How the tax is calculated in a Thai company, CONFUSED.........

[David Marksman]

Hello,

I can't find an accurate, clear answer to the situation I am currently trying to solve, I would highly appreciate some help here so that I can understand what to do next and how to move forward.

Facts:

- I am making around 800,000 baht/year from consulting to Non-Thai companies using a company I've opened in my own country.

*Don't want to make more as the corrent situation allows me to enjoy alot of free time

- I am interested in moving into Thailand, obtaining a work permit and pay tax on my income to Thailand (I will actually enjoy paying the tax in Thailand as I feel that it is giving my much in return for many reasons, much more than my home country!)

My expenses in Thailand would be my home (which is also my office) with a rent of 360,000 baht/year+around 40,000baht/year phone+internet (landline+3g) expenses which are required for my work, so total of 400,000 Baht expenses (I am only talking about expenses which directly relates to generating my income)

Will a person with my work and income be able to open a company and pay taxes legally in Thailand? what does the 2mil Baht min capital means exactly? does it mean that I have to put 2 mil Baht in the company's bank account? if that's the case I have no problems putting 2 mil baht but they won't be used as my work doesn't require any additional costs except the 400,000 which I've mentioned (which are reduced from the income)

Does it mean that I have to MAKE 2,000,000 in income/year? please clarify and thank you in advance!

Edited December 3, 2014 by David Marksman

[ubonjoe]

Moved to the business forum.

[bizzle]

Can j just clarify yr home is half yr yearly salary? Do u hv a mortgage?

If not, Hv u thought about buying then listing it as an asset?

[David Marksman]

Hi bizzle,

The house is rented, I don't plan to own it as I prefer to have my money available in a bank account in case something goes wrong and I have to leave for any reason.

In any case, I don't have much confidence in property ownership in Thailand so I prefer to rent.

[rwdrwdrwd]

To do what you suggest doing, I believe you'd need to be paying yourself 50k (or at least paying the tax on 50k) a month, along with the tax for the four Thai employees you will have to have in order to qualify for a Work Permit on a Thai company. Accountancy fees on top of that, last time I had a Thai co it was around 5k a month plus around 15k yearly fee for year end accounts (for sure I was being ripped off though). Even with just the salary factor though, you don't have enough to do this from the figures you supply, unless you state as part of the application that you are salaried more than you really are, and pay tax on the higher sum.

I don't think you have to show the 2 million, unless things have changed, use to be that you had to have a small fraction in the bank per 1 million, think it was around 10k but it could well have changed.

You'll also need to find some Thai nationals (at least 2 i think) to own 51% of the Thai company, since a foreigner cannot own more than 49% - possibly a different story if you're a US citizen.

No wonder many people that operate businesses serving exclusively non Thai clients opt to do so via an offshore entity with offshore banking. That approach would not get you a work permit though, to get one of those you need to be salaried by a Thai company to 50k a month.

One though just occurred to me - depending on the nature of your consulting, you could be a good candidate for iglu - http://iglu.in.th/freelance/ - that might be a whole lot simpler for you, since you wouldn't need to set up a company or have employees, and you would get your WP and be able to pay Thai taxes as you desire. You'll have to find out from them whether they are able to handle your office and comms expenses as part of their package.

Edited December 3, 2014 by rwdrwdrwd

[MAMMartin]

you could consider a representative office for your non-Thai company. In brief (you need to talk to a lawyer ideally) the money trail is that your non-Thai company sends the operating expenses over only. No corporation tax. you only need 1 Thai employee and you don't need Thai partners/shareholders. You cannot trade in Thailand i.e. deal with Thai companies and collect money off them into the rep office. Easy to set up, not overly expensive - perfect for a 1 man business.

note of caution a number of companies that offer the service of setting you up as a Thai company like you to fit their model - you will have to ask them about the Representative Office.

[rwdrwdrwd]

you could consider a representative office for your non-Thai company. In brief (you need to talk to a lawyer ideally) the money trail is that your non-Thai company sends the operating expenses over only. No corporation tax. you only need 1 Thai employee and you don't need Thai partners/shareholders. You cannot trade in Thailand i.e. deal with Thai companies and collect money off them into the rep office. Easy to set up, not overly expensive - perfect for a 1 man business.

note of caution a number of companies that offer the service of setting you up as a Thai company like you to fit their model - you will have to ask them about the Representative Office.

Definitely interested in how this works out if it's the route you take, I was under the impression that the requirements for having a rep office involved having a very large parent company and associated turnover. A search turned up the following, which is less draconian than I remember but still requires more than 800k a year to run through the Thai co.. I guess you could transfer in a circle though with a bit of creative accounting to hit the requirement.

