Welcome, Remote Workers in Thailand! Are you wondering about taxes? Konrad Legal is here to help. We understand that figuring out how to stay compliant with all the tax laws can be daunting – especially when you’re working from afar. That’s why we’re here to provide you with all the information you need to know about taxes for remote workers in Thailand. Let’s get started!
- Remote Workers in Thailand
- Qualifying for a Work-from-Thailand professional visa
- Planning to Work Remotely in Thailand
- Foreign Employer Tax Considerations
- New Developments in International Law
- Managing Risks
Remote Workers in Thailand – Situation Now!
Due to COVID-19 and the ongoing globalization trend, and extraordinary global economic shocks, the corporate landscape has unquestionably shifted.
Due to travel and social distance constraints, businesses cut back on their office staff levels. Furthermore, some companies temporarily closed their operations or offices and require their employees to work from home during its peak. The pandemic hastened several long-awaited trends. This includes the platform economy and digitization of the workplace. Additionally, this led to the growth of flexible and remote labor, and virtual education.
Flexible work schedules are now a permanent reality. Businesses are also discovering that they may access talent globally in a hybrid working environment by employing technology. Employees increasingly have options from their employers to work remotely through remote/office hybrid schemes, from home, or from any place.
Even before the pandemic, Thailand was a popular destination for digital nomads and travelers. The major reasons driving this force were its stunning beaches, engaging locals, delectable cuisine, and somewhat low cost of living. It makes sense that it is currently one of the most desirable locations for remote work.
Qualifying for a Work-from-Thailand Professional Visa
Four mandatory criteria to be eligible for a Work-from-Thailand Professional Visa are:
- Source of Personal Income,
- Consistent Job History,
- Your Foreign Employer’s Financial stability, and,
- Health Insurance.
Digital nomads might be dismayed to learn that a work-from-Thailand professional visa has a very strict eligibility requirement.
For instance, to be eligible, the remote worker’s overseas employer must meet one of the criteria below:
- A public company listed on the Stock Exchange in any country.
- A private company that has been in operation for at least 3 years and has total combined revenue of more than USD 150 million in the last 3 years.
Do You Want to Join the League of Remote Workers in Thailand?
It is undoubtedly enticing to work remotely in Thailand. However, it is crucial to be aware of the country’s employment and tax rules. This is to reduce the likelihood of facing unexpected tax liabilities making your remote working experience fall flat.
Work Permits
With very few exceptions, foreigners who wish to work in Thailand must get a work permit.
A professional work-from-Thailand visa can easily apply for and obtain a digital work permit in Thailand. This makes it convenient for them to work for their foreign company in Thailand. The annual processing charge for renewing a digital work permit is 3,000 Baht.
Additionally, individuals with work-from-Thailand professional visas may also apply for a long-term resident visa for their spouse. A spouse who wants to work in the Kingdom might apply for a work permit with an LTR visa. The spouse can work in any field that is open to non-Thai nationals.
Taxation of a Work-from-Thailand Professional Visa-holder
When working overseas, you must take into account both Thailand’s and your own country’s tax duties.
With very few exceptions, a foreign remote worker will be subject to personal income tax in Thailand. This will be in relation to employment in Thailand. However, this is regardless of the location from where income is received. Additionally, this is also regardless of whether the person is a Thai resident or not.
The personal income tax rates are as follows, ranging from 5 to 35%:
Tax Residency
Anyone earning in Thailand for 180 days in a calendar year is a tax resident here under Thai tax law. The tax repercussions of moving to Thailand as a tax resident mostly relates to income from sources outside of Thailand.
If you are a tax resident of Thailand, Thai income tax will apply to any foreign-sourced income. It is irrespective of the fact that it is paid, brought into Thailand, or repatriated within the same calendar year. This includes business income from employment, rental income, interest, dividends, royalties, capital gains, etc.
Such income will be liable to income tax. For instance, if a foreigner is a tax resident of Thailand and receives dividend income in his bank account abroad. If he/she remits the same to his Thailand bank account in the same year, he is liable to pay tax. If there is no income remittance to Thailand after the year 2022, it will not be taxable.
