This article is about tax on earnings which an employee received from the employer concerning the agreement of compromise. When the employee whose working period is not less than 120 days is terminated, the employer has to pay the employee the compensation according to the Thai Labor Law. The amount of the compensation depends on how long the employee has been working with the employer. This compensation is not subject to tax.

In the case that there is a dispute on unlawful termination in the labour court, if there is a monetary offer from the employer to settle the case and the employee accepts it, both parties can agree in front of the judge. The amount received according to the agreement of compromise before the judge is subject to tax because it is not considered a compensation stipulated in Labour Protection Act. It is considered an income under Section 40(1) of the Revenue Code, which shall be treated the same way as a monthly salary. Therefore, the employer has to deduct withholding tax at the progressive rate from the amount of settlement.

For questions regarding Thailand labour law, please contact our legal team at ThaiLawyers.com

Business people frequently have problems concerning the Thai taxation and cannot find the answers in the Revenue Code. Therefore, it is necessary for them to consult with the revenue department of Thailand. In some cases, you can ask an official verbally to get answers. However the best way is to write a letter detailing the tax question to the Revenue Department. The answer obtained with this process is called ‘’ruling’’.

Ruling is a letter written by people who have tax problems for consulting with Revenue Department to get their official answers. The following is how to get a Revenue Department’s ruling.

1. The letter should be addressed to the Director-general of the Revenue Department.
2. You should describe the problem clearly with the details and attach it with supporting documents.
3. If possible, you should ask the question in reference to the Revenue Code by specifying sections or terms in the code because the answer will refer to the terms and sections of the law.
4. You should keep a copy of the answer from the Revenue Department (ruling) and a copy of your letter for future reference.

However, ruling is only a legal opinion given by the legal team of the Revenue Department. It is not the law. Taxpayers are not obliged to follow it.

Contact MSNA for any tax and accounting needs in your doing business in Thailand.

Our company in Thailand will have a sales meeting in Hua Hin, thus we need to engage van transports for our associates. The vendor said that he is not registered as Private Limited or Company Limited; thus the payment will be to the company’s owner even though all transactions, quotation and billing will be under his company name. The invoice will not include tax; The THB 4,000 quotation is NETT.

Our question is can we pay him even though he is not a company?

Answer: It is OK that he is not a company. When you pay hi, you will have to ask for his ID card copy duly signed indicating that he received the amount of money from you. You said his quoted price was not. We assumed that he will not let you withhold 1% tax (transportation is subject to 1% withholding tax), then your company will have to bear it. You have to submit the withholding tax to the Thai Revenue Department even though you did not withhold it.

Contact MSNA for all your accounting and tax questions.

When a branch office of a foreign company has obtained a Foreign Business License from the Department of Business Development as required by Thailand Foreign Business Law, can it start operation without VAT registration?

You can start the operation of the branch office now. However, if your sales will reach Baht 1.8 M within the time before VAT registration, please refrain from issuing the invoice (whose amount will make the total sales to-date reach Baht 1.8 M) until you have registered VAT.

When a company’s gross income has not reached Baht 1.8 M in an accounting year for the first time, it is not required to be in the VAT system. However, your customers normally will not understand this and they will ask you for a tax invoice anyway. So that means you should register VAT before you make income from sales or services. If you are not registered in the VAT system, you cannot issue a tax invoice. You can only issue an invoice and a receipt and you cannot collect VAT from your customers. VAT can be collected by the companies that are registered in the VAT system.

Learn about Thailand VAT here.

Today, we got a question from one of our accounting clients regarding VAT.

Question:

I have just purchased a plane ticket for a business trip overseas and the travel agency issued a Tax Invoice/Receipt but shows 0 VAT. Is this correct?

Answer:

Yes, the receipt is correct. They cannot collect VAT from you when it is air ticket or transportation.

Tour companies; usually have pre-printed form of receipt/tax invoice so they can also use it when they arrange tours, which they need to collect VAT from their clients. When they receive money for just transportation, they cannot collect VAT and this paper should be called only “receipt”. For them to do it correctly, they need to cross out the word “Tax Invoice”, but if they did not do it, it is not your problem because there is no VAT that you will wrongly claim back anyway.

