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.

Today, THAI ACCOUNTANT answers a question from one of our payroll clients regarding the options to buy stocks of a parent company by employees of a Thai affiliate company.

As employees of a Thai affiliate company of an overseas parent company in the USA, it is stated in the terms of our employment that we have an option to purchase stocks of the parent company at a price lower than the market price. When we use this option to buy the stocks, will we be required to pay for tax?

Answer:

An option to purchase stocks of the parent company at a price lower than the
market price is considered assessable income derived from employment within Thailand (income under Section 40 (1) of the Revenue Code), and considered as income derived from the posts in Thailand under Section 41, first paragraph. Therefore, you shall include the benefits received from the purchase of stocks at a price lower than market price as your assessable income for personal income tax purpose. The assessable income of Thai employees derived from the purchase of stocks of a parent company (these are shares which are not publicly traded in the Stocks of Exchange of Thailand) is calculated from the market value of the stock less the exercise price of the stocks on the day ownership is
transferred to the employees.

Furthermore, any contributions the Thai affiliated company made to the purchase of stocks in the parent company as part of the scheme are considered as benefits from the employment under Section 40 (1) of the Thai Revenue Code, and are thus required to be included as assessable income for the purpose of calculating personal income tax.

More to consider:

Gains derived from the sale of shares on a stock exchange in the USA are assessable income under Section 40 (4) (b) and are regarded as overseas sourced income, and therefore subjected to Thai income taxes if you are considered to be a Thai tax resident and the proceeds are brought into Thailand in the same year they were received, in accordance with Section 41, second paragraph.

When you received dividends on the shares acquired from the exercise of the stock options, it is also considered as overseas sourced income, according to Section 41, second paragraph, and therefore subjected to Thai income taxes if you are considered to be a Thai tax resident and the income was brought into Thailand in the same year the dividend was paid.

Learn more about personal income tax and Thailand taxation. Contact MSNA for further information.

THAI ACCOUNTANT answers a question regarding the tax implications on income earned overseas.

I always visit your website and read your informative articles about doing
business in Thailand which is very helpful to foreigners like me. Now I’m considering moving there for a possible business opportunity and residency. My source of income will be profits from a company which is based and only operating outside of Thailand. I am very curious about what I will pay for tax: will it be my total global income or only the portion of it that is brought into Thailand?

Answer:

First, we thank you for reading our information posted on our website. We are happy to know that this has helped you to consider doing business here inThailand.

Referring to your question, when you reside in Thailand for more than 180 days (continuously or not) in a calendar year, the portion of income from overseas that is earned and brought into Thailand within the same calendar year will be subject to Thai tax. This we mean, the income earned in 2012, and brought into Thailand in 2012. For instance, if you bring $ 100,000 of the income that you earned overseas in 2011 into Thailand in 2012, it is not subject to Thai tax.

Contact MSNA to know more about Thai taxation and Thai visa matters.

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.

THAI ACCOUNTANT answers a question about corporate tax refund in case of an entire
business transfer by one company to another company.

Our company in Thailand transferred its entire business to another Thailand based
company. The transfer includes all assets, liabilities, rights and obligations.
However, in the appendix of the business transfer agreement, it says that we,
the transferor, shall have the rights to a corporate tax refund that we were
waiting to get from the Thai Revenue Department prior to the business transfer.
Moreover, we informed the Revenue Department of the business transfer and that we
retained the right to the tax refund. Now, our company, the transferor, has
completed the liquidation process and they said that we cannot get the tax
refund. What is your opinion?

Answer:

First you have to understand that upon the completion of the liquidation process, the
transferor’s status as a juristic person and the liquidator’s authority are
terminated. Therefore, claimable rights arising out of the business transfer including
the rights to a tax refund, will belong to the transferee.

Contact MSNA for your accounting and tax questions. We can also help you on company registration or dissolution matters.

In Thailand, there are many rates of withholding taxes to be considered when making a
payment. It is the duty of every company or other business entities to withhold
taxes when paying for salaries, transportation, advertising, rent or most other
kinds of services and remit the tax to the Revenue Department. Even when you
make payment to overseas vendors, you have to submit withholding taxes if the
transactions meet the criteria.

Today, THAI ACCOUNTANT discusses the withholding tax when paying for the service fee of a bank.

For instance, when a company requested a bank to issue a check to its supplier to
settle a service fee on its behalf, the bank would then charge the company for
both service fee for the issuance of the check and stamp duty for which the
bank is liable (whether the bank charged it separately or as part of their
service fee). In this situation, the Revenue Department requires the party
making the payment to deduct withholding tax of 3 % on the sum of the service
fee and the stamp duty, regardless of whether they are paid separately or
together.

Another example is when a bank issued a bank guarantee for a company, and in return
charged the company a service fee and the stamp duty for which the bank is
liable (either charged separately or as part of the service fee) the company is
also required to deduct 3% withholding tax on the sum of the service fee and
the stamp duty, regardless of whether they are paid separately or together.

Contact MSNA for your questions on Withholding Tax and Thai taxation.

The Board of Investment (BOI) of Thailand has been actively supportive to all of BOI promoted companies in the country particularly to those affected by the flooding. Here is the summary of the recently approved flood relief measures by the BOI of Thailand.

The Thailand BOI approved the following relief measures for flood affected
BOI-promoted companies:

1. Raw materials imported for export production that were completely damaged by the floods can be recognized as losses and are not dutiable.
2. BOI-promoted companies are allowed to subcontract all production by providing imported raw materials for subcontractors to process, on a temporary basis.
3. The measure exempting import duty on machinery acquired to replace machinery
   damaged by flooding (The Board of Investment Announcement No 4/2554, dated 17 January 2011) will be extended for another six months, and so applications to
   import replacement machinery should be submitted to the BOI by 30 June 2012.

These relief measures are subject to conditions and regulations to be announced by
the BOI.

The above mentioned flood relief measures are in addition to the previously
approved relief measures as listed below:

1. Machinery or raw materials are allowed to be relocated from factories in emergency cases.
2. Raw materials imported for export production that were damaged by flooding can be treated as losses, adjusted in the raw materials account and are not dutiable. BOI-promoted companies may use raw materials that are still in good condition in other projects and still be entitled to the import duty exemption.
3. BOI-promoted companies can outsource certain production processes, on a temporary basis to maintain business continuity.
4. The BOI has launched a measure to expedite the visa and work permit process for
   experts brought in to restore projects affected by flooding.

Meanwhile, BOI operators are invited to directly contact the Investment Promotion Bureau that looks after their projects for BOI-assistance, at the following telephone
numbers:

– Investment Promotion Bureau 1 (agricultural and light industries)

02 553 8298 (Khun Sithee Tanboonteck)

– Investment Promotion Bureau 2 (metal, machinery and automotive industries)

02 553 8366 (Khun Anin Meksuksai)

– Investment Promotion Bureau 3 (electronics and electrical appliances industries)

02 533 8167 (Khun Tanavadee Khuvasanont)

– Investment Promotion Bureau 4 (chemicals, papers, plastics, and high value added services)

02 553 8294 (Khun Wuttichai Pisatphen)

The BOI’s operations have been temporarily moved to the One-Start One-Stop
Investment Center (OSOS), 18^th Floor, Chamachuri Square, from 4 November 2011
until further notice. Tel 02 553 8111, 02 209 1100.

Contact MSNA for any questions regarding BOI Thailand.

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.