Double Tax Agreements (DTA)
A foreigner working remotely in Thailand must also know if their home country and Thailand have a double tax treaty.
Double taxation is when tax is on the same source of income by two or more distinct jurisdictions. It typically arises when a person or corporation conducts business internationally. Double taxation prevention is the main goal of these agreements. This centers on the ideas of income-sourcing rights and the presence of permanent establishments.
Numerous nations and jurisdictions have Double Tax Treaties with Thailand. By enabling a tax credit in the nation of residence or by offering a tax exemption, double taxation is prevented.
Taxation Rules under DTA
This rule states that the income is taxable in:
- The nation where the employment is actually exercised, or,
- Where the employee is physically present when executing the tasks for which the employment income is paid.
This provision shall be subject to a general exception. Additionally, this will apply to all persons performing services in the course of employment. To qualify for the exemption, the compensation must meet three requirements that are often outlined in a DTA. The three conditions generally demand the following:
- The employee is present in Thailand for less than 183 days or similar in the relevant period
- The employer is not a tax resident of Thailand
- The remuneration is not borne by a permanent establishment of the employer in Thailand.
The employee will not be subject to personal income tax in Thailand on their income from employment exercised in Thailand if the conditions of an applicable DTA, i.e., the DTA of the nation in which the employee is a tax resident, are met.
Very often, people operating remotely in Thailand for a foreign employer on occasion fit under this exception. In this case, you should get expert guidance from a tax advisor who is knowledgeable about Thailand’s tax regulations and double tax treaties. Contact us for a no-cost introductory consultation.
Foreign Employer Tax Considerations for Remote Workers in Thailand
Foreign employers with employees performing remote work in Thailand should also think about their tax responsibilities in Thailand.
There aren’t any special rules or tax exemptions for foreign businesses from the Thailand Revenue Department. Therefore, employees who are on professional work-from-Thailand visas must consult with a professional tax consultant.
It is quite simple to generate a risk of a taxable presence in Thailand, as shown by the Revenue Code.
For corporate income tax purposes, a foreign company will be considered to be carrying on business in Thailand if it uses an employee, a representative, or a go-between to conduct business in Thailand and as a result, generates income or gains there. As a result, the company will be subject to tax insofar as the aforementioned income or gains are concerned.
A worker’s stay in Thailand does not need to be for a certain amount of time in order for them to be considered to have established a taxable presence for their foreign employer, according to the Revenue Code.
A DTA could be helpful in this situation to reduce the likelihood of establishing a taxable presence in Thailand. Generally speaking, under a DTA, if a foreign business occurs to generate income from operations carried out in Thailand without also having a “permanent establishment” there, the business profits from such operations would not be subject to Thai taxation.
Permanent Establishments
So what precisely is a Permanent Establishment in Thailand?
In its model double tax agreement, the Organization for Economic Co-operation and Development (OECD) defines a permanent establishment as a fixed location where an organization conducts all or part of its operations. Although Thailand does not belong to the OECD, many of its current tax treaties adhere to this fundamental definition of permanent establishments.
Unless the company is conducting business in Thailand through a permanent establishment, as specified under the appropriate DTA, Thailand is not permitted to tax the business profits of a company that is tax resident in a nation or jurisdiction that has a DTA with Thailand.
The term “ business profits” also has its own meaning and in general does not include income like interest, dividends, and royalties that are taxable under other provisions of the DTA. The word “business profits” has its own definition and, generally speaking, excludes income that is taxable under other DTA rules, such as interest, dividends, and royalties.
Every DTA will have a section explaining what constitutes a permanent establishment.
The place of business must be “permanent,” meaning it must have a specific address and some level of permanence—it cannot be merely transitory.
For instance, the DTA between Thailand and the United States stipulates that, among other things, a place of administration, a branch, and an office all qualify as fixed places of business that, on the surface, form permanent establishments.
A DTA may also contain language defining what constitutes a permanent installation in Thailand for the purposes of providing services over an extended period of time.
