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Value Added Tax on Online Services

In accordance to the Revenue Code Amendment Act (No. 53) B.E. 2564 of the Revenue Department, non-residents or foreign online service providers and online platforms who earned more than THB 1.8 million per year from providing online services to non-VAT registered customers in Thailand must register for VAT, submit VAT returns and pay VAT by computing output tax without deducting input tax starting from 1 September 2021. Hence, the online service providers and online platforms are not required to issue a tax invoice or keep an input tax report.

Online services refers to service including incorporeal property which is rendered over the Internet or any other online network services that is impossible to deliver without information technology. Examples of online services includes:

  • Digital products such as mobile applications
  • Software programs
  • Digital images, videos and financial data
  • Digital music, films and games
  • Distance teaching via pre-recorded medium such as online courses
  • Electronic data management such as website supply, web-hosting, automated and digital maintenance of programs
  • Providing or supporting a business or personal presence on an electronic network
  • Search engine such as customized search-engine services
  • Listing services for the right to put goods or services for sale on an online market or auction house
  • On-demand streaming services where there is no interaction with the content provider
  • Advertising services on intangible media platform
  • Support services performed, via electronic means for arranging and facilitating the completion of transactions which may not be digital in nature such as commission fees to intermediaries, service fees to consumers and merchants for sale of products through the online marketplace

Meanwhile, the following are not categorized as an online service:

  • Telecommunication services
  • Payment channel or money transfer services
  • Electronic voucher delivered to the customer by email or SMS to be redeemed for a meal, a hotel stay or a theme park entrance
  • Live teaching services whereas the content of the course is delivered by a teacher over the Internet or an electronic network
  • Professional services involving human intervention and the nature of which is not essentially automated such as consulting services where advice from the consultant is communicated via email or video call.

On the other hand, online platform refers to market, channel or any other procedures that service providers use to deliver their services to the customers. It serves as an intermediary between the service providers and customers and facilitates the service transactions. It can be in the form of website, mobile applications or other channels.

Such online service providers and online platforms are required to register in the Simplified VAT System for E-Service (SVE). This system allows users to register for VAT, file VAT returns, and pay VAT and request for VAT refund electronically.

Make sure you are filing Thailand taxes correctly. Consult with MSNA’s Thai tax experts now.

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Credit Card for Companies in Thailand

The authorized directors of the company can open a business bank account for their company in Thailand right after they have registered the company. At MSNA Group, we are asked about credit card application for the company very often. In this post, we talk about opening a credit card account for business owners who are non-Thai nationals.

The conditions and requirements for the business owner to apply for a credit card depends on the issuing banks where they want to submit their application. In general, a business owner must provide the following:

  1. A copy of valid passport with visa and work permit
  2. Company registration documents
  3. Company Affidavit updated not more than 3 months from the date of application
  4. Shareholders list updated not more than 6 months from the date of application
  5. Personal Thai bank account statements updated from the last 6 months
  6. Company bank statements updated from the last 6 months

Thus, a foreigner can apply for a credit card under the company provided that he has obtained a visa and Thailand Work Permit to work as an authorized director of the company. ThaiLawyers are expert in registering a company, opening a corporate bank account and assisting in business credit card application. Contact us now for your best options.

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Opening a restaurant in Thailand

Opening a restaurant in Thailand

You might already thought about opening a restaurant in Thailand to contribute your unique taste in the “Kitchen of the World”. Well, that’s a good idea, but here are some pitfalls you should wonder about.

No matter what type of business you are attempting to run, Thai company registration laws apply to you and vary depending on your type of business.

The bad news that you can’t just easily and legally run a 100% foreign owned restaurant in Thailand, because  the bar and restaurant ownership in Thailand is subject to the rules and regulations contained within the Foreign Business Act.

The only one way is to find Thai partner who you can trust and open a Thai company. That means the majority of shares in this company must be owned by that Thai citizen. And you as a foreigner can only own up to 49% of that company. This limit can be exceeded or exempted for certain business activities, if a Foreign Business License is granted, but not in this case.

The process of opening a restaurant in Thailand

The process begins with reserving the name of the company with the Department of Business Development. You have to submit a minimum of three company names which follow current ministry regulations. The DBD will choose then one out of the three.

Next, the promoters must file a Memorandum of Association with the Commercial Registration Department. If you are going to have foreign workers, some requirements must be met:  2 million baht minimum registered capital and 4 Thai employees per one work permit for foreigner.

After filling a Memorandum of Association directors should submit an application within 3 months to register the company.

Once registration is finished, the company can begin the process of getting business licenses and start the operation of its new business. For restaurant, you have to get food license from FDA Thailand as well as alcohol license, in case you want to sell beer and other sprits.

If you have personal questions, don’t hesitate to contact ThaiLawyers – qualified English speaking lawyers that can help you to go through entire process of registration step by step.

