Doing Business in Thailand in 2023: BOI Updates

Doing business in Thailand in 2023 is now having a broader horizon in Thailand. It is because the Board of Investment of Thailand has included some more lines of business activities to be eligible for the promotion. This is great news for foreign investors willing to start their business in Thailand. 

Now, what makes the Board of Investment (BOI) of Thailand so crucial for investors? If you are already knowing about BOI Thailand, then it is needless to explain. You can straight jump to the section of the article that explains the “New Eligible Activities for BOI Thailand Promotion in 2023”. But if you are not aware, this article will guide you through the benefits of getting BOI Promotion for doing business in Thailand in 2023.

• What is the Board of Investment of Thailand?
• What are the Investment Promotion Policies of BOI Thailand?
• Which Incentives are covered by the BOI Promotions?
  • Tax Incentives of BOI Thailand
  • Non-tax Incentives of BOI Thailand
• How BOI Thailand helps Investors?
• What are the new eligible activities for BOI Thailand Promotions in 2023?
  • New BOI Eligible Activities
    • Senior Care Hospitals and Services
    • Clinical Research
  • Inclusion of Previously Delisted BOI Eligible Activities
    • Manufacture of Electric Vehicles
    • International Procurement Office (IPOs)
  • Extension and Amendment of Productivity Improvement Measure
• The Bottomline

What is the Board of Investment of Thailand?

A government organization within the Office of the Prime Minister is the Office of the Board of Investment. Promoting worthwhile investment, both in Thailand and abroad, is one of its primary functions and responsibilities.

In order to increase Thailand’s competitiveness, escape the “Middle Income Trap,” and achieve sustainable growth in line with the sufficiency economic theory, it is important to encourage worthwhile investment, both domestically and internationally. With this vision, the BOI keeps on formulating strategies to help foreign investors with various tax and non-tax benefits. 

What are the Investment Promotion Policies of BOI Thailand?

BOI Thailand operates on multiple grounds when it comes to the promotion of investments. The organization keeps a balance between the trades of national strategic importance along with that of the incoming FDI intent. All the schemes and policies that the Board of Investment announces primarily revolve around the following strategic points:

• Encourage investment that increases national competitiveness by fostering R&D, innovation, value creation in the industrial, commercial, and service sectors, SMEs, fair competition, and reducing social and economic inequality.

• To encourage balanced and sustainable growth, encourage eco-friendly, energy-saving, or alternative energy activities.

• Encourage the formation of clusters to focus investment in accordance with regional potential and to bolster value chains.

• To encourage investment in border provinces in Southern Thailand to promote local economic growth and initiatives to improve local security.

• Encourage the establishment of special economic zones, particularly in border regions, both inside and outside of industrial estates, in order to foster economic ties with other nations and to get ready for joining the ASEAN Economic Community (AEC).

• Encourage foreign direct investments in Thailand to boost the nation’s economy and the competitiveness of Thai companies.

What are the Incentives covered by the BOI Promotions?

BOI Thailand helps with both tax and non-tax incentives for eligible projects and investors. The classification is as follows:

Tax Incentives of BOI Thailand

• Up to 13 years of corporate income tax exemption (According to activity & conditions).
• 50% cut in corporate income tax for five years (only in special investment promotion zones).
• machinery imports are exempt from duties.
• duty-free imports of raw materials or components utilized in export-oriented manufacture.
• Import taxes on raw or necessary goods used for research and development are exempt.

Non-tax Incentives of BOI Thailand

• 100% foreign ownership (except activities under List One annexed to the Foreign Business Act B.E 2542 (1999) or stated in other laws).
• Permission to own land
• Permission to bring professionals and skilled laborers into the Kingdom.

How BOI will help Investors Doing Business in Thailand in 2023?

• Offer guidance and details on the BOI investment promotion laws and regulations as well as investment opportunities.
• To make commercial operations easier, like company formation and work permit application processes, connect investors with government organizations and the private sector.
• Support the sourcing of local suppliers and establishing industrial ties.
• support for locating possible investors is provided.
• BOI Strategic Talent Center to assist in locating and recognizing international experts or researchers in science and technology (STC).
• Give Thai investors advice on investing abroad and offer them training courses in doing so.

