Best setup for partnering with Local

[descc71]

Hello,

 

I want to setup a 49% (me, the foreigner) - 51% (local) company for an ongoing hair salon business.

The partner will operate the business, I am just a 49% shareholder.

I do not need a visa to stay from the company as I am on the Thai Elite visa and I live in Thailand

I want to pay tax on an dividends.

 

Question: Do I need the company to sponsor a work permit? Is this linked to the tax? Preferably I would like to pay the tax on dividends without having a work permit as I am a sleeping partner anyway.

                  Is the limited company the best setup for this?

 

Many thanks in advance

 

 

[A. BOOZER]

Sorry for sounding disparaging, but before the replies start flooding in.

 

Are really expecting to see a return?

 

Do remember the old saying about how to make a little money in Thailand..............start with a lot!

 

However, you decision, your money, so I do wish you the very best of luck.

[descc71]

Thank you for your advice.

 

The business is already profitable and I have already received back what I put in. I am just looking to formalize the structure of the partnership and am therefore looking for the best way to formalize it, and pay taxes on dividends without having to have a work permit if that is possible.

[robertson468]

I would suggest you go and see a Thai solicitor/accountant for advice.  Whilst many good hearted people on here will give an opinion, unless they are qualified, they might mislead you and then you, not them end up facing the wrath of the Thai Courts.

[descc71]

Thank you. I am considering a meeting with Siam legal or Sunbelt Asia (as they are in the business of selling/buying/set up) but wanted to also solicit the opinions of the BKK expat community.

[elgordo38]

23 minutes ago, descc71 said:

Thank you for your advice.

 

The business is already profitable and I have already received back what I put in. I am just looking to formalize the structure of the partnership and am therefore looking for the best way to formalize it, and pay taxes on dividends without having to have a work permit if that is possible.

If the business is profitable I am sure this has not gone unnoticed by the 51% percent partner which might want to enlarge it to a 100% I sense a little naivenes in your manner bordering on over confidence. Proceed with caution enjoy life. 

[lucjoker]

2 hours ago, descc71 said:

Thank you for your advice.

 

The business is already profitable and I have already received back what I put in. I am just looking to formalize the structure of the partnership and am therefore looking for the best way to formalize it, and pay taxes on dividends without having to have a work permit if that is possible.

you are unbelievable lucky, you have back what you put in ........high time to stop now !

The next step is loosing every thing.....your wife ...your house....your sanity.......

 

[khunPer]

You don't need a Work Permit to be a shareholder or even Director (Member of the Board), as long as you do not do any physical work, apart from signing an annual balance and like. You can also be paid dividend (minus withholding tax) without a Work Permit.

 

You will need 3 shareholders to fund a Thai company limited. If you wish to protect your share of the company, you can operate with preferred shares. There are to my knowledge two commonly used options:

1) Part of your 49% nominal shares are preferred with 10 votes each, whilst all other shares have 1 vote each; i.e. for example a nominal 2 million baht company limited set-up with 100 preferred shared of 10 votes per 1,000 baht, and 1,900 ordinary shares with 1 vote per 1,000 baht. Your 49% will give you 980 shares, but 1,880 votes; whilst the remaining 51% of 1,020 shares has 1,020 votes only. The method might be against the intention of the law, but has to my knowledge not yet been tested in a Court.

2) Shareholder number 3 is Thai and hold preferred shares. The preferred shares has a guaranteed annual dividend, for example 4% of the nominal value, against waiving the right to vote. If shareholder number 3 has 3% of the nominal value and no votes, your 49% will represent voting majority.

 

You will need a lawyer, eventually an accountant, to set up a company limited, which will cost from around 25,000 baht or more. You'll need an accountant to make the company statements and annual audited tax report, which will cost you probably not less than 25,000 baht a year; presumably quite a bit more in service fees for a running business with employed staff.

 

A more simple way as sleeping partner could be, just to make a loan agreement between you and the business partner, i.e. owner of the beauty salon, and let it operate as a (registered) personal business – may solve expenses and tax, as there is an allowance for personal income before taxation. For a small Thai operated business, a registered company limited should not be necessary.

 

Wish you good luck with your project...

[descc71]

Thank you KhunPer,  this was the answer I was hoping for.

 

Your last statement

"A more simple way as sleeping partner could be, just to make a loan agreement between you and the business partner, i.e. owner of the beauty salon, and let it operate as a (registered) personal business – may solve expenses and tax, as there is an allowance for personal income before taxation. For a small Thai operated business, a registered company limited should not be necessary"

 

That is how I initially set it up. A loan agreement with a claim on a % of the profits of the salon. Do I then declare taxes on these profits every month or can I wait for the profits to equalize with the loan (i.e. loan at which point is fully repaid) before declaring taxes on the post-loan profits? All this is assuming that I don't need a work permit to have entered into such an agreement AND to also don't need a work permit to pay taxes on the post loan profits.

 

In any case your answer has been most helpful especially when you said "You don't need a Work Permit to be a shareholder or even Director (Member of the Board), as long as you do not do any physical work, apart from signing an annual balance and like. You can also be paid dividend (minus withholding tax) without a Work Permit." which is exactly what I was asking.

 

many thanks

[khunPer]

15 hours ago, descc71 said:

Thank you KhunPer,  this was the answer I was hoping for.

 

Your last statement

"A more simple way as sleeping partner could be, just to make a loan agreement between you and the business partner, i.e. owner of the beauty salon, and let it operate as a (registered) personal business – may solve expenses and tax, as there is an allowance for personal income before taxation. For a small Thai operated business, a registered company limited should not be necessary"

 

That is how I initially set it up. A loan agreement with a claim on a % of the profits of the salon. Do I then declare taxes on these profits every month or can I wait for the profits to equalize with the loan (i.e. loan at which point is fully repaid) before declaring taxes on the post-loan profits? All this is assuming that I don't need a work permit to have entered into such an agreement AND to also don't need a work permit to pay taxes on the post loan profits.

 

In any case your answer has been most helpful especially when you said "You don't need a Work Permit to be a shareholder or even Director (Member of the Board), as long as you do not do any physical work, apart from signing an annual balance and like. You can also be paid dividend (minus withholding tax) without a Work Permit." which is exactly what I was asking.

 

many thanks

Thanks.

I'm not qualified to answer about tax, and whether it's considered "work" or not, when it's a loan agreement with a percentage of a company's outcome, rather than fixed interest – might be "interest", as it appear to be like Islamic banking – whilst for personal income and taxation in Thailand, you'll have some deductions, so any annual gross income of below around 150,000 baht is not taxable (you'll need to check with some knowing about it, if not one of the ThaiVisa experts post here), and income tax-rate begin at 5% only. I have this official link for personal income tax, it's last updated 2014, but seem to be the present version (?). Withholding interest tax, as withheld by banks, is 15%, but can be reclaimed if one is below the tax-ceiling – you can receive interest without a Work Permit – which is done by some for their bank deposits used for extension of stay, as foreign income is only taxable in Thailand if taken into the Kingdom the same year as it's earned, otherwise it's savings. Retirement pension taxed abroad in countries with double-tax agreement, is not taxable in Thailand. To my knowledge one will file tax income statement annually, but please check with an expert.

 

The infomation about shareholder and Work Permit comes from the news feed, quoting the Immigration or Police chief in Phuket (cannot remember, can be Googled).

[descc71]

Thank you Khunper. I guess its time to make a visit to the accountants.

 

many thanks