Revenue Department Targets Expats and their Employers

[Arkady]

An interesting article yesterday by a prominent Thai tax lawyer in a newspaper that cannot be quoted here suggests that the Revenue Department has been targeting expats and their employers in a bid to plug the government's yawning fiscal deficit. The Revenue Department has apparently been using the little understood permanent establishment (PE) rule with some success. Under the Revenue Code foreign companies with a PE in Thailand are taxable on their income arising in the Kingdom. The definition of a PE is rather broad and having an employee seconded to a local subsidiary, affiliate or agent can easily qualify, if the contractual paperwork and correspondence with the overseas company is not carefully drafted to eliminate any possible suggestion that the expat is actually working for or reporting to it in any shape or form. Tax assessments and penalties have apparently been levied against such overseas companies deemed to be operating in Thailand in 2013.

Additionally the Revenue Department has apparently been going after individual expats' tax returns and assessing tax and penalties against undeclared perks such as air tickets for home leave, club memberships school fees and payment of overseas social security dues. Furthermore, suppliers of expat perks, such as residential landlords, have also been asked to provide information about the value of perks supplied to expats, sometimes leading to tax audits for the suppliers as well.

It sounds as the Revenue Department has so far limited itself to larger companies believed to have the ability to cough up substantial arbitrarily assessed tax and penalties. Who knows if they will broaden their quest out to include small and medium sized companies employing expats and the expats they employ, as populist policies put more and more strain on government finances?