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Making Payment to a Singapore Company from Thailand

Today we got a question about making payment to a Singapore company from Thailand. The invoice is for research services rendered in Singapore for use in Thailand. For this we look into the double taxation treaty between Thailand and Singapore. The vendor does not have a permanent establishment in Thailand, so in this case Singapore, not Thailand, should get the tax from the business profits. Therefore when the Thai company makes payment to the Singaporean company, it does not have to withhold tax to submit to the Thai Revenue Department.

The next thing to really consider is whether the Thai company has to submit VAT on behalf of the Singaporean company. Since the research services were rendered in Singapore and the result of the work was to be used in Thailand, VAT must be submitted with Form PP36 by the 7th of the month following the payment. If the Thai company is VAT registered, it can use the receipt of PP36 as one of its input tax invoices and claim back the amount of VAT in the Form PP30 of the same month as PP36 submission.

Looking for a great team of Thai accountants who speak fluent English at reasonable prices? Contact us today.

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Writing Off Debts By Companies

Here we want to talk about writing off debts by companies which can happen when the creditors are related to the company (shareholders, group companies, etc). Thai accountant should know how to treat writing off debts by companies on the accounting books. You have to recognize the amounts as the company’s income. They are part of the profit to calculate corporate income tax for the year.

When you are closing down a Thai limited Company, most likely the company still has liabilities in its accounting books. You need to send a registered mail to each creditor to let them know you have decided to close down. This is so that if they have money owed by the company, they will know where to contact the liquidator. If you do not pay any of the debts, it will become an income. The treatment is the same as writing off debts by companies.

Do you need to pay VAT on the income recognized from writing off debts? Thai Tax Law does not impose VAT on revenue from forgiven debts as it is not compensation from selling goods or services. To summarize, when writing off debts by companies, you need to consider how much corporate tax the company will pay. In case of closing down the company, if you choose to leave the liabilities on the books, the Thai revenue department will make you recognize them as incomes which may make the company have a profit, thus pay tax, anyway.

For accounting, audit, closing down companies, etc., contact MSNA Group now.

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Thai Nominee Shareholders Stealing From The Company

Foreigners having business in Thailand should beware of Thai nominee shareholders stealing from the company. Many want to set up their business in the Kingdom, but cannot own their company 100% because Thailand Foreign Business Law does not allow foreigners to do so. It allows only a few activities, like exporting products from Thailand, having a manufacturing plant to produce goods to export or sell them in Thailand, etc. Most businesses need to have Thai majority ownership and many unethical lawyers would provide some Thai names to hold the 51% shares for the foreigner.  Or the foreigner may have a Thai employee to hold shares on their behalf. Thai nominee shareholders stealing from the company is not the only risk you have. Using nominee shareholders is breaking the Foreign Business Law. Penalty can be a big fine and a jail term.

Here are some cases we see from Thai nominee shareholders stealing from the company. Thai employees who hold majority shares for the foreigner will demand millions from you in order for them to give back the ownership later. Many of them are also authorized directors of the company and they sign checks to themselves. One of our clients is a property developer and bought a lot of land in Chiang Mai. The Thai director (who is also the nominee shareholder) told them that the Land Department needed the company to have only Thai shareholders and Thai directors. So the company took of the foreign director who is the real owner of the company and the money. Later our client learned that the Thai director actually bought the land in her own name and refused to transfer the land to the company. She even sold some land and did not return all the proceeds to the company. We hope that these cases of Thai nominee shareholders stealing from the company will open the investors’ eyes. Do not practice nominee shareholding. Talk to us, we have solutions for you. If you need to have Thai shareholders, you need to protect your investment. Use good lawyers who will provide your protection so you do not have Thai nominee shareholders stealing from the company later.

MSNA Group of companies have helped foreigners setting up their business in Thailand for 25 years. We have seen it all. You may be eligible to have Board of Investment promotion (see List of Business Activities Eligible for Thailand BOI Promotion). You may be able to obtain a Foreign Business License to operate your business as a foreign company, or to get the protection of the Treaty of Amity if you are American. Save yourself from Thai nominee shareholders stealing from the company. Talk to us now for all your business needs in Thailand. We are a one stop shop who can help you from setting up your new company, payroll outsourcing, accounting, tax filing, auditing, or even due diligence for your next merger and acquisition.

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Work Permit for Working Anywhere in Thailand

At MSNA Group, we get quite often an inquiry about a work permit for working anywhere in Thailand.

In each work permit, it shows the name of your employer company, your work position and a brief job description. In addition, it says the province where you work, which is the province where your employer’s registered address is.

As a foreign employee, you need to be able to show your work permit to a police officer or a Labor officer when asked for. The Alien Working Act B.E. 2551 (2008) says you have to have your work permit on your possession or at the place where you are working, during work hours, otherwise, you may need to pay a fine of up to Baht 10,000.

