We have to transfer some of our senior employees from our own company to a sister company along with the reserve funds designated for those employees in case of retirement and resignation. Is there any tax point to be considered?

Answer:

When you transfer your employees from your company to work with your sister company which is considered a separate legal entity, along with the reserve funds designated for those employees in case of retirement and resignation, you are allowed to treat the transferred reserve funds as tax deductible expense for the purpose of computing net profit during the transfer period, without conflict with Section 65 ter. (1) and (9) of the Revenue Code. However, the transferred amount is not considered as income of your sister company because the transfer of reserve is considered a transfer of future payment obligations to the transferred employees. Accordingly, the sister company is not allowed to claim a deduction upon making payment (from the transferred reserve funds) to transferred employees upon their retirement or resignation.

Contact MSNA for your accounting and tax questions and business needs.

Is there any exemption on taxes if we have a disabled employee hired to work with our company?

Answer:

Under Royal Decree (No. 499) BE 2553, a business entity employing a disabled employee with an identification card issued under the Persons with Disabilities Empowerment Act, that has paid employee remunerations, including salaries, overtime wages, bonuses, hardship allowances (if any), medical expenses and social security fund contributions, in accordance with its obligations under the employment contract, is entitled to a corporate income tax exemption.

Contact MSNA for more information on accounting and tax in Thailand.

Today, THAI ACCOUNTANT answers a question from one of our payroll clients regarding the Workmen’s Compensation Fund contribution.

Question:

We have just received a letter from the Social Security Office regarding the Workmen’s Compensation Fund submission. Our Thai staff told us that they are forms to be submitted for this year and for the previous year’s workmen’s compensation fund contribution. Why do we have to pay for both years now?

Answer:

Companies in Thailand who have employees normally receive some forms from the Social Security Office in December or early January of each year.

1. Form “Kor Tor 26 Kor” is the form that the Social Security Office estimates the amount of Workmen’s Compensation Fund contribution for the new year (2012) for your company to pay. It is estimated from 2011 salaries that the official has seen from the Social Security form filed monthly throughout 2011. In this form, it says the amount you have to pay for the fund of 2012. The payment must be made to the Social Security Office within this month (January 2012).
2. Form “Kor Tor 20 Kor” which appears on the same paper under Form Kor Tor 26 Kor of the year 2012, is for the company to fill out the total figure of 2011 payroll (but for each employee, the maximum annual salary for workmen’s compensation fund calculation purpose is not more than Baht 240,000 only). The figure is obtained from the worksheet we will talk about in no.3 below. This form is to be compared with the amount you paid in Form “Kor Tor 26 Kor” of the previous year and make you pay the difference within the end of February (in case you paid too little in 2011) or give you the refund (if you paid too much in 2011).
3. The third form which is a separate sheet of paper is the worksheet to show the calculation of the annual salaries to attach to Form “Kor Tor 20 Kor”.

Contact MSNA for further assistance and information on Workmen’s Compensation Fund and Thailand Labour matters.

The Thailand’s Social Security contribution rates for 2012 has announced the following rates to deduct from the employees’ salary for monthly social security contribution and the company will have to pay the same amount to the Social Security Office:

For January to June 2102, the social security deduction rate is 3% with the maximum deduction of Baht 450. (That means if the employee makes more than 15,000 a month, the company only has to deduct 450 from his salary).

For July to December 2012, the rate is 4% with the maximum deduction of Baht 600.

It should be noted that the rate used in 2011 was 5% with the maximum deduction of Baht 750.

Contact MSNA for further assistance and information on Social Security and Thailand Labour matters.

In order to support the flood-hit companies’ rehabilitation project and help the
affected employers, the Thai Cabinet has postponed the effective date for the
country-wide increase in the minimum wage to Baht 300 per day from 1 January 2012 to 1 April.

Based on the approved resolution of the Wage Committee, the details of minimum wages are summarized by provinces below:

*The Thai Cabinet has acknowledged the resolution to increase the daily minimum wage rate which varies across the country from Baht 63 to Baht 85. Thus, this will be increased in two steps as follows:

Step 1. An increase of 39.5% of the 2011 daily minimum wage rate

Step 2. An increase to Baht 300 starting on 1 January 2013.

Remark:
In the years 2014 and 2015, the daily minimum wage rate will be fixed at Baht 300 for all provinces. However, if there happens to be a strong economic disturbance that affects the living standard of the workers, the daily minimum wage rates applicable for 2014 and 2015 may be adjusted as the Wage Committee deems appropriate.

Contact MSNA for your questions regarding the minimum wage hike or should you need further assistance with any other Thailand Labour Law matters.

As sound labour relations is a key factor for achieving harmony in the workplace, the Department of Labour Protection and Welfare, Ministry of Labour has adopted “Guidelines on the promotion of labour relations in 2551 crisis ” and good faith principle to apply for solving the problems resulting from the floods in 2554 as follows:

Whereas a workplace hit by the floods, representatives of an employer and
an employee should consult and work together in every way as far as possible for supporting a workplace to run his/ her business without a case of termination of employment or lockout.

