Personal Income Tax - work done for offshore company

[falang07]

According to http://www.rd.go.th/publish/6045.0.html, for income derived from contract of work whereby the contractor provides essential materials besides tools one can deduct actual expense or 70%. A friend of mine is providing programming services for my offshore company, and is sending an invoice for these services directly to this offshore company. Can he deduct 70% from the invoice amount for the purpose of calculating the taxable income? Anyone has experience with this?

[Arkady]

I would guess that the RD means contractors that use tools and materials for construction or similar. Computer programming is much more likely to be classified under the category that covers income from business, commerce etc with a deduction of actual expenses or 65-85% depending on the business. These deductions are applicable for a sole proprietorship or unregistered partnership. I assume you friend is Thai because foreigners cannot normally obtain work permits to work as freelancers in these types of business structures.

[falang07]

Well, 65-85% sounds even better Yes, he is Thai working as a freelancer.

[falang07]

I have one more question: what about a sole proprietorship for a foreigner providing translation services in a foreign language that is exotic in Thailand and no Thai can speak/understand it. Would this be possible?

[Arkady]

I have one more question: what about a sole proprietorship for a foreigner providing translation services in a foreign language that is exotic in Thailand and no Thai can speak/understand it. Would this be possible?

I think you could file a tax return and pay tax on such earnings, as the Revenue Department will not turn any taxpayers away but you will not get a work permit as a freelancer. So you would be working illegally and filing a tax return would create evidence that could be used to prosecute you for violation of the Working of Aliens Act and the Immigration Act. The Labour Ministry announced plans to allow foreigners to work as freelancers or for offshore employers some years ago but have never got around to issuing the necessary regulations. So far all that has happened is that questions relating to people working for overseas employers are in the current application forms, like a bridge to nowhere.

BTW the way tax for sole proprietors works is that you have a choice to pay tax based on a flat rate of deductions, i.e. 65-80% depending on the business, which means you just declare your income. Or, if your costs are more than the flat rate, you can file the exact exact expenses, e.g. if your income is B1m a year and costs are B900k, your profit is B100k but, based on the flat rate you would pay tax on more than that which would make it worth filing the actual expenses. The problem is that the Revenue Department will usually ask for audited accounts, if you want to file the actual expenses. Most business don't bother with this because it is much easier for small businesses to simply under declare their income.

[falang07]

Thank you for the information, Arkady. The option to use flat rate of deductions is definitely preferred for online services since the real expenses are pretty low with the added advantage of not having to do any accounting. I could make B1m per year and still pay zero tax (flat rate deduction of around 80% + the personal allowances of almost 200,000 per year). This is the way to go for sure.