VAT for Recruiting an Employee Overseas by a Thai Headhunter
Today THAI ACCOUNTANT got a VAT question from a Thai headhunter company who recruit an employee overseas to work outside Thailand.
Scenario 1: If the employee is recruited inside Thailand to work overseas and is hired by the overseas company, the Headhunter’s service is done in Thailand, but the end product is used overseas. The Headhunter does not have to charge 7% VAT on its service fee to the overseas client.
Scenario 2: If the Headhunter Company recruits an employee (inside or outside Thailand) to work for a Thai client company on a project overseas, then the Headhunter has to charge 7% VAT on its invoice to the Thai client company.
What Should be Filed by a Company in Thailand?
If you have a company in Thailand, you should know that your Thai accounting staff may not know everything your Thai company should file in a year. Even if you hire a Thai accounting firm to handle your accounting, you need to make sure they do their job.
Here is a brief summary of what should be filed by a Thai company, but keep in mind that depending on many factors, there may be more forms that your company should file than these:
- Within 31 January, file form Kor Tor 26 Kor “Workmen Compensation Fund Estimate for the year …. (current year)” with the Social Security Office.
- Within 28 February, file form Kor Tor 20 “Employees Compensation Sheet to attach to Form Kor Tor 20 Kor for the year….(previous year)” and also make payment with the form Kor Tor 20 Kor with the Social Security Office.
- Within 7 February, file form “Information of foreign employees’ income” with the Revenue Department (together with the monthly PND 1 of January (see the monthly filing below). Also if during the year there is any foreign employee joining or leaving the company, this form must be filed within 7th of the month following the transaction.
- Within 28 February, file PND 1 Kor with the Revenue Department. This is the return that summarizes all the employees’ income and tax withheld throughout the previous year.
- Within 30 April (or within 4 months after the accounting year-end), hold an AGM (Annual General shareholders’ Meeting) to approve the prior year financial statements.
- Within 27 May, (or within one month after the AGM, whichever comes first), file the audited financial statements and the copy of list of shareholders as of the AGM date with the Department of Business Development, the Ministry of Commerce.
- Within 27 May, (or within 150 days after the accounting year-end) file the audited financial statements and Corporate Income Tax Return (PND 50) with the Revenue Department.
- Within 31 August, (or within 2 months after the first half of your accounting year) file the interim corporate income tax return (PND 51) with the Revenue Department.
- Within the 7th of the month, file the withholding tax returns (PND 1, 3, 53 and 54 if any) of the previous month with the Revenue Department. Also VAT return form 36 (PP 36), if any, must be filed.
PND 1 shows all the taxes withheld from the employees’ salaries.
PND 3 shows all the taxes withheld from the suppliers who are individuals.
PND 53 shows all the taxes withheld from the suppliers who are juristic persons.
PND 54 is shows all the taxes withheld from paying the suppliers overseas.
PP 36 is the Valude Added Tax (VAT) return that the company files on behalf of its overseas suppliers. Because overseas suppliers are not registered in the Thai VAT system, when the company makes payment to them, it has to submit 7% VAT on behalf of them. The VAT amount will become the company’s input tax (thus can be claimed back) in the month that the company submits it.
- Within the 15th of the month, file the monthly Valude Added Tax (VAT) return (PP 30) with the Revenue Department. This form summarizes the input and output VAT of the previous month and it has to be filed even if there are no transactions. If the company is not registered in the VAT system, it cannot file this form.
- Within the 29th of the month, file the social security form “Sor Por Sor 1-10” with the Social Security Office. This form shows all the social security contribution deducted from the employees’ salaries and the contribution made by the company from the previous month.
Good Thai accounting companies (like MSNA) know to file all those forms for their accounting clients. However, you may be surprised that many Thai accounting firms don’t.
Options for Foreigner Who Wants To Do Business in Thailand
The following is an overview of establishing a business in Thailand. There are 4 forms of establishment you can choose to operate your business in Thailand:
- Sole Proprietorships. This is not the form of business we recommend since the sole owner is exposed to unlimited liability of the business.
- Partnerships. A partnership can be registered and unregistered. Again partnerships are not recommended for foreigners wanting to do business in Thailand for the same reason as sole proprietorships.
- Limited Companies. The most popular form of business organization among general investors is private limited companies due to the fact that the liability of the investors is limited to the amount of unpaid shares subscribed by them.
A private limited company requires a minimum of three promoters who file a memorandum of association, convene a statutory meeting and register the company. Once the company has been registered, it needs to obtain a tax identity card. Some companies are required to register into the VAT (Value Added Tax) system, depending on the types of business and the level of their gross income. They must also follow accounting procedures specified in the Civil and Commercial Code, the Revenue Code and the Accounting Act. Companies are required to close their accounts and have an auditor audit their books and file their audited financial statements once a year with the Revenue Department and the Department of Business Development.
- Branch Office . You may choose to operate your existing foreign company in Thailand as a Branch Office. Or you can choose to set up a representative office, which is a form of Branch Office but you cannot earn income in Thailand.
In order to operate a business in Thailand as a foreigner, you need to consult Thailand Foreign Business Law (Alien Business Act). Certain types of businesses do not have to apply for a Foreign Business License while most types do require that you get the Foreign Business License before you start the business operation.
Contact MSNA for any questions about setting up a business in Thailand.
Types of Business a Foreigner Can Do in Thailand
If your company is Thai majority owned, you can do almost any kind of legal business. However, if yours is a foreign majority owned company, set up inside or outside of Thailand, you can do business with the following conditions:
(1) Non-restricted Businesses
General rules are that if your foreign majority company does export (from Thailand) or manufacturing businesses, it can operate the business without having to apply for a Foreign Business License.
(2) Restricted Businesses
Nearly all types of service and retail businesses are restricted to foreigners. As a foreign majority company you may obtain exemptions through getting a Foreign Business License or a Board of Investments (BOI) promotion, or in case of US companies or American majority companies, registration under the Treaty of Amity and Economic Relations between the United States of America and the Kingdom of Thailand. It should be noted that for some types of businesses, exemptions cannot be obtained.
Click for more information of Thailand Foreign Business Law or for the full version: http://msnagroup.com/thailand-business-company/thailand-foreign-business-law.
Welcome to MSNA Ltd.
Welcome to MSNA Ltd, your business partner in doing business in Thailand. We are Thai accountants who know the Thai Accounting Law and Thai Tax Law very well. We provide not only accounting services, but also many other services necessary for helping you do business in Thailand. If you have any questions, be it Thai accounting or Thai tax related or anything to do with doing business in Thailand, please email us at email@example.com.