New BOI-eligible activities for Doing Business in Thailand in 2023

Updates on the BOI measures can be divided into three (3) different categories as follows:

• Newly-listed BOI Eligible Activities
• Relisting of Previously Excluded BOI Eligible Activities
• Extension and Amendment of Productivity Improvement Measures

New BOI Eligible Activities

The following businesses will be added to the list of those that qualify for BOI incentives:

Senior Care Hospitals and Services

According to predictions in 2021, there will be at least 13 million people in Thailand over the age of 60 or 20% of the country’s whole population. The following two (2) businesses will be introduced as qualifying businesses, with the specific incentives noted, in order to prepare for the upcoming aging society:

• Senior care hospitals: entitled to a five (5) year CIT exemption; and
• Senior or dependent care services: entitled to a three (3) year CIT exemption.

Clinical Research

The BOI wants to persuade top medical researchers to conduct their medical research in Thailand, creating the opportunity for medical institutions or personnel in Thailand to obtain expertise and knowledge therefrom. This is part of the plan to increase Thailand’s competitiveness in the medical industry and to promote Thailand as an international medical hub. Thereby, it is a goal of priority and a great opportunity for investors in the Medical Industry of Thailand. The two (2) additional companies listed below will be made eligible for the BOI program offering an unlimited eight-year CIT exemption incentive:

• Contract Research Organizations; and
• Clinical Research Centers.

However, please note that to be eligible for the promotions the following relevant requirements must be fulfilled:

1. A total annual salary of not less than 1,500,000 THB for newly hired researchers who are Thai nationals; or
2. Investment capital of not less than 1,000,000 THB (excluding the cost of land, working capital, and vehicles).

Inclusion of Previously Delisted BOI Eligible Activities

Due to various strategic and regulatory issues, some of the eligible activities were delisted from the list earlier. As the BOI plays a crucial role in maintaining the foreign direct investment volume as well as the GDP of Thailand, it keeps on amending policies. That may include the inclusion or exclusion of eligible activities whenever applicable. Following is the list of some of the re-included activities:

Manufacture of Electric Vehicles

Following the exclusion of the former packages in 2018, the BOI re-welcomes applications for new incentive packages for the business of manufacturing electric vehicles (“EVs”). The investment packages will cover all kinds of EVs, i.e. four-wheelers, motorcycles, three-wheelers, buses, trucks, and ships (the former investment package covered only EV cars and EV buses).

Various requirements and incentives will apply to each form of EV, and they can be summed up as follows:

Additionally, the BOI approved incentives for four (4) more categories in respect of the manufacture of EV parts, namely: 

i) high voltage harnesses; 

ii) reduction gear; 

iii) battery cooling systems; and 

iv) regenerative braking systems.

Additionally, the BOI also granted an additional incentive for the production of battery modules and battery cells in order to support local EV battery manufacturing. This incentive entails offering a 90% decrease in import duties for a period of two (2) years on raw materials or necessities.

International Procurement Office (IPOs)

The “IPO” (international procurement office) will once more be an acceptable activity. The IPO’s duties include sourcing components, semi-finished items, and raw materials from both Thailand and abroad.

In addition to additional non-tax benefits, a company operating in the encouraged business under the IPO will primarily benefit from exemptions on import duty on machinery and raw materials to be used in manufacturing for exports.

Please be aware that the applicant must own or lease warehouse space as one of the most crucial requirements of the IPO in the past (s). Therefore, to meet this requirement in the past, the majority of trading enterprises had to buy or rent the warehouse from logistic providers, which could not be very convenient. 

However, recent International Commerce Center (IBC) technology enables a trading organization to conduct wholesale business without the need for a warehouse (although there are other specific restrictions in addition to the IPO). On the basis of the available data, this point isn’t yet clear. As soon as the official BOI notification is out, you will get updates in our periodicals.

