Today, our U.S. CPA answers a question from one of our payroll and tax clients regarding his U.S.personal income tax.

Question:

I’m a dual citizen (Thai & US) working for a multi-national company in Thailand. I was born and raised in Thailand and have always reported and filed my Thai tax returns. I’m currently working under my Thai citizenship and making below US income standards. Do I need to file my U.S .tax returns now?

Answer:

With respect to filing your U.S. Income Tax Returns, every citizen is required to file a return based on their world-wide income. That would, of course, include your Thai Income. Your income would be excluded under the foreign earned income exclusion, and accordingly, no tax would be due in theU.S. Hence, it simply becomes an administrative requirement. However, if your income exceeded $100,000, then it would be possible that taxes would be due but it doesn’t sound like this is your situation having a dual citizenship.

Questions on U.S.tax returns filing? Contact MSNA for professional assistance.

We have received an inquiry from an avid reader of our Blogs. Today, THAI ACCOUNTANT answers his question.

Question:

Hi, allow me to send you a question because I can’t find the answer
in any other place.

On the self declaration to the Thai Revenue Department, is it possible to deduct Baht 190,000 for a person with disability under and over 65 years of age?

I received a 100% disability pension from my home country and have a document in English confirming my situation and the document is verified by the Embassy of my home country. What documents does the Thai Revenue Department require to get the above deduction accepted?

Answer:

Thank you for your question. To be eligible to the disability deduction, you need:

1. to be a Thailand tax resident (residing in Thailand for 180 days or more)
2. to be not more than 65 years old
3. to have a disability card issued by the Department of Empowerment of Persons with Disabilities (DEP), Thailand Ministry of Social Development and Human Security.

We are not sure if the National Office for Empowerment of Persons with Disabilities will issue a disability card for you as you are not Thai. And if you don’t have the card you cannot use 190,000 tax deductions. You may want to contact the Department of Empowerment of Persons with Disabilities (DEP) and see if they can issue you a disability card.

Contact MSNA for your tax questions in Thailand.

Setting up a branch office of a US company is possible in Thailand. Today, Thai Business Expert summarizes the steps and timeline for MSNA to set up a branch office of a US company to operate in Thailand as follows:

1. We would like to see your US Company’s documents like Articles of Association, By Laws, Operating Agreement, Certificate of Registration or Certificate of Incorporation (Different US states call corporate documents different names). Basically, we need the official documents that show the company name, registration number, address, registered capital (if any), names of shareholders (if possible) and names of authorized directors. Also we need a passport copy of the president/CEO who is going to sign all the papers and the name of the American (or Thai) person who will be the Thailand branch manager. After we see those documents, we may ask for more papers.

2. We will use the information from step 1 to prepare an Affidavit and a Power of Attorney for the Branch Manager for the president or the CEO of the US company to sign, and we will also prepare a General Power of Attorney for one of MSNA’s staff to be able to sign and file all the papers on your company’s behalf. The affidavit and the POA’s will be emailed to you to print out and sign and have them notarized. We need at least 2 business days to draft the 3 documents for you.

3. Once we get all the papers from step 2 from you, we will apply with the US Commercial Service inBangkokfor a letter certifying that the majority of shareholders and directors of the company are American and so the company is entitled to the right perThailand- USA Treaty of Amity to operate the business inThailand. – This step usually takes 1 week for the US Commercial Service to issue the certification letter.

4. We will submit all the papers to the Foreign Business Committee, Ministry of Commerce, to get the Certificate of Business Operations per Foreign Business Law. – It usually takes 3-4 weeks for the certificate to be issued. Please note that this step also requires a passport copy of the Branch Office Manager showing entry intoThailand a few days before we submit the papers.

5. We will register the Branch Office into the Thai tax system (including VAT). – We need only one day.

6. We will get a work permit for the American Branch Manager so that he can sign any papers on behalf of the Branch Office, including bank accounts. – This takes about 10 days.

7. If you would like, we will prepare the papers and meet with your Thailand Branch Manager at a bank to open a saving account and/or a checking account for the Branch Office. – This takes one day.

