Today, THAI ACCOUNTANT got an interesting question regarding the tax incentives related to employee training expenses.

Our Thailand-based company provides training courses to companies’ employees. We
heard from our clients that they can deduct 200% of the training cost when they
pay to us. How is it possible?

Answer:

Yes, your clients are able to deduct 200% of the training cost not as a discount
from their payment to your training course but they can use this as
expenditures for the purpose of computation and submission of their Corporate
Income Tax.

As imposed by Department of Skill Development, Ministry of Labour of Thailand, the
Skill Development Promotion Act B.E. 2545 has been issued to encourage enterprises to provide training, upgrading skills, knowledge and competencies for employees and for those who are not employees. And also encourage private sector to set
up and register with the DSD its own training centers for workplace learning
and training. The incentives have been provided to enterprises by deducting the
cost of training 200% from the annual tax payment. The compulsory measure has
been applied for the establishments with at least 100 employees which have to
provide training for the employees at the rate of 50% of the total number of
employees, if not the employer have to pay contribution to the Skill
Development Fund approximately 480 Baht per head per year for the number of untrained employees. Furthermore, the establishments gain other benefit under this Act such as exemption tax of the training machines, bringing experts or trainers to train their workers, free of charge of water and electric fees.

But before your clients can use this training cost as their expenditures, you must
check with the Labor Ministry if your training courses have to be approved by
them. You can contact them for details on how you can register your courses
with them.

After your courses have been approved by the Labor Ministry, your clients can use 200%
of the amount they pay for training in those courses. 100% of the expense is
normal deduction from your income and the other 100% will be deducted from the
net profit before tax. They will have to fill out the form prescribed by the
Revenue Department, which is the form to keep track of the expenses of sending
employees for training for each accounting period, and they should keep it for
future checking by the tax authorities.

For more expert advice on accounting and tax, please feel free to contact MSNA,
Thailand Accountant.

When an employer company pays rewards to its employees, there are both Personal Income Tax on the employee and Corporate Income Tax on the employer company to consider.

THAI ACCOUNTANT got a question about the tax implication when paying monetary rewards to employees as follows:

Question:

The Company used monetary rewards as an incentive for employees to improve performance or reduce operating costs. Such rewards are paid at a rate of 3% of the profit before corporate income tax based on profit and loss figures reviewed quarterly. However, if in any quarter the company incurs a loss, the rewards would not be given. What does the Company has to consider tax-wise.

Answer:

The amount of money received is considered as assessable income of the employees pursuant to Section 40 (1) of the Thai Revenue Code and must be included in the personal income tax computation of the employees. And the Company is responsible to deduct withholding tax as per Section 50 (1) of the Thai Revenue Code at the time of payment.

From a corporate income tax perspective, even though the payment is based on a profit that the company makes every quarter as opposed to the profit at the end of accounting period, it is evident that the payment is based on profit and no compensation is paid if the company generates no profits. Therefore, the payment is a non-tax deductible expense in
accordance with Section 65 ter (19) of the Thai Revenue Code.

Please contact MSNA for more information regarding accounting and tax in Thailand.

Today Thai Work Permit Expert got a very useful question regarding Minimum Salary for Foreign Employees for Work Permit and Visa Extension.

What is the minimum salary for an expat in Thailand to be able to extend his visa?

When a foreigner has a work permit in Thailand, he is able to extend his permit of stay in the kingdom to one year (or what most people call one year visa). However, there is a schedule of different monthly salaries earned by different nationalities that the National Police Bureau of Thailand used to determine if they will extend the expatriate’s permit of stay.

• Countries in Europe (except Russia and eastern Europe), Australia, New Zealand, USA, Canada and Japan – Baht 50,000
• South Korea, Singapore, Taiwan and Hong Kong – Baht 45,000
• Countries in Asia (except Japan, South Korea, Singapore, Taiwan, Hong Kong, Cambodia, Myanmar, Laos and Vietnam), Eastern Europe, Central America and South America, Mexico, Russia and South Africa – Baht 35,000
• Countries in Africa (except South Africa), Cambodia, Myanmar, Laos and Vietnam – Baht 25,000

Our Thailand work permit page has information about Thailand’s work permit rules.

For any questions about work permit and visa extension for expats in Thailand, contact MSNA.

Usually when an employer fires an employee, there are two kinds of payment that the employer is required by the Thai labor law to pay the employee for termination of employment.

1. Payment in lieu of advance notice

If an employment contract does not specify any duration, either party can terminate the contract by giving an advance notice in writing before or at the date the wage payment is due, to take effect on the following wage payment due date. If the employer terminates an employee and wants the termination to take effect right away, the employer has to pay the employee all the wages that should have been owed if the termination would take effect on the following wage payment due date. This is called payment in lieu of advance notice.