Extension and Amendment of Productivity Improvement Measure – a Great Privilege for Doing Business in Thailand in 2023

The BOI will extend the application deadline for investors who intend to pursue the advantages of what was once known as the Production Improvement Measure and is now referred to as the “Productivity Improvement Measure” until the end of 2022. (“Measure”). However, the advantages of the Measure—a 50% CIT exemption for three (3) years and an exemption from import duty for machinery—remain the same.

The Production Improvement Measure in Thailand was started to encourage involvement in R&D and advanced engineering design in order to increase production efficiency, as well as to promote and upgrade technology and machinery for energy conservation, alternative energy utilization, or reduction of environmental impacts. For both of the above, the Productivity Improvement Measure is applicable:

Any existing businesses (whether or not they are currently involved in a promoted project); however, if they are not, they must at the very least be eligible for BOI promotions; and Promoted Projects for which the CIT exemption or reduction privilege has already expired or for which the specific Promoted Project is not eligible for the CIT exemption.

The Measure includes the following four (4) sub-measures:

1. Energy conservation and alternative energy utilization;
2. Production efficiency improvement through the upgrading of machinery for manufacturing;
3. R&D and advanced engineering designs for efficiency improvement; and
4. Sustainable development for agriculture.

According to this Measure, you must:

1. A minimum investment capital of not less than 1,000,000 THB (excluding the cost of land and working capital); and
2. Submission of the application by the end of 2022 and implementation of the BOI-promoted project within three (3) years from the date of issue of the BOI certificate.

The Bottomline

So, there is already an active list of activities that are eligible for BOI Promotions. Additionally, some new activities are flashing in the list along with the inclusion of previously delisted activities. It will be commendable if you can identify whether your is eligible for BOI promotions or not. However, if you cannot, go through the following steps:

• Identify the particular industry that your business belongs to.
• Check the verticals of the industry that your business will probably tap upon.
• Cross-check whether your business is going to be useful for the Thai Market.
• Go to the BOI Website and check the list of eligible activities.
• Check the list of eligible businesses and see if your business matches any of the criteria.

If you are able to judge your eligibility for the BOI promotion for doing business in Thailand in 2023, then it is great. If not, we are here to help you. Book your free round of consultation with us by emailing us at officer@konradlegal.com. The most efficient and professional team will be there to assist you in the complete process of BOI-promoted business registration in Thailand.

Shop Dee Mee Kuen for Tax Deduction in Thailand in 2023

Tax Season in Thailand is going to start very soon. So, if you have already made the calculations to file your Personal Income Tax this year, you need to hold back and check once. Have you made a deduction for the shopping you did this year? If not, let us explain to you the “Shop Dee Mee Kuen” Scheme which grants Personal Income Tax deduction for purchasing goods and services in Thailand.

• What is Shop Dee Mee Kuen?
• Shop Dee Mee Kuen Program: Background
• Who will benefit from Shop Dee Mee Kuen?
• Shop Dee Mee Kuen Personal Income Tax Deduction: Scheme Details
  • The Mandates
  • Who is Eligible for the Deduction?
  • Shop Dee Mee Kuen Slab
  • Are there any Exemptions Shop Dee Mee Kuen Tax Deductions?
• The Bottomline

What is Shop Dee Mee Kuen?

The Thai Cabinet gave approval to a new stimulus plan on December 20, 2022, to support the nation’s economy in 2023 as tourism will improve drastically. Please note that customers who spend money on goods and services in Thailand will be able to deduct up to THB 30,000 in taxes due to the “Shop Dee Mee Kuen” program. Additionally, note that “Shop Dee Mee Kuen” means “Shop and Payback”.

The initiative will run from January 1 through February 15, 2023. Meaningfully, it will create more than THB 56,000 million in cash flow for the nation. Furthermore, according to the estimates from the Ministry of Finance, is going to cost the Revenue Department THB 8,200 million in lost tax revenue. However, the program has the potential to increase Thailand’s GDP by 0.1-0.2% in 2023.

Shop Dee Mee Kuen Scheme: Background

To promote consumer spending in the final two months of the year, the Thai Retailers Association has suggested that the government resurrect the “Shop Dee Mee Kuen” program in November 2022.

