The road to working for your own business legally

**pickel** · 12-01-2012, 05:05 PM

Originally Posted by 9999

Originally Posted by pickel

When I got a law firm to form my company, I never had to show them any financial information, or wire money to Thailand.

Did you get a work permit Pickel? If so, what were the circumstances and what was required?

Yes, I have a work permit. A 2 million baht company allows for one foreigners work permit. The lawyers that formed my company had staff accompany me to the labour dep't to get mine. All a very easy process.

**madjbs** · 12-01-2012, 05:07 PM

Anyhow, if you are doing work from overseas it would be hugely beneficial to do all the business through an offshore company to avoid paying any corporation tax.

**William** · 12-01-2012, 05:17 PM

Originally Posted by madjbs

Originally Posted by William

the Thai Supreme Court has ruled that directors' loans can be ruled as transfer pricing

Since when? Law firms and accountants were using directors loans to balance the books to account for the missing capital when I last checked a few months ago.

One of the last cases I worked on in Thailand - 2007 - was on this very issue. You cannot loan an amount at 0% - the Thai tax authority will deemed the loan at market rate - and redistribution of interest back to the director - was seen as transfer pricing of profit from the company.

I will admit that in that case the amounts were much larger than the amounts discussed in this thread, but the principle would probably apply.

**jamescollister** · 12-01-2012, 05:19 PM

You have all got me confused now and I have a Limited Partnership company. We just went to the SME Dept and an accountant did the paper work. No money was shown, but we owned the land and the small factory out right. There were loads of permits and licenses needed, that was the accounts job, with the help of the SME Dept. It was not a cheap deal though, from memory 3 major permits were needed to get the license to operate and each was 30,000 Baht and that was the cost not grease. All in all seemed straight forward, but I really don't know the in ins and out, just left it in the hands of those who are paid to do the job. Jim
As a PS I don't have a work permit, didn't move here to work.

**madjbs** · 12-01-2012, 05:20 PM

Yes that is correct, you have to charge the minimum interest rate stipulated by the revenue department, which is 5% I believe. I should have mentioned that in my first post.

**William** · 12-01-2012, 05:23 PM

Originally Posted by madjbs

Anyhow, if you are doing work from overseas it would be hugely beneficial to do all the business through an offshore company to avoid paying any corporation tax.

Is this the case?

In my day you could not have tax residents [180 days or more] of Thailand as directors of an offshore company in a double tax treaty company for the purposes of avoiding Thai tax. So if you have a Hong Kong company [double tax treaty] or Singapore company, or my favourite - Mauritius - then the directors of the company had to be resident there.

As i was leaving the Thai tax authorities were starting look behind the screen to look at where the real money was earned and spent - but that may have changed

**Butterfly** · 12-01-2012, 05:24 PM

Originally Posted by William

You cannot loan an amount at 0% - the Thai tax authority will deemed the loan at market rate - and redistribution of interest back to the director - was seen as transfer pricing of profit from the company.

makes perfect sense,

**madjbs** · 12-01-2012, 05:32 PM

Thai tax authorities would have nothing to do with you, keep all the money in an offshore bank account and just use the companies debit card to take what you need from the ATM. Make all payments to staff (who are self employed) from the offshore account, it is up to them if they declare their income or not.

**William** · 12-01-2012, 05:44 PM

Originally Posted by madjbs

Thai tax authorities would have nothing to do with you, keep all the money in an offshore bank account and just use the companies debit card to take what you need from the ATM. Make all payments to staff (who are self employed) from the offshore account, it is up to them if they declare their income or not.

But you can only do this if the income was earned under the 1 year and 1 day rule, otherwise you would fall within the global earning rule.

or has this changed too?

**Butterfly** · 12-01-2012, 05:48 PM

Originally Posted by William

Originally Posted by madjbs

Thai tax authorities would have nothing to do with you, keep all the money in an offshore bank account and just use the companies debit card to take what you need from the ATM. Make all payments to staff (who are self employed) from the offshore account, it is up to them if they declare their income or not.

But you can only do this if the income was earned under the 1 year and 1 day rule, otherwise you would fall within the global earning rule.

or has this changed too?

nope, still the same

**madjbs** · 12-01-2012, 05:51 PM

Technically yes, but they would never be able check or link it to you personally. When was the last time you were taxed on cash you took out of your home country bank account via a Thai ATM

**William** · 12-01-2012, 05:57 PM

Originally Posted by madjbs

Technically yes, but they would never be able check or link it to you personally. When was the last time you were taxed on cash you took out of your home country bank account via a Thai ATM

True - as far as I am aware the Thai tax authority has never investigated an average person on the street for tax evasion.

