Can a foreigner have salary + extra income paying withholding tax?

[JaseTheBass]

Has anyone been salaried to a company here, but also had extras/bonuses paid to them as a provider of a service (paying the 3% withholding tax)?

 

Both incomes would come from the legal employer.

 

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[Arkady]

I was working as a contractor to a large company and empolyed by my own small company and was very annoyed once to find the large company had reimbursed travel expenses to me personally as if they were income and deducted 3% withholding tax.  This meant I ended up paying for part of the overseas trip made on their behalf myself.  In the end it was too exhausting to argue any more with them, and I put up with it and moved on.  I was worried that I would end up also being charged personal income tax on it but that didn't happen.  However, it did happen to my wife after she was paid a one-off commission as a contractor on a sales deal.  I ended having to pay tax on it myself, as we filed joint tax returns.  The Revenue Department enquired as to why it wasn't included in my tax return (I didn't know about it) and asked for the document which Mrs Arkady had lost and had to go to the company to get a copy.  

 

Technically, if you are a foreigner, you should have another job entered into your WP, if you also working as an independent contractor for your employer but it is virtually impossible to get a WP as a freelancer, even though it is not illegal. However, you are unlikely to get caught.  It is also a rather odd remuneration structure but I don't think the Revenue Dept will have any objection to it, although it will make your tax return a bit more complicated.  You will have to file a Phor Ngor 90 tax return for earners of diverse income including salary and fee income instead of the more straightforward Phor Ngor 91 for salary earners only.  Your fee income will be added to your salary income and you may have more tax to pay, since you also have a salary, but will get a credit for the 3% already withheld.   

 

I can't see much benefit to the employer in doing this, except that the fee income is not counted towards your average income in calculating redundancy pay, if it comes to that.      

 

 

[blackcab]

I've been in exactly the same situation. Salary taxed in the normal manner, but (variable) bonuses subjected to 3 percent WHT.

 

Correctly or incorrectly I lumped everything together and declared the lot on my PND91. It couldn't have been a serious error because I got a tax refund of about 200 baht that year.

[Arkady]

31 minutes ago, blackcab said:

I've been in exactly the same situation. Salary taxed in the normal manner, but (variable) bonuses subjected to 3 percent WHT.

 

Correctly or incorrectly I lumped everything together and declared the lot on my PND91. It couldn't have been a serious error because I got a tax refund of about 200 baht that year.

 

That works, if the RD doesn't ask for a copy of your PND 50 bis form that shows how much salary the company paid.  If they do, the numbers won't match as PND 50 bis only lists salary, wht and ss tax payments but they might be satisfied if you include the documents for the other payments.  However, I think they only ask for documents, if you are claiming additional deductions, such as LTF, RTF, life insurance etc.  If you are claiming those sort of deductions, it is probably better to file a PND 90 form which has a page you can fill in your other income.  It only takes a few more minutes when you know how.

 

Since there are now at least two companies that pay extras or bonuses like this, does anyone know the reason for it?  I think it may be something to do with commission payments,  e.g. commission salesmen may be paid a low fixed salary and a variable monthly commission based on previous month's sales.  That would I think reduce a company's liability to pay redundancy only on the fixed salary and could make a big difference in the closure of a division.  But annual bonuses have always been treated the same as salary in all the Thai companies I have been involved with.        

[blackcab]

3 hours ago, Arkady said:

Since there are now at least two companies that pay extras or bonuses like this, does anyone know the reason for it?  I think it may be something to do with commission payments,  e.g. commission salesmen may be paid a low fixed salary and a variable monthly commission based on previous month's sales.  That would I think reduce a company's liability to pay redundancy only on the fixed salary and could make a big difference in the closure of a division.  But annual bonuses have always been treated the same as salary in all the Thai companies I have been involved with.

 

I don't know why the company I worked for did it that way. The business owners owned several companies and the general manager of each company was paid a monthly bonus depending on performance (or not as the case may be).

 

Where I work now the staff get an annual bonus (13th month) and that is taxed in the standard way.

Edited August 2, 2017 by blackcab

[JaseTheBass]

I think it is easier for the employer to simply deduct 3% then forget about it.