The head office is required to transfer working capital of at least 5 million baht into Thailand for the representative office, of which two million baht must be remitted in the first year, and at least one million baht per year after that. The manager of the representative office must prepare an annual report on business activities and file the report with the Ministry of Commerce.

Edited December 4, 2014 by rwdrwdrwd

[Gsxrnz]

Sorry, but you lost me at "I will actually enjoy paying the tax..."

Professional guidance (of a non-accounting nature) may be necessary to cure you of this strange affliction you've acquired.

[David Marksman]

Sorry, but you lost me at "I will actually enjoy paying the tax..."

Professional guidance (of a non-accounting nature) may be necessary to cure you of this strange affliction you've acquired.

LOL...

No one likes to pay taxes and we all would prefer to live in a country which doesn't have taxes and gives us what we want.

This doesn't happen in real life and we all pay taxes in some way for our income (doesn't have to be direct government tax)

In Thailand, we need to choose which tax to pay, is it the mental tax each couple of months+the logistical part of it OR some cut from our income to the gov/Iglu etc. in exchange to hassle free, no visa-run, no worries life (at least from the visa point of view cuz at least for me, the rest in Thailand is mostly good)

So taking the real life situations, I would gladly exchange the worries in some taxes and enjoy the peace of mind it gives.

Also, I personally have a better feeling paying tax in Thailand rather then my home country because I feel I am getting so much more in Thailand.

Edited December 4, 2014 by David Marksman

[rwdrwdrwd]

You could just get a Thai Elite visa for 500k (5 year visa) and legally pay no corporate or income tax by running your business from HK (or easier still BVI co + HK company bank) and doing your personal banking in Singapore. It would also be a lot simpler, particulary in terms of beaurocracy, and would be the cheapest solution that did not incur Visa stress, unless you are married or qualify for retirement (and it's probably easier than either of these paperwork and reporting wise).

Some would claim you need a Work Permit even if exclusively serving foreign clients via the internet / telephone and being paid outside of Thailand, others would say you don't. Certainly there has never been a report of anyone getting in to trouble for doing so without one.

Next easiest could well be Iglu or similar, with which you would be paying Thai taxes, they just sort it out for you. Rep office is interesting if you could satisfy the requirements for one.

Edited December 4, 2014 by rwdrwdrwd

[Wasa]

Sorry, but you lost me at "I will actually enjoy paying the tax..."

Professional guidance (of a non-accounting nature) may be necessary to cure you of this strange affliction you've acquired.

LOL...

No one likes to pay taxes and we all would prefer to live in a country which doesn't have taxes and gives us what we want.

This doesn't happen in real life and we all pay taxes in some way for our income (doesn't have to be direct government tax)

In Thailand, we need to choose which tax to pay, is it the mental tax each couple of months+the logistical part of it OR some cut from our income to the gov/Iglu etc. in exchange to hassle free, no visa-run, no worries life (at least from the visa point of view cuz at least for me, the rest in Thailand is mostly good)

So taking the real life situations, I would gladly exchange the worries in some taxes and enjoy the peace of mind it gives.

Also, I personally have a better feeling paying tax in Thailand rather then my home country because I feel I am getting so much more in Thailand.

You will still do visa runs unfortunately; you need a non-B to get a work permit and for the1st year of the non-B you have to in/out every 90 days, from 2nd year on you can elect to report every 90 days by mail. At least that's what my company made me do.

For the Representative Office you need 2 million baht in the first year and after that 1 million baht for the next three years as registered capital. When your application goes for review your home country company will have to provide financial returns that substantiate the ability to pay this amount. I think not a good option for a small consultant.

[khunPer]

OP, to my knowledge:

You need a Work Permit to legally work inside borders of Thailand – even it’s for a foreign company with foreign customers, however some do it under the radar and keep a (very) low profile – and if you open you own limited company that will have to apply for the Work Permit.

A Thai limited company can only be 49% foreign owned, so you will need Thai partners/shareholders for the remaining 51%. The method used before with proxy-shareholders cannot be used anymore, as the Thais has to prove funds for their shares. Some companies have preferred shares, for example with 10 votes each instead of 1, but the government talks about making rules so foreigners cannot obain voting majority based on preferred shares.

The 2 million baht is the minimum registered shareholder capital needed to obtain one Work Permit for a foreigner (for following WPs I think you will need to add 1 million baht capital for each). However, your company needs 4 Thais employees (min. salary plus social security) for each foreign WP; there may be exemptions for certain business where foreign expertise is required, a lawyer can advise you. Furthermore the company normally needs a full years audited tax statement (preferably showing a profit). Immigration may wish to physically check your office/workplace; at least photo documentation is required.