1. Severance pay

An employee terminated without a valid cause as stipulated by law is entitled to receive the following severance pay:

• 30 days’ wages where the employment period is at least 120 days but is less than one year.
• 90 days’ wages where the employment period is at least one year but is less than three years.
• 180 days’ wages where the employment period is at least three years but is less than six years.
• 240 days’ wages where the employment period is at least six years but is less than ten years.
• 300 days’ wages where the employment period is ten years or more.

Tax implication:

The payment in lieu of advance notice is considered the employee’s income from work. If the employer is a juristic person (limited partnerships, companies, etc.), which normally has to withhold tax from employees’ income, it has to include this payment to the withholding tax calculation to determine if there is any more tax to withhold from this employee.

Severance pay is tax exempt for the employee if the amount is not more than Baht 300,000 and not more than 300 days’ wages. The portion over Baht 300,000 or the portion that is more than 300 days’ wages has to be included in the withholding tax calculation by the employer.

Note for employees: If you worked for more than 5 years, when you prepare your personal income tax return of the year, you can claim more deductions on the severance pay’s portion over Baht 300,000 or the portion that is more than 300 days’ wages.

If you want to ask us questions on Thailand labor law, please visit www.msna.co.th for more information.

Today MSNA wants to discuss Annual or Paid Vacation Leave in Thailand Labour Law.

“Section 30: An employee who has worked for an uninterrupted period of one year is entitled to annual holidays (or paid vacation leave) of not less than 6 working days in one year and the employer is obliged to fix the annual holidays in advance for the employee or as agreed by the employer and the employee.

In the following years, the employer may fix the annual holidays for the employee of more than 6 working days.

The employer and the employee may agree in advance to accumulate and postpone any annual holiday that has not yet been taken in a year to be included in the following years.

For the employee who has not yet completed one year of service, the employer may set the annual holidays for the employee on a pro rata basis.”

MSNA’s notes:

– The employer can agree with the employee when he wants to take his holidays. It can be 1, 2, 3 or 4 days at a time or the whole 6 days at once. The company may have a policy that the employee has to submit the request to take his annual holidays and get the employer’s approval for how long in advance before the dates of the intended holidays.

– The number of days of paid vacation leave (annual leave) can be increased (or not) for the following years.

– The employer may choose to allow the employee to take his unused annual holidays in a particular year to roll forward to the following year.

– For the employee who has not completed one year of service, the company may choose to allow (or not) paid vacation leave on a pro rata basis.

– The employer may choose to pay the employee (or not) for the unused paid vacation leave (annual holidays).

Please visit www.msnagroup.com for more information on doing business in Thailand and Thai labor law.

Thai Labor Law prescribed different kinds of leave that an employee is entitled to.

Section 32: An employee is entitled to sick leave as long as he is actually sick. For sick leave of 3 days or more, the employer may require the employee to produce a certificate issued by a first class physician or an official medical establishment. If the employee is unable to produce such a certificate, he shall give an explanation to the employer.

If a physician is provided by the employer, the physician shall issue the certificate except where the employee cannot be examined by the physician.

The day on which an employee is unable to work on account of an injury or illness, arising out of employment or on maternity leave under section 41 shall not be regarded as sick leave under this section.

Note: The employer has to pay wages to the employee on sick leave equivalent to the wages of a working day throughout the leave period, but not more than 30 days a year.

Section 33: An employee shall be entitled to leave for sterilization and leave as a result of sterilization for a period determined and with a certificate issued by a first class physician.

Note: The employer has to pay wages to the employee on leave for sterilization equivalent to the wages of a working day throughout the leave period.

Section 34: An employee shall be entitled to leave for necessary business in accordance with the work rule of his workplace.

Section 35: An employee shall be entitled to leave for military service for inspection, military drilling or for readiness testing under the law concerning military service.

Note: The employer has to pay wages to the employee on leave for military service equivalent to the wages of a working day throughout the leave period, but not more than 60 days a year.

Section 36: An employee shall be entitled to take leave for training or the development of his knowledge and skills in accordance with the rules and procedures prescribed in the ministerial regulations.

Section 41: A female employee who is pregnant shall be entitled to maternity leave of not more than 90 days for each pregnancy.

Any leave taken under paragraph one shall include holidays during the period of leave.

Note: The employer has to pay wages to the employee on maternity leave equivalent to the wages of a working day throughout the leave period, but not more than 45 days a year.

For questions about Thai labor law, contact us at www.msnagroup.com.

