Tax in Thailand on freelance income from the Netherlands
Dear readers,
An idea has arisen to remain active at my current, Dutch, employer, of which I am currently still employed and co-shareholder, even after my retirement in 2023 and my stay in Thailand. However, as a director and advisor at a distance at a freelance rate to avoid payroll taxes in the Netherlands.
By then I will be permanently in Thailand, which means that I am a non-resident taxpayer for the Dutch tax authorities. In addition to AOW and pension to be received from the Netherlands, I therefore charge the company in the Netherlands monthly by means of a freelance invoice for the consultancy work carried out from Thailand.
How does this construction relate to the tax on this income? What about VAT, which if I were to do this in the Netherlands, would I have to – or not – have to levy it?
Also, how can something like this be done legally? After all, I read that according to the conditions of the visa (non-imm-O Thai Marriage), you are not allowed to work. However, this work is only done from the couch.
Another route is to have the invoice written out via my Thai wife, who is of course permanently in Thailand (the BV in NL is flexible and I am and will remain a driver), but the same questions apply to her.
Thanks in advance!
Regards,
Hans K
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The simplest is to use your wife's one-man business, because you are not allowed to work in Thailand just like that. Up to 1,8 million baht this is VAT free, after this amount you must apply for a VAT certificate. Although of course you cannot calculate VAT with a Thai company to a Dutch company. The sole proprietorship is called Sole Proprietorship in Thailand. They can register this company at the local district office, but if the income is not very high, many Thai people do not. After the sole proprietorship, she can also set up a BV (LTD). This is of course a bit more feet in the earth. And if you still have an address in the Netherlands, you can of course also just keep the Dutch BV and send the invoices from Thailand. For a Thai sole proprietorship or Ltd, of course, there must be a Thai account number of your wife or BV on the invoice. For the Dutch BV this must be a Dutch account number. The tax is then simply levied in the Netherlands. The Thai in Thailand of course, if you specify it from the sole proprietorship, the BV/Ltd is of course self-evident.
Hi Hans K,
You are currently employed by a Dutch BV, of which you are also a co-shareholder. After your retirement in 2023, you intend to emigrate to Thailand. You then wish to continue your activities for this Dutch BV as a director and freelance consultant.
In that case you will have to deal with Articles 15 and 16 of the Treaty for the avoidance of double taxation concluded between the Netherlands and Thailand (hereinafter: the Treaty).
For the readability of Article 15, I have placed the name of the country in brackets in the text.
“Article 15. Personal Labor
1 Subject to the provisions of Articles 16, 18, 19, 20 and 21, remuneration derived by a resident of one of the States (Thailand) in respect of personal labor (including the exercise of a liberal profession) shall only be State (Thailand) taxable, unless the work is performed in the other State (the Netherlands). If the work is performed there (the Netherlands), the remuneration derived therefrom may be taxed in that other State (the Netherlands).
2 Notwithstanding the provisions of paragraph XNUMX, remuneration derived by a resident of one of the States (Thailand) in respect of employment performed in the other State (Netherlands) shall be taxable only in the first-mentioned State (Thailand), if:
a) the recipient is present in the other State (the Netherlands) for a period or periods not exceeding an aggregate of 183 days in the tax year concerned, and
b) the remuneration is paid by or on behalf of a person who is not a resident of the other State (the Netherlands), and
c) the remuneration is not borne by a permanent establishment which the person paying the remuneration has in the other State (the Netherlands).”
The rule of thumb is: personal labor is taxed in Thailand (art. 15, paragraph 1).
If the work is performed in the Netherlands, Thailand may only levy if:
– the stay in the Netherlands was shorter than 183 days and
– the employer is not a Dutch entrepreneur and
– the remuneration is not borne by a company established in the Netherlands.
You write that you live or stay in Thailand permanently after emigration. That means that your freelance income is taxed in Thailand.
This is different with regard to the position of director of the Dutch BV (if you receive a remuneration for this). This remuneration falls under Article 16 of the Treaty, which reads:
“Article 16. Remuneration of directors and supervisory directors
1 Remuneration and similar payments derived by a resident of the Netherlands in his capacity as a member of the board of directors of a company which is a resident of Thailand may be taxed in Thailand.
