Foreigners Working in Thailand with Offshore Paid Employment Income
Tax Insight | August 2007
Some foreigners working in Thailand fall into a tax trap when they arrange for large portions of their Thailand employment incomes to be paid offshore and if a Thailand-based foreigner is found to be doing this, a considerable amount of additional tax, penalty and late payment interest charge (surcharge) could be payable.
Under the Thai tax law, a Thailand resident foreigner working in Thailand is subject to tax in Thailand on:
If the Thailand Revenue Department audit officers become aware (as they did in past years for Japanese foreigners working in Thailand), that Thailand-derived employment income is being paid offshore, they will assess tax on the offshore-paid income plus tax penalties and surcharge.
Foreigners with Regional Roles
If a foreigner has a regional role and actually travels outside of Thailand to perform duties outside Thailand, there is commercial substance for the income that is derived from outside Thailand being subject to tax in Thailand only when that income is brought into Thailand.
The Thailand Revenue Department tax audit officers will accept that commercial substance, but having said that however, it still remains the obligation of a foreigner to prove to the tax audit officers that there is in fact commercial substance and one way of doing this is to have in place formal dual (or split) employment contracts.
Dual or Split Employment Contracts
Under a dual or split employment contract arrangement, a foreigner enters into one contract of employment with a Thailand employer for work duties in Thailand (onshore contract), and another contract of employment with an employer outside Thailand for work duties outside Thailand (offshore contract).
And if a foreigner can prove that he or she actually travels outside Thailand to perform the work duties under the offshore contract, then the income earned under the offshore contract should not be subject to tax in Thailand, provided that income is not brought into Thailand.
If however, a dual or split employment contract arrangement is entered into, but without any commercial substance, they may be disregarded by the Thailand Revenue tax audit officers who may assess tax on the total of the incomes under both of the contracts.
This Tax Insight is general information only. It should not be used to determine any particular matter without consulting with an experienced Thailand tax advisor.