Many foreigners think that they can work anywhere in Thailand when they have a work permit. Or they can work legally in different jobs to earn more incomes because of having just one work permit. No, it is not that simple. Your work permit can have more than one job or one employer. That means, all of the jobs and all of the employers need to be listed on your work permit. Now, it is not going to happen that easily. You will find that many employers are not able to sponsor your work permit. This is because each employer needs at least Baht 2M paid up capital and 4 Thai employees, both per expat employee they hire. Only BOI promoted companies may have different ratio, but then you cannot add a BOI company as one of your employers. If you get caught working where you do not have a work permit, you could face up to 5 years jail term or a fine of Baht 2,000 to 100,000 or both. Plus, you may be deported.

Now, let’s talk about working for the only employer listed on your work permit. Most likely the area you can work is the same province where your employer’s official address is. Some companies have branches in different provinces. If your work permit lists those provinces as the areas you will be working in, then you are okay. Section 52 of Foreigner Working Act, B.E. 2551 (2008) stipulates a fine of not more than Baht 20,000 if a Thailand work permit holder works in jobs or places other than at his official employer. So please make sure, if you are sent to work in different places, that they are listed in your work permit book.

Talk to us at MSNA Group. We can assist you with all your work permit needs. Whatever your scenarios are, we will have a solution for you.

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Deposit is not an Income

The money you receive for your goods or services as a deposit is not an income per Thai accounting law. A deposit received is treated as a liability on your books because it is an unearned income. Once you have delivered the goods or rendered the services, the deposit amount has become “earned”. Thus, it will be moved from being a liability in the statement of financial position to income in the profit and loss statement. However, per tax laws, the value added tax incurs when you receive money or when you deliver goods, whichever comes first. When you receive a deposit, you need to issue a tax invoice and submit the output VAT on the deposit in the VAT return of the month that you receive the deposit.

Deposits received is a reason why your total income reported in the accounts is different from the total income reported in the VAT returns throughout the accounting period. After you close the year’s accounts, your accountant should prepare a reconciliation of the revenues per books against the total revenues reported in the VAT returns of the same period. The Thai Revenue Department may ask to see it.

Contact MSNA Group for your tax and accounting needs in Thailand.

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When to issue a tax invoice

In Thailand, when a VAT registered company is in the business of selling goods (wholesale or retail), the value added tax (VAT) point occurs when you deliver the goods or when you get paid whichever comes first. VAT point determines when to issue a tax invoice. For more clarification:

  1. When you deliver goods, even when you have not received payment, you need to issue a tax invoice.
  2. If a customer just makes a deposit, though you have not delivered the goods, you need to give them a tax invoice (and a receipt) for the amount you got.

Now, for service businesses, when to issue a tax invoice? The VAT point occurs when you receive payment, whether or not you have rendered the service. So make sure you issue a tax invoice and a receipt for the amount of money you receive. If you just send an invoice to your client asking them to pay you, you don’t have to prepare a tax invoice yet.

Please note that not everyone can register in the VAT system. Some business activities are exempt from VAT. Others can register in the system, but if they have not reached Baht 1.8 M in gross sales, they may choose not to be in the VAT system yet.

If an individual or a company is not registered in the VAT system, they cannot issue a tax invoice and they cannot claim the 7% VAT they pay to vendors.

Contact MSNA Group for tax planning, accounting and tax compliance services.

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When landlords don’t agree to rent withholding tax

Normally when you (as a company) rent an office space, you need to deal with rent withholding tax of 5% (to submit to the Revenue Department in the following month). You will pay the landlord only 95% in cash amount and prepare a withholding tax certificate for the amount of 5% that you withhold and give it to the landlord. If the landlord is a company, they may not have any problem receiving the amount of 95% from you in cash and 5% in a withholding tax certificate because they can use the withholding tax certificate as a proof of their prepaid corporate income tax at the end of their accounting year. However, when the landlord is an individual, many of them normally do not report their rental income on their personal income tax return. They will demand 100% rent amount from their corporate tenants. They will make you submit the rent withholding tax from your own pocket. If you do not accept it, they will probably not want to rent their space to you. Of course, they are wrong. You are just doing what the Thai tax law requires you to do. Most individual landlords whose properties are in high demand will not care. They want their rent in full amount or else you should find another place to set up your shop or office. It is your choice to see what they will do if you give them only 95% payment and a certificate showing the rent withholding tax of 5% . Most tenants will give in because they have already spent a lot of money renovating the space to suit their business needs and cannot afford to move to a place whose owner will accept that they need to pay tax on their rental income. Some individual landlords specify in the rental agreement that the tenants will pay for any taxes, including withholding taxes. In that case the tenants know from the beginning that the 5% rent withholding tax will come from their own pocket.

Talk to Thai accounting and tax experts at MSNAGroup today for the best advice.

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