1. Both parties should apply the bipartite systems to consult or negotiate based on the principle of good faith for any action affecting to them.
2. An employer and an employee should disclose facts concerning the business profits and the actual status of the floods.
3. Employers should listen to the employees’ opinion and take into account the majority of the employees’ consent and acceptance without using administrative powers to put pressure on employees on issues concerning cost cutting such as wages, welfare and etc.
4. Employees should be aware of the impact of the floods and should
   cooperate with an employer to resolve the problem by avoiding the violence methods or exercising their rights causing hardship to the people; strike, obstruction of the road and so on.
5. Where there is negotiation or joint consultation which may not reach a conclusion, both parties should inform an officer promptly to discuss and propose ways to resolve problems rapidly.
6. The officer would solve the problem by the impartial, flexible and
   peaceful approach to end the problem on the basis of validity and fairness.
7. Leaders of an employer’s organization and an employee’s organization should participate in preventing and resolving labour conflicts and disputes adhere to work together peacefully.

If an employer needs to reduce the number of employees employed, he/ she should apply the measures and guidelines to alleviate the problem of termination of employment as a guideline in the implementation.

Learn more information and guidance in handling Thailand Labour matters. Contact MSNA for expert advice.

The Ministry of Labour Protection and Welfare has announced the project to help prevent and alleviate the problem of termination of employment of the flood hit companies.

Project guidelines

1. The project will be made public to employers.

2. An employer or an establishment hit by the floods submits documents concerned to the Provincial Office of Labour Protection and Welfare/ the Bangkok Metropolitan Office of Labour Protection and Welfare where the establishment located for joining in the project.

3. An officer of the Provincial Office of Labour Protection and Welfare/ the
Bangkok Metropolitan Office of Labour Protection and Welfare verifies the
documents and qualification of the employer hit by the floods according
to the required criteria.

4. The committee will be set up at the Provincial Office/ the Bangkok Metropolitan Office composing of the representatives from the agencies under the Ministry of Labour to consider and approve the establishment joining in the project.

5. An employer or a person authorized to act on behalf of the employer signs the Memorandum of Understanding (MOU) with the Director-General of the Department of Labour Protection and Welfare or the assigned person from the Director-General.

6. Whereas an establishment complies with the MOU without a case of termination of employment due to the floods situation and pay employees not less than seventy-five percent of their wages, the Provincial Office of Labour Protection and Welfare/ the Bangkok Metropolitan Office of Labour Protection and Welfare shall contribute additional payment to the establishment.

Criteria for acceptance of an employer hit by the floods to join
in the project

1. Qualification of an employer

1.1 An employer or an establishment hit by the floods for 7 days consecutive or more and temporarily suspend business for a month or more has to provide evidence for consideration.

1.2 An employer has to notify a record of employees who are insured person at the Office of Social Security when joining in the project at the registration date.

1.3 A contract employer employs workers working in an establishment hit by the floods has to be affirmed by an entrepreneur before providing a record of insured employees to join in the project.

2. An employer has to agree and accept the following conditions;

2.1 While joining in the project, an employer must not terminate a contract to an employee hit by the floods.

2.2 The Government would pay an employee for 2,000 baht a month and an employer would contribute payment to an employee. The total payment received by an employee would not less than seventy-five percent
of his/her wage for a working day received before hitting by the floods.

2.3 An employer has to notify an employee and post a notice for the project’s participation.

2.4 Whereas an employer fails to comply with these criteria, he/she would disqualify to participate in this project. If the officer later found that the employer fails to comply with the terms of the MOU, or submitted information, or the evidence does not match reality, the employer has to return money and be prosecuted.

Criteria of Payment

1. The Provincial Office of Labour Protection and Welfare/ the Bangkok
Metropolitan Office of Labour Protection and Welfare would verify a status of insured person in a record of employees received from an establishment. The Officer has to verify payroll evidence that the employer paid to employees not less than seventy-five percent of his/her wages for November 2011 payment.

2. The Provincial Office of Labour Protection and Welfare/ the Bangkok
Metropolitan Office of Labour Protection and Welfare would pay a cheque to the employer entitled in the project commencing on November 2011 onwards for 2,000 baht per an employee.

3. The payment would be ceased when an establishment can run his/her business as usual, but it would not exceed a three-month consecutive.

4. The Provincial Office of Labour Protection and Welfare/ the Bangkok
Metropolitan Office of Labour Protection and Welfare would submit a record of employees received from an employer to Social Security Office for verification.

For assistance in Thailand Labour matters, contact MSNA
for an expert advice.

This post about “RMF and SSF – Personal Income Tax Saving Strategy” was updated in 2021.