An employee terminated without a valid cause as stipulated by law is entitled to receive the following severance pay:

• 30 days’ wages where the employment period is at least 120 days but is less than one year.
• 90 days’ wages where the employment period is at least one year but is less than three years.
• 180 days’ wages where the employment period is at least three years but is less than six years.
• 240 days’ wages where the employment period is at least six years but is less than ten years.
• 300 days’ wages where the employment period is ten years or more.

In the event that the employer relocates its place of business that essentially affects the normal living of an employee or his/her family, the employer must notify the employee of the relocation at least 30 days in advance or pay an amount in lieu of the advance notice equal to 30 days’ wages. In this connection, if the employee refuses to move and work in the new location, the employee has the right to terminate the employment contract and is entitled to receive a special severance pay of not less than the prescribed rates of severance pay.

In the event that the employer terminates the employment of an employee as a consequence of streamlining the work units, production process, distribution service, or the introduction or change of machinery or technology, which thereby results in the reduction of the number of employees, the employer must notify the Labor Inspector and the employee concerned at least 60 days before the date of termination of the employment or pay in lieu of the advance notice to the employee an amount equal to 60 days’ wages. The terminated employee will be entitled to the prescribed rates of severance pay. Moreover, if the terminated employee, has worked consecutively for over 6 years, the employee would be entitled to an additional special severance pay at the rate of 15 days’ wages per one full year of service, calculating from the start of year 7 onwards. However, the total amount of this additional special severance pay is limited to the equivalent of 360 days’ wages.

Read the official version of the Thai Labor Law:

Labour Protection Act B.E. 2541 (A.D. 1998)

Labour Protection Act B.E. (No.2) 2551 (A.D. 2008)

According to the Thai labor law, if an employment contract does not specify any duration, either party can terminate the contract by giving notice at or before any time of payment, to take effect in the next pay period.

In Thailand, an employer does not have to pay severance pay to an employee when employment is terminated upon any of the following conditions:

(1) performing his/her duty dishonestly or intentionally committing a criminal offence against the Employer;

(2) willfully causing damage to the Employer;

(3) committing negligent acts causing serious damage to the Employer;

(4) violating work rule, regulation or order of the Employer which is lawful and just, and after written warning having been given by the Employer, except for a serious case with no requirement for the Employer to give warning.

The written warning shall be valid of not exceeding one year from the date when the employee commits the offence;

(5) absenting himself/herself from duty without justifiable reason for three consecutive working days regardless of whether there is holiday in between;

(6) being sentenced to imprisonment by a final court judgment.

In item (6), if the imprisonment is for offences committed by negligence or a petty offense, it shall be the offense causing damage to the Employer.

Upon termination of employment without severance pay upon the above conditions, the Employer needs to specify the fact which is the cause of termination in a letter of termination of employment or inform the cause of termination to the employee at the time of termination of employment.

The maximum number of working hours of employees in Thailand is fixed at 8 hours a day and 48 hours a week in total. In some types of works, as stipulated by the Thai labor law, the employer and the employee may agree to arrange the period of working hours but the working hours in any case must not exceed 48 hours a week. In establishments in which the work is deemed injurious to health or personal safety, as stipulated by law, working hours must not exceed 7 hours a day and 42 hours a week in total.

All employees are entitled to a daily rest period of at least 1 hour after working for 5 consecutive hours. The employer and the employee may arrange the daily rest period to be shorter than 1 hour at each time but it must not be less than 1 hour a day in total. A weekly holiday of at least 1 day a week at intervals of a 6 day period must be arranged for the employee.

For work performed in excess of the maximum number of hours fixed either by regulation or by specific agreement (if the latter is lower), employees must be paid overtime compensation. The rates of overtime vary ranging from 1.5 times to 3 times the normal average hourly wage rate for the actual overtime worked. Certain employees engaged in employment related work on behalf of the employer and other types of work as prescribed by law are not entitled to overtime compensation. The maximum number of overtime working hours is limited to not more than 36 hours a week.

All employees are entitled to unlimited sick leave, but the number of days paid sick leave shall not exceed 30 regular workdays a year. The employer may require an employee to produce a certificate from a qualified doctor for a sick leave of three days or more.

A female employee is entitled to maternity leave for a period of 90 days including holidays, but the number of days paid leave shall not exceed 45 days.

An employee who has worked consecutively for one year is entitled to at least 6 working days of paid vacation every year, in addition to the 13 holidays in a year traditionally observed in Thailand.

Here is the full version of Labour Protection Act B.E. 2541 (A.D. 1998)

and Labour Protection Act B.E. (No.2) 2551 (A.D. 2008)