Setting up your US company’s branch office inThailand can be relatively easy with MSNA. Contact us for more questions and information on company registration and setting up a branch office inThailand.

A question on withholding taxes: We hire a company to repair old molds and to produce new ones. Do we have to withhold taxes when we pay them? In another case, we have a manufacturing company (who normally produces and sells its own products) produce our plastic products using our own molds. Are we responsible for withholding taxes?

Answer:

When you hire a company carrying on repair service, to repair and produce molds and the required materials are provided by that company itself, such transaction is considered to be a hire of work for the production and repair service. The payment for this kind of service is therefore subject to a 3% withholding tax.

As for the manufacturing company by which you order your goods to be manufactured using your provided mold, and required materials are sourced by that company, in accordance with your orders, the transaction is considered to be a sale of goods and thus, withholding tax does not apply.

Contact MSNA for your accounting and tax questions.

Here is a VAT question from one of our clients:

Hi, our Thai company provides information technology services, including systems monitoring and software management to a company overseas via a website based in United States. Part of our service is to send our employees to the client’s office overseas from time to time for consultation and training purposes. Do we have to include VAT when issuing service invoice to our clients?

Answer:

Services in relation to systems monitoring and software management provided to clients outside of Thailand are considered as an exportation of services which is entitled to a 0% VAT rate.

Learn more information on the VAT system of Thailand on www.MSNAGOUP.com. Contact MSNA for your accounting and tax questions.

As the deadline for submission of Personal Income Tax Returns is nearly approaching, we often receive questions from our individual clients concerning the deductions and computation of their personal income taxes. Here is one of the questions that were answered by the THAI ACCOUNTANT:

Question:

Is it considered a taxable income for the employment benefits in terms of childcare facilities provided by our employer?

Answer:

Employee benefits in the form of contributions made by employers in relation to providing childcare facilities are exempted from Thai tax from 1 January 2011 onwards. The exemption only applies to the employee’s natural children, as opposed to adoptive children, and the childcare facilities must be licensed to operate as part of employee benefit scheme under Child Protection Law.

Contact MSNA for your accounting and tax questions and for more information on Thailand personal income tax.

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.

Thai Government imposes a duty exemption measure to help manufacturers in declared disaster areas whose plants and factories were inundated by the floods.

In summary, eligible flood-affected operators can be exempted from import duty upon meeting the criteria as follows:

1. The business operator has plants in declared disaster area.
2. The business operator imports the goods itself.
3. The imported goods are brand-new and have never been used.
4. The imported goods are the same or similar to those were produced by the business operator at its plants before being inundated by the floods.
5. The imported goods must be pre-approved for import by the Ministry of Industry or other authorized government agency.

The exemption covers imports commencing 1 January 2012 to 30 June 2012.

Further details on the implementation of the above mentioned measures and associated regulations have yet to be announced.

Contact MSNA for your Thailand tax and accounting questions.

Here is the summary of the recent tax incentives offered by Thailand Board of Investment for directly flood-affected companies.

I. Tax incentives for directly flood-affected companies

Conditions:

• Existing BOI-promoted projects directly affected by flood
• Still have remaining unused corporate tax exemption period

REMARK: An official announcement is to be issued soon.

Tax Incentives:

1. Projects subject to a corporate income tax exemption cap

Remaining at original province

-8 year corporate income tax exemption (subject to 150% cap on new investment * + remaining unused cap)

Relocation to another province

-8 year corporate income tax exemption (subject to 100% cap on new investment * + remaining unused cap)

* All fixed assets (except land) including repairs of existing machinery and replacement machinery previously imported under the BOI scheme

2. Projects not subject to a corporate income tax exemption cap

Companies can use option 1 above or the following scheme.

II. Tax incentives for flood-affected industrial estates

Conditions:

• All industrial estates/zones
• Invest in flood-prevention infrastructure and system

Incentives:

• 8-year corporate income tax exemption with cap of 200% of investment excluding costs of land and working capital.

Contact MSNA for Thailand BOI questions and information.