RMF stands for Retirement Mutual Fund.

A taxpayer’s personal income invested in one or more RMF’s (which are in compliance with Thailand Securities and Exchange Act) (combined with contribution to provident fund and/or government pension fund) is tax exempt up to 30% of his income in the year, but not more than Baht 500,000 when combined with other retirement funds for example SSF and provident fund. The following conditions apply to RMF:

1. The taxpayer has to buy RMF at least once a year and he must not cease buying RMF for more than one year continuously.
2. The taxpayer has to hold the RMF for at least 5 years from the date of the first purchase and redeem it when he is at least 55 years old unless the redemption is due to disability or death. And when the taxpayer has hold the RMF for more than 5 years and is at least 55 years of age, he can stop buying RMF, or if he wants to buy more RMF, he does not need to comply with no. 1 above any more.
3. The taxpayer must not receive dividends or any other money from the RMF during the holding period and must get the investment and all benefits back only on redemption.
4. The taxpayer must not get a loan or take money from the RMF fund that he has invested in.
5. The taxpayer must attach to his personal income tax return the certificate of RMF purchase issued by the company that manages the RMF.

SFF stands for Super Savings Fund.

Super Savings Fund is any mutual funds to promote long-term savings. A taxpayer’s personal income invested in one or more SSF’s which are in compliance with Thailand Securities and Exchange Act is tax exempt up to 30% of his income in the year, but not more than Baht 200,000. The following conditions apply to SSF:

1. The taxpayer has to hold the SSF for at least 10 years from the purchase date.
2. The taxpayer may use the SSF tax exemption during the years 2020 to 2024.

Contact MSNA, a Thai accounting company in Bangkok, for any tax or accounting questions.

One of MSNA’s payroll service clients has asked us a question regarding Social Security
Fund and provident fund.

My salary gets deducted for Provident Fund and Social Security. Could you please
clarify the difference between Social Security and Provident Fund in Thailand?
Are we required to pay for both funds?

Answer:

Under the Social Security Act as imposed by the Thai labour law, it is compulsory to pay for the social security. The employees have to contribute 5% of their salary, but not exceeding Baht 750 per person into the social security fund (The employers are required to withhold the social security contributions from each employee’s monthly salary). The
employer must also contribute the same amount and submit the total amount to
the Social Security Office within 29^th day of the following month.

As for provident fund, the Thai labour law does not make it compulsory. It always
depends on each employer’s policy. In your case, your company has the policy of
having the employees pay 5% from their salary into the fund and the company
pays 7.5%.

Read more on Thailand provident fund here.

In Thailand Provident fund is the fund voluntarily established by agreement of
the employees and employer and registered under the Provident Fund Act B.E.
2530 to encourage savings and serve as security for employees and their
respective families in the event of employees’ termination of employment, resignation
from the company or from the provident fund, retirement, disabilities and death.
A fund may be set and registered as a single fund for employees with sole
employer or a pooled fund for employees with more than one employer and/or multiple
investment policies. Thus, as required by law, the investment policy of the
provident fund to be registered must comply with the Security and Exchange
Commission’s (SEC) rules and regulation.

Once the provident fund has been registered with the Ministry of Finance, it is
considered as a juristic person, a legal entity separated from both the
employer and the fund manager. None of them has the right to claim on the fund
because it is the Registrar appointed by the Ministry of Finance who has the
authority and duties to supervise the management of the fund and has the power
to order the fund manager to give statement and provide reports on the
management of the fund. In the case of the fund manager or the company having
financial problems or has to end its operation, it is guaranteed that the
employees will still receive their money from the fund upon their resignation
or retirement in accordance to their entitlement and the fund regulations.

As specified in the Provident Act B.E. 2530, the provident fund must consist of
percentage of both employees’ and employers’ contributions. The contribution
rate starts from 2% – 15% of the employee’s salary. Normally, it depends on the
company’s policy on how much rate to be used as long as the employee’s
contribution rate will not exceed the employer’s contribution rate and the
employer’s contribution rate must be more than or equal to the employee’s
contribution but not more than 15% of the salary.

Benefits of Provident Fund to Employees

– Tax deductible on employee’s contribution

– Tax exemption on earnings of the fund

– Deferred tax payment until resignation

– Receive higher welfare benefits upon resignation or retirement

– Secure more savings for oneself and family

– Future security for family in the event of disability or death

– Tax exemption on the lump sum received in the event of retirement, death or
disability

Benefits of Provident Fund to Employer/Company

– Tax benefits. Company’s contribution to the provident fund can be used as company’s
expenditures of not more than 15% of the company’s annual salary expenses of
that year

– Reduce the burden of company administrative works

– Maximize the company’s cash flow

– Another means of employee fringe benefit; employees will feel more loyal to the company which can result to more efficiency and productivity of the workforce

Read the law here, Provident Fund Act.