MANY multinationals share their top talent by appointing employees in a regional role, for example being stationed in Singapore but having to fly to Thailand, Vietnam, or Myanmar for business.
This is partly to retain control of subsidiary companies to ensure there’s the same standard across the board, and partly to share resources. Even though a regional role seems to be cost efficient in having one person perform work in various countries, in the end, is it actually cheaper? Have all the hidden costs, i.e. for visa/work permits or tax, been discovered and considered, or are there surprises that may arise later?
There are two types of employees that perform regional roles. One performs an oversight role for the home/regional entity, and the other holds dual or multiple roles, which is termed double/multi-hatting. By being appointed to a regional role, the employee has to face tax issues in both the home country and host countries, and legal issues related to visa and work permits.
From the Announcement of the Department of Employment on 6 March 2015, the need for a work permit is waived when attending business or board meetings. But if a foreigner has to work in Thailand, they have to apply for a work permit.
Many countries’ nationals can travel to Thailand without a visa to stay up to 30 days per trip. Other nationals, for example from China, have to apply for a visa on arrival and can stay up to 15 days. Obtaining a work permit and extending the long-term visa means the employee has to report a monthly income of at least Baht 25,000 to Baht 50,000, depending on the employee’s nationality, to the Revenue authorities.
Personal income tax
There’s no domestic tax exemption in Thailand. Working in Thailand for one day will trigger Thai tax. Therefore, if there’s no double taxation agreement in place with Thailand, it’s easy for the employee to be double taxed on the same income.
Where the employee can use the double taxation agreement, the regional employee must be aware that they mustn’t be deemed as an employee of the Thai entity in carrying out their duties in Thailand.
If the regional employee is deemed an employee of the Thai entity, they have to pay Thai personal income tax.
Payment is one way to determine who the employer is, however, it isn’t conclusive from a tax point of view. Two examples should make this clearer.
For example, if Steve is a Regional Technical Specialist dispatched by Singapore Regional Headquarters to make visits to its Thai affiliate to train the latter’s employees on technical standards, and to check whether the technological standards of the group is adhered to in the Thai manufacturing plant, Steve will be considered as performing his work according to his roles and responsibilities prescribed by the Singapore Regional Headquarters.
So, the Thai entity wouldn’t be considered as his employer. This means he isn’t obligated to pay income tax in Thailand if all the conditions under the relevant double taxation agreement are met. A second case is where the Singapore Regional Headquarters promotes its Deputy Managing Director, Maria, to be the Managing Director of its Thai subsidiary while still keeping intact her Deputy Managing Director position in the Singapore Regional Headquarters.
She will spend 60 per cent of her time in Singapore and 40 per cent in Thailand. As a result, the Thai entity has become her employer. Maria would have to pay tax for performing her roles and responsibilities for the Thai entity and could be subject to tax on her income as Deputy Managing Director if she falls under the remittance rules. Supporting documents should be maintained.
Taxation for employees with a regional role is still open to interpretation by the Revenue authority in Thailand, and even though one of the purposes of having the regional role is to cut costs, this may not happen because of the tax and legal issues the expatriate faces in Thailand. The right guidance can prevent non-compliant consequences.
JIRAPORN CHONGKAMANONT, Partner and NATCHANOND CHAROENMECHAIKUL, Senior Manager, contributed this article. If you’d like advice in this area, you can contact Natchanond Charoenmechaikul or Jiraporn Chongkamanont at PwC International Assignment Services.