According to Chairman Yon Pokesap, the weeks before the New Year are the perfect time to encourage people to spend. Additionally, it was noteworthy that spending has already begun to increase as a result of the relaxation of lockdown regulations.

Therefore, now was a good time to use this spending behavior of consumers for a tax deduction. Furthermore, he advised that the optimal period to introduce the program would be between November 15 and the end of December.

He said that other consumer groups would be included in the program. Additionally, this will include individuals who have signed up for previous government stimulus programs like the “Ying Chai Ying Dai” (the more you spend, the more you get) and 50:50 co-payment programs.

Note that, Yon added that the government should raise the cap on personal spending under this scheme from 30,000 to 200,000 baht. Furthermore, he estimates that this will increase annual shopping expenditures by about 400 billion baht in the final two months of the year, which could increase Thailand’s growth rate by 0.7 to 1%.

Additionally, Yon asserts that by doing this the government stands to lose 15-20 billion baht in tax revenue. But, the immediate benefits from more money moving in the economy will accelerate economic recovery. Furthermore, it will make up for the loss in tax revenue.

Who will benefit from “Shop Dee Mee Kuen”?

According to market research, customers who earn at least THB500,00 per year, or roughly THB42,000 per month, will certainly profit from the stimulus program known as “Shop Dee Mee Kuen”. Furthermore, 70% of all respondents to this research survey plan to take part in this stimulus program. However, the majority of consumers, who make less than THB 500,000 annually, do not intend to do this. It is because they continue to worry about future expenses. Furthermore, they don’t need to spend more on tax deductions because their personal income tax rates are relatively low.

Note that, the “Shop Dee Mee Kuen” stimulus campaign is to encourage customers to spend more on dining out, IT products (such as smartphones, smartwatches, and computers), and personal care items (namely shampoos, liquid soaps, and toothpaste). However, because customers frequently eat out and buy certain personal care products anyhow, such expenditure during the implementation of this effort may not increase much over a typical period (when there is no stimulus program). Furthermore, it’s expected that more young people and adults will buy IT devices. Meanwhile, the majority of customers plan to eat at restaurants and shop in malls. It is because the e-marketplace is the preferred purchasing platform for the younger generation. However, these offline channels provide a full range of goods and services.

Personal Income Tax Deduction: Scheme Details

The Mandates:

• Scheme valid on purchases made between January 1, 2023 – February 15, 2023.
• Deductions will be done only on purchases made from VAT-registered sellers.
• All purchase receipts showing the VAT Number of the seller must be preserved till filing Income Tax.

Who is Eligible for the Deduction?

All taxpayers in Thailand with an annual income of above 150,000 THB are eligible for this deduction. However, Ordinary Partnerships and non-juristic bodies are not in the scope of this income tax deduction. Please take note, that you should consult with a professional Tax Consultant in Thailand to check your eligibility.

Shop Dee Mee Kuen Slab

Annual Income Range (in THB)	Income Tax Rate (%)	Tax Deduction (in THB)
0 – 150,000	0	Not Eligible for Deduction
150,000 – 300,000	5	Upto 1,500
300,001 – 500,000	10	Upto 3,000
500,001 – 750,000	15	Upto 4,500
750,001 – 1,000,000	20	Upto 6,000
1,000,001 – 2,000,000	25	Upto 7,500
2,000,001 – 5,000,000	30	Upto 9,000
Above 5,000,000	35	Upto 10,500

Are any Goods Exempted from Shop Dee Mee Kuen Tax Deductions?