But as advice goes, we have advised the OP to:

* set up an illegal company,
* with illegal methods of payment and revenue

and told him that, really, it's up to his workers to make the declaration - which they would need to do if he wanted some form of work permit, etc.

Hell, why f***ing bother - resume normal positions if you asked me!

**dirtydog** · 12-01-2012, 06:00 PM

madjbs, did you read the op? He wants to set up a legal entity, not evade tax and commit other criminal acts.

**madjbs** · 12-01-2012, 06:10 PM

Originally Posted by William

* set up an illegal company,
* with illegal methods of payment and revenue

Not exactly.

Whether it was legal or not would depend on other factors as well.

You could set it up perfectly legally if you wanted and still avoid paying most of the tax. Just leave the income offshore for a year then transfer it to your Thai bank. There might still be work permit problems but if you were just finding overseas clients for an overseas company you would probably be fine.

**William** · 12-01-2012, 06:12 PM

^absolutely true - [edit] as the post above mine has been edited I have deleted my response [/close edit]

best advice - see a lawyer if the amounts of revenue you are talking about are more than 2M; otherwise, do what most of us dream of an live off the missus!

**madjbs** · 12-01-2012, 06:24 PM

Originally Posted by dirtydog

not evade tax and commit other criminal acts.

Avoid not evade. He could declare all his personal income in Thailand if he wished. Or wait a year.

Only a fool would set up the company out of a tax free zone if they were doing all their business offshore!

**Tom Sawyer** · 12-01-2012, 07:52 PM

^Doesn't solve the work permit issue though does it? If he's "here" and doing anything related to the company (offshore or not) he needs a work permit, unless he claims he's here on "business" of his 'overseas' company. It all gets pretty dicey.

**madjbs** · 12-01-2012, 08:14 PM

Well it really depends on the volume of trade and if the work the OP was doing in Thailand would require a work permit or not.

If a work permit was really needed then you would just set up a Thai company as well to employ 4 staff in Thailand and give yourself a work permit. Then you would just keep the profits of the Thai company to a minimum while retaining most of the revenue in the offshore company.

The volume of trade and the profits of the company would dictate whether the tax savings would be sufficient or not to cover the extra fees and hassle, and make it worthwhile.

**Butterfly** · 12-01-2012, 08:17 PM

another issue, why does he want ownership in that company if it's only for the work permit ? the girlfriend could own 51% and the others 49%

then he would still get the work permit as an employee,

no need to do silly overseas transfer,

private small companies never grow enough to warrant ownership, unless we are talking 10M THB profit each year for the next 10 years

**Butterfly** · 12-01-2012, 08:21 PM

also running a business in a "unstructured" environment without proper accounting might "hide" the real costs of the business, so real profits might be very small at the end after all costs are accounted for professionally.

keep in mind that most Thai confuse profits and sales, some farangs do also actually, so when they setup their company with all the costs being structured, they find out too late that they turning losses, not profits

You need proper accounting analysis before you open the company I would suggest,

**madjbs** · 12-01-2012, 08:22 PM

Originally Posted by Butterfly

private small companies never grow enough to warrant ownership

How did you work that out?

Why wouldn't you have equity if you could......

**Butterfly** · 12-01-2012, 08:25 PM

Originally Posted by madjbs

How did you work that out?

the majority of small businesses are family owned and not generate enough profits to increase equity capital. This is particularly true in Asia, where profit margin are small and running the business is more of a lifestyle than an investment choice.

**madjbs** · 12-01-2012, 08:26 PM

And if the business grows, you will certainly regret not having that 49% in the future!

**Tom Sawyer** · 12-01-2012, 08:27 PM

I'd bet most small businesses with three or four employees even in Bangkok (think foot massage joints, cafes, beer-bars), are lucky if they can pull in 7 or 8,000 baht in revenue per day. If the four Thai staff get paid 1,000 - 1,200 total, that leaves you with around 6,000 baht. If rent is 20,000 per month + 6,000/mo water/power then that eats up another 1,000 per day (and certainly costs would be a lot more in a shopping centre or high-traffic area - though so would revenue). So that leaves you with 5,000 baht per day. Hardly worth the hassle is it?

**Fondles** · 12-01-2012, 08:28 PM

Originally Posted by Butterfly

private small companies never grow enough to warrant ownership

The "private small company" that my boss purchased a few moons ago put 60 million USD (NET) into his pocket last year and that was just from the automotive side of the "company".

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