A foreigner have to be paid a certain minimum salary that varies a bit from branch-to-branch and what country the foreigner comes from, but if you count 50k baht a month that may be average. Personal income tax, around the first 200,000 baht are exempt, and thereafter the progressive scale begins with 5% only, of a 50k salary a few thousand bath are to be withheld in income tax.

Company tax is a flat 30% rate, however smaller companies with a limited profit only pays 20% - an accountant can advise you; they often change a bit in the rates and rules from year-to-year. It is advisable always to have a small profit for taxation (your accountant will assure that in the annual statement) to avoid scrutiny. Count minimum 40k baht a year for accounting and tax auditing.

Small business/companies with up to 9 employees and under a certain minimum turnover (some millions baht) don’t need to be VAT-registered (check actual conditions with a business accountant).

The rules about foreigners controlling Thai limited companies have gradually been changed over the past decade to avoid foreigners through foreigner-controlled companies owing real estate.

A lawyer can advise you about the present conditions, normally the first meeting/session is free-of-charge. You shall count some 40k to 50k baht in fees to open a limited company.

Wish you good luck with your pland...

[mortenaa]

If you turn around will be only 800K Baht a year, I would NOT recommend you to setup a Thai Company Ltd. They always figure out a way to squeeze more money out of you. You can't write off expenses for an apartment, unless its your main branch office, which is highly unlikely neither the landlord or the revenue apartment accept. Unannounced visits are common, where they will check how much you are actually utilizing as an office, check your books and equipment to see it if matches with the receipts and so on. Withholding-taxes, another ancient and time consuming practice they use here. Then its Visas, work-permit renewals, 90-days reporting, extension of stay. For even a small company, I found that you need a full time staff just to overlook things like this.

Best of luck...

[David Marksman]

If you turn around will be only 800K Baht a year, I would NOT recommend you to setup a Thai Company Ltd. They always figure out a way to squeeze more money out of you. You can't write off expenses for an apartment, unless its your main branch office, which is highly unlikely neither the landlord or the revenue apartment accept. Unannounced visits are common, where they will check how much you are actually utilizing as an office, check your books and equipment to see it if matches with the receipts and so on. Withholding-taxes, another ancient and time consuming practice they use here. Then its Visas, work-permit renewals, 90-days reporting, extension of stay. For even a small company, I found that you need a full time staff just to overlook things like this.

Best of luck...

So basically what you are saying is to either go for Thailand Elite card or go and live in Cambodia?

I love Thailand very much but can't imagine living 10 years with constant worrying about Visas so unless I feel comfortable putting 500,000 baht in an unstable country (they can change the rules any day) then it seems more likely that I will have to choose another place to live.

Its sad cuz I REALLY DO want to live in Thailand and I think that although I'm not a wealthy person, having people like me who are spending 800,000-1,000,000 baht/year in the country is actually a good think for Thailand but I guess the government doesn't feel that way.

[bizzle]

If you turn around will be only 800K Baht a year, I would NOT recommend you to setup a Thai Company Ltd. They always figure out a way to squeeze more money out of you. You can't write off expenses for an apartment, unless its your main branch office, which is highly unlikely neither the landlord or the revenue apartment accept. Unannounced visits are common, where they will check how much you are actually utilizing as an office, check your books and equipment to see it if matches with the receipts and so on. Withholding-taxes, another ancient and time consuming practice they use here. Then its Visas, work-permit renewals, 90-days reporting, extension of stay. For even a small company, I found that you need a full time staff just to overlook things like this.

Best of luck...

So basically what you are saying is to either go for Thailand Elite card or go and live in Cambodia?

I love Thailand very much but can't imagine living 10 years with constant worrying about Visas so unless I feel comfortable putting 500,000 baht in an unstable country (they can change the rules any day) then it seems more likely that I will have to choose another place to live.

Its sad cuz I REALLY DO want to live in Thailand and I think that although I'm not a wealthy person, having people like me who are spending 800,000-1,000,000 baht/year in the country is actually a good think for Thailand but I guess the government doesn't feel that way.

The elite card seems pretty stable however Thailand is silently <deleted>. When you realise how many of the new buildings are empty, it does make you wonder when it will really kick in and when it does the westerners will be hit first to soften the blow; in fact it might be a constant already

Better taking your money elsewhere for the long term

[Time Traveller]

If you don't know what registered capital is then I question whether you even have your own company at all. (Hint: It has nothing to do with tax or income)

Edited December 8, 2014 by Time Traveller

[Time Traveller]

deleted double post

Edited December 8, 2014 by Time Traveller