The scheme is applicable on all purchases from January 01 – February 15, 2023. However, the following expenditures do not fall in the classification to get the eligible deduction:

• Purchase of liquor, beer, wine, and tobacco products
• On the purchase of motor vehicles, motorcycles, and boats
• Purchase of newspapers and magazines
• Subscription of e- newspaper and online magazine services
• Tourism services and hotel accommodation
• Utility, water, electricity, telephone, and internet service charges
• Service fees paid for services that can be used after 15 February 2023 (e.g. club membership fees)
• Non-life insurance premiums

The Bottomline

By now, we hope that you have understood the concept of Shop Dee Mee Kuen for tax deduction thoroughly. However, it is advisable that to claim your tax rights, you must consult with an expert tax consultant. Furthermore, there are many vital factors that you must keep in mind before you pay taxes, which are, although not limited to, the following:

• Manage your accounts effectively
• Get your accounts audited
• Have updated knowledge of the tax rates, deductions, and applicable incentives
• Prepare all the documents for filing the tax
• Be Conversant with the Tax Return filing process
• Have a thorough knowledge of tax payment and return filing deadlines

There are many more small factors and considerations that are very much case-specific. Apart from the tax slab, deduction rates, and incentive figures, nothing is absolute when it comes to paying taxes. Therefore, you must have a reliable tax firm by your side in Thailand. For professional support and complete guidance along with documentation support, you can consult with Konrad Legal. Email your requirements to officer@konradlegal.com.

Do Remote Workers in Thailand Have to Pay Taxes?

 

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
  • Work Permits
  • Taxation of a Work-from-Thailand Professional Visa-holder
  • Tax Residency
  • Double Tax Agreements (DTA)
• Foreign Employer Tax Considerations
  • Permanent Establishments
  • Dependent Agents
  • Exceptions to the General Definition
• 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:

1. The employee is present in Thailand for less than 183 days or similar in the relevant period
2. The employer is not a tax resident of Thailand
3. 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.

Top Business in Thailand in 2023

The second-largest business-to-consumer e-commerce industry in the area after Indonesia, Thailand boasts one of the fastest-expanding economies in Southeast Asia. 2023 is the year to start a business in Thailand and forge key contacts. This is because of the advantageous location, stable economy, business-friendly environment, and affordable labor in Thailand. Go through this article of ours and check the top business opportunities in Thailand in 2023.

Tourism Industry in Thailand in 2023

Many international business owners and industries prefer to invest in the Thai tourism sector. It is worth mentioning that this industry accounts for over 20% of Thailand’s GDP, due to its:

• Easiness of application procedure (21st easiest place in the world)
• Open and welcoming economy
• Reasonable taxation (from 10%-30%)
• Affordable business cost
• Skilled and well-educated workforce
• Convenient regional transportation
• Sufficient infrastructure (most importantly in digital)
• Ease of Internet connectivity

In this article, we’ll examine Thailand’s strategies for maintaining its top position to start a business and invest.

The Eastern Economic Corridor (EEC)

The Eastern Economic Corridor (EEC) of Thailand is one of the region’s most visible megaprojects. It is the primary economic zone for infrastructure, urban growth, and industrial development in the ASEAN region.

The Thai government has embraced a new economic model called Thailand 4.0. This model focuses on changing Thailand into a value-based economy. Additionally, science, technology, innovation, and creativity build the base of this model. Furthermore, it ensures that Thailand’s economy continues to thrive over the next 20 years.

The 12 target S-curve industries for the EEC, in the three Eastern provinces of Rayong, Chonburi, and Chachoengsao, are:

• Automobiles & Automotives; 
• Smart Electronics; 
• Affluent, Medical, and Wellness Tourism; 
• Agriculture and Biotechnology; 
• Food; 
• Robotics for Industry; 
• Logistics and Aviation; 
• Biofuels and Biochemicals; 
• Digital Infrastructure; 
• Medical Services; 
• Defense; 
• Education Development.

The Board of Investment and the EEC Office are planning to expedite the revision of promotional rights for those sectors. Note that, this is to make five new S-curve industries more appealing to foreign investment.

Please note that, from January to May 2022, FDI applications in the target EEC industries were worth 27.1 million baht. This value is 37% of the total foreign direct investment in Thailand during the same period. However, this excludes defense and education development, for which data are not yet available.

