the car as a "benefit in kind" to whatever Salary you declare and calculate Income Tax on the total, so there will be no tax benefit to you.

That said of course they may not become aware of the arrangement.

Patrick

[monty1412]

I think it depends on who is the actual leasing party in the contract:

If it is your company who is on the contract, then they will give you the car for business use (and maybe have a provision for private use in the contract between you and them) and thus, they will deduct their expenses from your salary before tax and you would have same tax relieve.

If however, the lease is in your name and the company mainly acts as guarantoor for your lease towards the leasing company (which might give you preferential leasing terms), then they (your company) will deduct their expenses (assuming they pay the lease in your name) from your salary after tax and you don't profit from tax relieve

So basic question is WHO is taking the lease?

It would be the company taking the lease and paying with monies that would have otherwise been paid to me as gross salary but of course would only have been realised personally as net salary. Issue then becomes who owns the car at lease end.. if its traded in and renewed fro another leased vehicle then moot point however in event of total windup company would have on paper a certain residual value invested in the car which I have effectively paid for .. thought s??

[Swiss1960]

I think it depends on who is the actual leasing party in the contract:

If it is your company who is on the contract, then they will give you the car for business use (and maybe have a provision for private use in the contract between you and them) and thus, they will deduct their expenses from your salary before tax and you would have same tax relieve.

If however, the lease is in your name and the company mainly acts as guarantoor for your lease towards the leasing company (which might give you preferential leasing terms), then they (your company) will deduct their expenses (assuming they pay the lease in your name) from your salary after tax and you don't profit from tax relieve

So basic question is WHO is taking the lease?

It would be the company taking the lease and paying with monies that would have otherwise been paid to me as gross salary but of course would only have been realised personally as net salary. Issue then becomes who owns the car at lease end.. if its traded in and renewed fro another leased vehicle then moot point however in event of total windup company would have on paper a certain residual value invested in the car which I have effectively paid for .. thought s??

Sounds like a bad deal for you this way... the give you less salary, let you use the car but at the end you have nothing...

So you will need an additional contract. As I don't know the Thai law whether benefits for the employees (i.e. free use of a car) would be taxable (they are here in Switzerland...), I can't really comment on how to best do this... but I would set up a contract with your company that states

- they give you a car for business use that you are allowed to freely use for private also

- you pay let's say 50% of the lease and insurance throught salary reduction (might be a problem with tax if that shows on your salary slip)

- you have the right at the end of the lease to take over the car by re-paying the 50% borne by your company and paying the residual amount to the leasing company

seems the best option, as at the end of the lease, you might decide NOT to take over the car.

Alternative would be to pay the full amount of lease and insurance, not have a contract with your company about taking it over, but ask them for a renumeration of expenses for using the car (i.e. xx cent per kilometer used for business reasons).

[PattayaParent]

Is the tax saving really worth all the hassle?