Another point is, that if the annual amount is under 1.8m then you'll only be paying 3% tax. Even if it goes over 1.8m you only have to pay 10% VAT on anything over 1.8m so you'd pay a lot less tax than if you got it all as part of your normal salary.

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[blackcab]

1 hour ago, JaseTheBass said:

I think it is easier for the employer to simply deduct 3% then forget about it.

Another point is, that if the annual amount is under 1.8m then you'll only be paying 3% tax. Even if it goes over 1.8m you only have to pay 10% VAT on anything over 1.8m so you'd pay a lot less tax than if you got it all as part of your normal salary.

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I'm not sure I understand you. Income tax in Thailand is a progressive tax. Income tax is payable on earnings in excess of 150,000 baht per year. The exact rates can be seen in section 3.1 of this page:

 

http://www.rd.go.th/publish/6045.0.html

 

VAT is an indirect tax and it has nothing to do with salaries at all.

 

While the official rate of VAT in Thailand is 10 per cent, successive governments have given an easement that sets the actual rate if VAT at 7 per cent.

 

[JaseTheBass]

 
I'm not sure I understand you. Income tax in Thailand is a progressive tax. Income tax is payable on earnings in excess of 150,000 baht per year. The exact rates can be seen in section 3.1 of this page:
 
http://www.rd.go.th/publish/6045.0.html
 
VAT is an indirect tax and it has nothing to do with salaries at all.
 
While the official rate of VAT in Thailand is 10 per cent, successive governments have given an easement that sets the actual rate if VAT at 7 per cent.
 

Only reporting what my wife had to pay a few months ago.

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[Arkady]

6 hours ago, JaseTheBass said:

I think it is easier for the employer to simply deduct 3% then forget about it.

Another point is, that if the annual amount is under 1.8m then you'll only be paying 3% tax. Even if it goes over 1.8m you only have to pay 10% VAT on anything over 1.8m so you'd pay a lot less tax than if you got it all as part of your normal salary.

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Good point re the VAT, although it is charged at 7% (the 10% rate is the official rate but it has been reduced to 7% since about 1999 through a law that must be renewed every September).  If you are receiving more than B1.8m a year in extras that are booked as fee income as a contractor with tax withheld at 3%, you must also be registered for VAT and invoice the employer for 7% VAT which has to be paid by you to the Revenue Dept by the 15th of the next month.  So if a company is paying more than B1.8m in bibs and bobs not classified as salary to employees, that could create a headache for staff.  Not registering for VAT, if income over B1.8m and avoiding paying it is, I think, a criminal offence.  However, I expect companies paying staff in this way are mainly paying them much less than that and assume that don't have fee based income from other sources that would push them into the VAT net. 

 

VAT is not an alternative to income tax.  An independent contractor or freelancer with income over B1.8m a year pays the VAT monthly to the RD, while the employer of the contractor deducts 3% of the nominal value and pays that monthly to the RD.  In submitting your tax return all salary and fee income will be lumped together to determine tax liability.  The 3% withholding tax already paid on the fee income is considered a tax credit but the tax rate on that income depends on your total income, so you may have to pay more.  VAT is separate and is not taken into consideration is determining your personal income tax rate.      

 

[JaseTheBass]

 
Good point re the VAT, although it is charged at 7% (the 10% rate is the official rate but it has been reduced to 7% since about 1999 through a law that must be renewed every September).  If you are receiving more than B1.8m a year in extras that are booked as fee income as a contractor with tax withheld at 3%, you must also be registered for VAT and invoice the employer for 7% VAT which has to be paid by you to the Revenue Dept by the 15th of the next month.  So if a company is paying more than B1.8m in bibs and bobs not classified as salary to employees, that could create a headache for staff.  Not registering for VAT, if income over B1.8m and avoiding paying it is, I think, a criminal offence.  However, I expect companies paying staff in this way are mainly paying them much less than that and assume that don't have fee based income from other sources that would push them into the VAT net. 
 
VAT is not an alternative to income tax.  An independent contractor or freelancer with income over B1.8m a year pays the VAT monthly to the RD, while the employer of the contractor deducts 3% of the nominal value and pays that monthly to the RD.  In submitting your tax return all salary and fee income will be lumped together to determine tax liability.  The 3% withholding tax already paid on the fee income is considered a tax credit but the tax rate on that income depends on your total income, so you may have to pay more.  VAT is separate and is not taken into consideration is determining your personal income tax rate.      
 