2 Remuneration and other payments derived by a resident of Thailand in his capacity as a director or supervisory director of a company which is a resident of the Netherlands may be taxed in the Netherlands.”
Pursuant to paragraph 2 of this article, such remuneration is taxed in the Netherlands in your case.
Then keep in mind that if the Dutch BV decides to distribute dividend, you will owe dividend tax in the Netherlands.
With regard to the foreign entrepreneur (self-employed person) and VAT, I refer you to the website of the Tax and Customs Administration:
https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/belastingdienst/zakelijk/internationaal/btw_voor_buitenlandse_ondernemers/
Incidentally, I am surprised about the reason for emigration to Thailand. You write about this: “To prevent payroll taxes in the Netherlands.”
You overlook the fact that the tax burden of the Personal Income Tax (PIT) is often considerably higher than the tax burden of the income tax when living in the Netherlands. In the Netherlands, for example, you pay €35.472 in gross income from work (max. 1st bracket before 2022) and, after deduction of the tax component of the general tax credit and the employed person's tax credit, you pay €306 in income tax. With an average THB : Euro exchange rate of 34,041, the PIT due as unmarried, but already 65 years old, is rounded off at € 2.910. If you are younger than 65, the PIT would even amount to € 4.144. Why: emigrate to Thailand so as not to have to pay income tax in the Netherlands!
Lammert de Haan, tax lawyer (specialized in international tax law and social insurance)
Dear Lambert,
Thank you very much for your expert answer and the references to the treaty and the tax authorities. Much appreciated as always; also your answers to other tax questions.
However, it is a misconception that the prevention of income tax - or any other financial reason - would be the reason for emigration. The reason is that I have been deeply in love with my Thai wife and her home country for many years and we want to spend the remaining years in Thailand anyway, after having worked and lived together in the Netherlands for many years.
The fact that I still want to remain active after retirement through the most favorable legal construction possible is a much less important motive, but that motive alone raised the questions.
As always, Lammert gives an excellent explanation.
But, Hans, working in Thailand is not allowed without a permit. And you don't get that in your situation.
http://thailandrelocationhub.com/how-freelancers-can-legally-work-in-thailand/
“A foreigner who engages in work without having the work permit for it, shall be liable to imprisonment for a term of not exceeding 5 years or to a fine from THB 2,000 to 100,000 or both.”
For freelancers, there aren't many options available to legally work in Thailand. One of them – “grey”, is to get any visa, work online, and hope no one will catch you.
But in this gray area there seems to be some room, some are overlooked:
https://www.thaiembassy.com/thailand/thailand-digital-nomad-visa-and-work-permit
10 examples are given here.
This one has parallels with your activities:
A foreigner sits in his apartment and teaches Chinese students online via Skype.
Answer: Officially, it is work, however, it is not the main concern right now, so the authorities allow the foreigner to do this without a work permit. In this case, it will be a matter of the scale of the work and the environment.
Think for yourself whether you want to run the risk of what could ever happen if you report your work to the Thai authorities (tax authorities).
The link points to a website that pretends to be official, but is not. It is a commercial site. You can therefore not rely on the information provided in the event of any subsequent problems with the Thai authorities on this subject.
Hello Cornelius,
On the 2nd website it says at the top left: “this website is managed by Siam Legal International – a law firm in Thailand”.
You are right, the website name does indeed suggest that it is official, but it is not.
But a law firm will undoubtedly not 'sell' obvious nonsense.
The information, the examples they give, are clear and helpful (appear based on practical examples) in forming an opinion by Hans K.
The example I give also clearly states that “officially, it is work”.
I talked about this at length a few months ago with an English teacher who teaches Chinese children online. He said not to worry at all: the Thai government really knows that there are 100s of such foreigners working here illegally in this way.
But if Thailand starts demanding a work permit from them (which cannot be given under current law – unless they start a company and employ some Thais… think about that), these men (and women) will leave to a neighboring country. Thailand prefers that they earn their money here and spend it again!
There is always the danger that if such a person gets into a fight with a Thai and he calls in the police, that ….. (fill it in).
I'm not saying they're selling nonsense either, I'm just pointing out that it's not information you can rely on in a possible conflict with the authorities.