Contact MSNA for your Thailand accounting and tax questions.

One of our accounting clients asked a question about VAT on their export.

I would like to know if the export portion of my product sales which is roasted whole coffee beans grown, roasted and packed in Thailand, is classified as 0% VAT? The challenge is that I export only 1 or 2 kg per shipment and it is done by EMS courier and then sent via a Thai Post Office. I do not export from an airport or customs point. Kindly clarify. I have been told conflicting answers and I can’t seem to find a definitive answer. Your assistance is greatly appreciated.

Thai Accountant answered: When you export products from Thailand, you must do it via customs. Sending it by post or EMS, you still can declare it with the Customs Department of Thailand. You need to tell the post office that you want to declare Customs, which normally is done using form EMS Por 256. When exporting your products using DHL or Fedex, you need to tell them that you want to send your products through customs. They will prepare some customs export shipment papers for you.

If you do not have Customs export shipment papers, the Thai Revenue Department will treat your sale as domestic one, which is subject to 7% VAT.

Contact MSNA for your accounting and tax questions.

One of our tax clients is planning to purchase a condominium unit in Bangkok. He asked us if there is any tax to be paid to the authorities. Today, we answer his question based on two scenarios: if the condominium will be purchased under his name or the company’s name.

1. When he buys it in his name, he needs to hold it for 5 years otherwise, he has to pay for Specific Business Tax (SBT) 3.3% of the selling price when he sells it on top of the 2% transfer fee and his personal income tax because it will be considered as purchasing a condo for business purpose. However, if he sells the unit after 5 years, he doesn’t have to pay for SBT of 3.3% although he needs to pay for the transfer fee and income tax.

2. When the purchase is done in company’s name, the company has to pay the transfer fee plus Specific Business Tax 3.3% of the selling price whether he sells it before 5 years or after. Although we are not yet sure how much corporate income tax the company has to pay in the future, tax will be based on the net profit of the company, part of which is the profit from selling the condominium. Furthermore, if he use it personally, when the Revenue Department comes to check the condominium and they know that he is staying there, they will make the company charge him for rent and this will be part of company’s income. The company can also use the depreciation of the condo as company’s expenses.

Contact MSNA for your accounting, tax and other business needs in Thailand.

Today, we answer a question from one of our accounting clients regarding the tax withheld by overseas-based company. Can they recover this cost?

In theory, the tax withheld by another country should be a tax credit to the Thai company, but only if the company makes profit and will have to pay tax, then this tax credit will lower the amount of tax check it has to pay to the Revenue Department.

Hence, to use the withholding tax as tax credit, the company needs the following documents to prove it:

1. The withholding tax certificate issued by the client overseas, and has to attach its Thai translation too.
2. The proof of payment for the service on the transaction.

Know more about Thailand withholding tax and how it works. Contact MSNA for your Thailand accounting and tax questions.

Today, one of our accounting clients has asked us about any tax implications of reimbursing phone and car expenses to their employees.

Question:

As a company policy, we have to reimburse phone bills of our employees provided that their personal phones are used in doing their jobs. When we pay our employees for such expense, do we have to withhold any tax? Please advise.

Answer:

Normally, when the company provides mobile phone allowance to employees, this benefit will be part of their income and therefore subject to personal income tax. But since it is in your company policy to pay phone bills to your employees who used their personal phones for the company’s business, this is not considered as employee’s benefits and therefore, is not subject to withholding tax. However, you just have to make sure that phone expenses were related to your company’s business and the employees provide the original bill. Phone expenses are to be reimbursed on an actual basis, but should not exceed THB 1,000.

Contact MSNA for your Thailand accounting and tax questions.

Private company, public company, juristic partnership, foundation and association or any other legal entity with accounting period ended 31 December 2013 are required to file the annual corporate incom tax (Por Ngor Dor 50, Por Ngor Dor 52, Por Ngor Dor 55) on this Friday, 30^th May 2014 (within 150 days from the accounting period ending date). For online filing, the due date will be extended for 8 days, and since it falls on a government holiday, the last day for online filing is on Monday, 9^th June 2014.

Please make sure that you file the tax forms correctly and accurately. Contact MSNA for your Thailand accounting and tax questions.