Problems in Enforcing Personal Income Tax Collection under the article ‘Independent Personal Services’

Abstract

The taxation of independent personal services is a complex issue under Thai domestic law and becomes even more complicated when considering double taxation conventions between countries. This article aims to study the personal income tax obligations of non-residents working in Thailand by analyzing the problems arising from the application of the Thai Revenue Code and the enforcement of double taxation conventions. It will highlight the issues caused by ambiguities and the current tax law enforcement problems, as well as propose solutions to address these challenges.

The problems in collecting personal income tax under the provisions of the Thai Revenue Code begin with classifying income types under Section 40. The type of income an individual receives relates to the withholding tax issue. For the case of independent personal services performed by non-residents, withholding tax must be applied under Section 50 and the Revenue Department’s Order Tor. Por. 4/2528. Taxpayers face uncertainties due to unclear legal provisions.

Regarding double taxation conventions, this article focuses on Article 14, which pertains to independent personal services according to the UN Model Tax Convention. It will analyze the enforcement and issues arising from it, alongside comparing it with the OECD Model Tax Convention, which does not include Article 14 and instead reverts to Article 5 concerning permanent establishment. The study of Article 14 under double taxation conventions covers the definition of a “fixed base” that lacks clear interpretation in Thailand, as well as other conditions and criteria in double taxation conventions such as the duration test and the minimum income threshold criteria.

To address the issues of enforcing personal income tax on independent personal services under the Thai Revenue Code and double taxation conventions, it may be necessary to amend the law and provide additional guidelines to ensure clarity and fairness for taxpayers. This will result in more effective tax law enforcement and reduce international disputes.