Hiring foreigners without work permits in Thailand
As an accounting firm that provides accounting service to foreign companies in Thailand and also work permit service to foreigners, MSNA gets asked by our clients very often about employing foreigners when they don’t have a work permit. What should they do to be able to expense the salary?
If your Thailand company employed a foreigner who does not have a work permit then your company is hiring an illegal foreign worker, which is against the law. You will not be able to take advantage of the expense. The same applies to the case where he has a work permit with another company, but will work for your company too. If you hire a foreigner, your company must sponsor his work permit so as to be legal for the both of you. Or in other words, his work permit has to have your company as one of the employers.
If you hire foreigners who work outside of Thailand (Some of our clients are software companies and hire foreigners who work outside Thailand), this way, they don’t need to have a work permit. However, you need to withhold 15% when you pay them each time. In this case, you can use their invoice and a copy of their passport as the supporting documents for the expense and you have to submit the withholding tax of 15% to the Revenue Department within the 7th of the month following the payment.
Contact MSNA for your tax and work permit questions.
Passenger car – lease or buy
When your Thailand company buys a passenger car of not more than 7 seats (cash or installments), the cost of the car allowed to be depreciated over 5 years is not more than Baht 1,000,000. This cost includes VAT, interest paid (in case of installments), registration fee and the car itself. So basically, when you acquire the car, it is booked as a fixed asset with the amount of all the costs previously mentioned combined. If your accountant calculates the depreciation expense of the car for the year using the straight-line method, the depreciation expense allowed by the Thai tax law is not to exceed Baht 200,000 a year (to be prorated to the exact number of days in the first and the last years). Whatever amount exceeding Baht 200,000 becomes non-tax deductible and will be added back to your bottom line profit when filling out the end of year corporate income tax return.
The expenses like a driver, car maintenance, gasoline and yearly vehicle tax can be tax deductible only if they are proven to be related to the business operation.
In case your company leases a passenger car of not more than 7 seats (including leasing with a driver), where the company will not own it at the end of the lease term, the lease expense allowed by law is not more than Baht 36,000 per month (or Baht 1,200 per day). For the expenses like insurance premium, car maintenance, gasoline and yearly vehicle tax can be tax deductible only if they are proven to be related to the business operation and it is advised that there should be an agreement with the lessor that the lessee is responsible to those items otherwise the Revenue Department may view it as the lessor’s responsibility and thus your company should not pay for them so they should become non-tax deductible for your company.
Contact MSNA for your Thailand tax and accounting questions.