Integrity Legal

29th Sep 2009

There are many expatriates living in the Kingdom of Thailand who opt to run their own business(es). In cases where the expat is not married to a Thai national, then it is highly likely that a Thai business visa will be used in order to remain in the Kingdom long term. A somewhat tongue-in-cheek question that often arises in the context of Thai business is: why do I need to pay my taxes? Although no one actually expects to be granted some sort of tax amnesty, the fact remains that no one really relishes paying taxes. It can be even more difficult when one takes into account the fact that Thailand is predominantly a cash based economy. However, for expats basing their visa status upon small business ownership in the Kingdom, visas and taxes are inexorably linked.

Each year, each and every limited company in Thailand must submit an up-to-date balance sheet reflecting the profits and losses for the previous fiscal year. The managing director of a Thai limited company can do themselves a great disservice by failing to submit a yearly balance sheet as this can be punishable by strict sanctions and fines. Thailand, like many nations, imposes a corporate tax upon nearly all legal entities operating within the jurisdiction of the Kingdom of Thailand.  Further a corporate witholding tax is required for certain transactions.

In Thailand, the most well known method of taxation is the Value Added Tax (aka VAT). The government places a value added tax of seven percent upon most goods and services. The consequences for a business that fails to pay these taxes can be severe.

The reader is likely asking themselves: “Ok, I understand, Thailand has taxes, but how does this effect my Thai visa?” One of the major concerns of Thai Immigration officers is that those present in the Kingdom of Thailand on a business visa will use a “shell company,” in order to maintain Business visa status. In order to forestall such chicanery, Thai Immigration routinely looks at the tax records of companies that employ foreigners. This mostly occurs when the foreign national attempts to obtain a visa extension or a visa extension renewal. This type of scrutiny can also occur at the Ministry of Labour when a foreigner submits an application for an extension of his or her Thai work permit. In cases such as this, it is always better to have a good record of tax payment as this can greatly facilitate the quick issuance of a Thai visa or work permit.

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