I'm not saying you're wrong, but the tax dept where my wife paid the VAT didn't mention any extra tax liabilities, in fact, they said nothing else was due. I do worry when dealing with govt depts though, as none of them seem to have a clue and just make stuff up or feed you BS instead of admitting they don't know something.

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[Arkady]

23 minutes ago, JaseTheBass said:

I'm not saying you're wrong, but the tax dept where my wife paid the VAT didn't mention any extra tax liabilities, in fact, they said nothing else was due. I do worry when dealing with govt depts though, as none of them seem to have a clue and just make stuff up or feed you BS instead of admitting they don't know something.

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If you earn enough as an independent contractor or freelancer to have to register for VAT, you are definitely above the threshhold to file for and pay income tax over and above the 3% WHT.  My own experience was as operating a company that earned fee income.  We invoiced the employer for 7% VAT monthly, paid it and had 3% WHT deducted.  Then we filed for tax and paid corporate income tax on the liability that was left after deducting the 3% tax credit.  I, of course, also paid income tax on the salary I earned.  The part of the RD that collects VAT is separate from the part that collects income tax.  

[JaseTheBass]

 
If you earn enough as an independent contractor or freelancer to have to register for VAT, you are definitely above the threshhold to file for and pay income tax over and above the 3% WHT.  My own experience was as operating a company that earned fee income.  We invoiced the employer for 7% VAT monthly, paid it and had 3% WHT deducted.  Then we filed for tax and paid corporate income tax on the liability that was left after deducting the 3% tax credit.  I, of course, also paid income tax on the salary I earned.  The part of the RD that collects VAT is separate from the part that collects income tax.  

Unfortunately, the company's 'accountant' is <deleted> useless, so we've had to muddle though ourselves, meaning we don't know if we're doing anything wrong until we get a letter demanding money be paid. When we talk to the 'accountant' to try and get them to fix it, i.e. hire their services as an add-on to their normal duties, they print out a statement of what's been paid and tell her to talk to the tax people herself - then bill us for their services! There's zero pre-emptive support from them whatsoever.

I'll have to look back through the threads regarding accountants in Chiang Mai and get the missus to try and find one who has a proper understanding of the tax system here.

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[Arkady]

3 minutes ago, JaseTheBass said:

Unfortunately, the company's 'accountant' is <deleted> useless, so we've had to muddle though ourselves, meaning we don't know if we're doing anything wrong until we get a letter demanding money be paid. When we talk to the 'accountant' to try and get them to fix it, i.e. hire their services as an add-on to their normal duties, they print out a statement of what's been paid and tell her to talk to the tax people herself - then bill us for their services! There's zero pre-emptive support from them whatsoever.

I'll have to look back through the threads regarding accountants in Chiang Mai and get the missus to try and find one who has a proper understanding of the tax system here.

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I would suggest you change your accountant.  My former accountant got me into trouble with the RD because his untrained clerk booked the company's foreign currency loans as USD when they were actually GBP which I had pointed out to them very clearly several times. This had a significant impact on the companies earnings due to forex gains and losses annually.  Eventually the accounts had to be restated and refiled going back 3 or 4 years and I got a bill for B200k for back taxes and penalties for incorrect filing. I realised he was an alcoholic which explained why he didn't pay attention to client instructions.  I switched to a new accountant who settled the issue with the RD.  She is a free lancer and not expensive but doesn't have enough time to take on new clients.

[JaseTheBass]

 
I would suggest you change your accountant.  My former accountant got me into trouble with the RD because his untrained clerk booked the company's foreign currency loans as USD when they were actually GBP which I had pointed out to them very clearly several times. This had a significant impact on the companies earnings due to forex gains and losses annually.  Eventually the accounts had to be restated and refiled going back 3 or 4 years and I got a bill for B200k for back taxes and penalties for incorrect filing. I realised he was an alcoholic which explained why he didn't pay attention to client instructions.  I switched to a new accountant who settled the issue with the RD.  She is a free lancer and not expensive but doesn't have enough time to take on new clients.

If she's in CM, my wife could always ask her nicely...

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