They present a good possibility for E&E investors seeking stable returns over the long term. Foreign businesses planning to enter the ASEAN market must start in this region due to the following iconic reasons:

• Robust connectivity to regional and international markets,
• Modernized infrastructure,
• Significant tax and non-tax incentives from the Board of Investment of Thailand, and,
• Highly industrial ecosystem

Thailand Transforming to Become a Digital Hub

The Covid outbreak has expedited the digitalization of commerce and services. Additionally, it has forced many businesses to use digital technologies. Evidently, this is to adapt to the new normal era’s changing economic climate and satisfy consumer expectations.

It is crucial to have a distinct digital brand identity. Nevertheless, there are so many companies operating in the same digital environment. Therefore, businesses are understanding the value of having a strong online presence to increase sales and lead the competition. So, digital marketing companies providing efficient SEO techniques, display advertising, and other digital promotions are the need of the hour.

Forecast of Revenue from the Digital Economy of Thailand (Source: Statista)

Bio-Circular-Green (BCG) Economy of Thailand

By promoting Thai bio, circular, and green (BCG) economic development, the Industry Ministry hopes to increase Thailand’s post-pandemic GDP. Additionally, it expects to transform the nation into an ASEAN bio-hub by 2027.

The government is putting in place tax privilege schemes to make them more appealing to investors. Nonetheless, this is to encourage firms to create and add value to products with no or minimal environmental impact.

Thailand currently satisfies the requirements to become the subsequent Asian bio hub with:

• An abundance of Bio-based Materials (like cassava, sugar cane, and palm oil)
• Existing Infrastructure (Thailand hosts several facilities that are instrumental in developing the Thai bio-economy)
• Strategic Location (like in Chonburi with Palm Bio-complex)

Thailand also has a comprehensive Plastic Waste Management Roadmap. This model aims to remove at least 50% of Thailand’s marine debris from plastic by 2027. Doing so is one of the plans to contribute to the Circular Economy of Thailand. Therefore, foreign investments in projects promoting this initiative in Thailand will surely attract great earning potential.

Import-Export or Trading Business in Thailand

One of Asia’s major transportation hubs, Thailand has excellent transit connections to neighboring nations. The country is a fantastic market for foreign firms to import items. This is because of its big ex-pat population, especially those that are challenging to find, such as particular food brands. Foreigners and locals alike are willing to pay more for Western products.

Another excellent business possibility is to export Thai products like jewelry, apparel, and handicrafts. Western nations frequently seek Thai quality at a lower cost than what they can find in their own countries.

Medical Industry in Thailand

The third-largest medical tourism destination in the world is Thailand. Each year, Thailand welcomes 350,000, serious medical tourists. The tourists spend an average of $1,700 at hospitals and clinics in Thailand.

Thailand is famous for its skilled medical professionals and surgeons, particularly for plastic surgery procedures.

Growing Covid-19 concerns had a favorable impact on the growth of health-related companies. The Board of Investment (BoI) promoted initiatives to speed up investment in the medical sector.

Forecast of Medical Tourism in Thailand (Source: Statista)

Logistics or Delivery Business in Thailand

According to Statista, the delivery business market volume will reach US$6.58 billion by 2027. Additionally, a 13.45% CAGR is very certain from 2023 to 2027. Nonetheless, due to the pandemic lockdown, there is a three times growth in the food delivery industry.

The main players in Thailand are Food Panda, Lineman, and Grab Food. The food delivery industry has expanded beyond merely restaurant takeaways. It is now serving the traditional retail industry as the new normal since the epidemic.

Get Food, the newest operator in the Thai food delivery industry claims that only 30% of their orders originate from well-known eateries. Whereas, 70% come from independent shops or food carts. This implies that food delivery is becoming a crucial component of the revenue for even street food vendors.

Wrapping Up

These were the top business opportunities in Thailand in 2023. If you are already in any of these lines of business, then 2023 is the time to develop them further. If not, try to link your existing business with any of these industries for assured RoI and profit.
However, if you are planning to make a new start, choose any of the said industries in Thailand. It will take relatively less time to grow and prosper when compared to other lines of trade. For all types of legal, accounting, and/or payroll support in Thailand, feel free to email us at officer@konradlegal.com.