Under the DTA with the United States, for instance, the provision of services in Thailand by a US company, including consultancy services, through employees or other personnel engaged by the company for such purpose may constitute a permanent establishment in Thailand if such activities continue within Thailand (for the same or a connected project) for a period totaling more than 90 days within any 12-month period. When such services are provided in Thailand during a given tax year, a permanent establishment may not be present for a total of fewer than 30 days throughout that tax year.
Dependent Agents
The so-called dependent agent test is an additional consideration in addition to the fixed place of business test.
Even if a foreign employer doesn’t have a fixed place of business in Thailand, it may be considered to have a permanent establishment there if it employs personnel who negotiate contracts on its behalf or play a major part in such negotiations.
Exceptions to the General Definition
Normally, a DTA with Thailand will include a list of commercial operations that, even when conducted through a fixed place of business, are insufficient for those locations to qualify as permanent establishments.
The list will be created based on the idea that if the activities carried out through a fixed place of business are solely auxiliary or preparatory in nature, they do not qualify as a taxable permanent establishment.
For instance, this clause will apply to a foreign company’s representative office in Thailand, which can only conduct a restricted number of operations on behalf of its home office abroad.
In this area, a judgment of the facts is necessary, together with careful consideration of the exceptions and their interpretation. The application of the exception to the general criteria to avoid establishing a taxable presence may not always be clear-cut.
The OECD issued guidance stating that employees temporarily working from home or in a location outside the jurisdiction of their employer, should not create permanent establishments as this lacks a substantial degree of permanency in light of the unique travel restrictions imposed by the Covid pandemic.
New Developments in International Law for Remote Workers in Thailand
Thailand completed ratification of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (Multilateral Instrument or MLI) in July 2022. This convention seeks to implement OECD international tax rules and update DTA measures that are currently in place.
The MLI implementation goes with Thailand’s current double tax agreements in order to stop international businesses operating in Thailand from evading taxes.
The MLI’s main components include tax-treaty measures to prevent treaty abuse, enhance dispute resolution, counteract the effects of hybrid mismatch arrangements, and prevent the artificial avoidance of permanent establishment status—more specifically, a call to stop the use of some common tax avoidance techniques that evade the definitions of existing permanent establishments.
How Remote Workers in Thailand can Manage Risks
It will be crucial for a foreign employer to comprehend whether an employee working remotely in Thailand will create a taxable presence for them in Thailand because the Thailand Revenue Department does not offer any special tax privileges for foreigners working in Thailand on a work-from-Thailand professional visa.
If not, only the extremely broad taxing provisions of the Revenue Code will be in effect. Ideally, the employer is a tax resident in a nation that has a DTA with Thailand.
Under a DTA, a place of the business test is mandatory. For instance, would a prolonged stay in a “home office” in Thailand result in a high enough level of permanence to establish a taxable presence? The establishment of a fixed place of business may not be necessary to establish a taxable presence if the employee establishes business relationships in Thailand.
It’s possible that the employee’s activities are merely preliminary or auxiliary in nature and do not produce a taxable presence.
The length of the employee’s stay in Thailand may also have an impact on whether or not a permanent establishment exists. Therefore, the following suggestions are useful under some circumstances:
- Remote workers in Thailand should visit the Kingdom for brief periods of time,
- They strictly limit their activities in relation to their foreign employment, and,
- Refrain from engaging in any local business activities that are a close connection to create a risk of permanent establishment under the applicable tax treaty.
The Bottomline
If remote workers in Thailand are unsure about how the legislation and want assurance on their tax liabilities, they can ask the Revenue Department for a judgment.
The Revenue Department occasionally redacts and publishes private judgments granted to taxpayers. Although these publicly available opinions are not binding precedents, they provide a useful overview of the Revenue Department’s interpretation of the law in light of the taxpayer’s facts.
The best course of action would be for the person and their employer to speak with their tax department and/or seek advice from a Thai tax expert to determine whether their actions in Thailand will result in a risk of a permanent establishment there. For a free introductory consultation about your tax liability in Thailand, get in touch with us. Email us at officer@konradlegal.com.
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