Newsletter No. 235 (EN)
Secondment of Employees to Thailand
(February 2022, 5 pages, reading time approx.: 8 minute)
This newsletter outlines points to consider when an employee from Germany is to work in a Thai company.
2. Employment and secondment contract
If an employee is seconded to Thailand, first and foremost the employer and the employee have to agree on the conditions of the secondment.
To do so, it is advisable that the parties conclude a secondment agreement which regulates the conditions of the secondment, e.g.:
– What happens to the existing em-ployment in the home country (made dormant, terminate, return guarantee etc.)
– Conditions for the secondment coming into force (positive health check, visa and work permit ap-proval etc.)
– Conditions of the employment in Thailand (salary, allowances, insur-ances, holidays, family integration, company car, school fees, home flights, etc.)
– Position and title
– Payment arrangements (split pay-ment?)
Such secondment agreement serves as a link between the old employment in the home country and the employment in Thai-land.
Additionally, the employee and the em-ployer in Thailand (which is often a differ-ent legal entity) conclude a local employ-ment agreement which mirrors the ar-rangements of the secondment agreement as far as they are relevant for the employ-ment in Thailand.
Such local employment agreement does not need to be in writing, however, it is advisa-ble to do so in order to avoid misunder-standings.
Also, in some cases, a copy of the employ-ment agreement has to be presented to the immigration authorities.
3. Visa application
Foreign citizens need a visa and work per-mit to work in Thailand.
The appropriate visa can be applied for at the nearest Thai embassy or consulate. With this visa, the foreigner can then pro-ceed with the work permit application in Thailand.
a) Criteria for visa approval
An application for a non-immigrant “B” vi-sa requires an invitation from the Thai em-ployer and usually a pre-approval from the Thai Department of Employment (so-called WP3 certificate) or a pre-approval letter of the Board of Investments. Addi-tional documents may be requested de-pending on the embassy/consulate in charge. It is therefore important to double check with the embassy/consulate in charge which documents are exactly need-ed.
b) Entry of family members
Applicants applying for a work visa may request that their spouse and unmarried dependent children under 20 years of age be allowed to enter Thailand under the ap-plicable provisions for dependants.
The duration of stay of these family mem-bers is usually linked to the duration of stay of the work permit holder. Subsequent ap-plications for extension of stay will only be considered if the applicant continues to meet the criteria for entry as a dependant (including the fact that there has been no change in circumstances which would oth-erwise have led to the loss of the appli-cant’s sponsorship, e.g. change in marital relationship between the dependent spouse and the work permit holder or death of the work permit holder).
c) Processing time
The processing of applications for work vi-sas usually takes 2-3 business days once all the necessary documents have been sub-mitted.
All applications are processed and decided by the embassy/consulate in charge. The approval of applications is discretionary and subject to changes in government poli-cy and internal guidelines. Overall, howev-er, the process is relatively simple.
4. Work permit
Once the expat has entered Thailand with the abovementioned visa, the work permit can be issued. The pre-approval was usual-ly already obtained during the visa applica-tion process (WP3 certificate or BOI coop-eration letter, see above).
It should be noted that a work permit is re-quired from the first day of work and re-gardless of the duration of the expat’s se-condment.
5. Compulsory registration in Thai-land
Foreigners temporarily residing in Thailand must report their valid address to the Im-migration Office every 90 days (so-called “90 days report”).
6. Social security
In addition to questions of labour law and immigration law, there is always the prob-lem of how to deal with the German social security system in the case of an assign-ment.
Thailand has not concluded a social securi-ty agreement with Germany and is there-fore a so-called non-contractual foreign country. This means that, in principal, there is no obligation to pay social security in Germany if an employee starts working in Thailand. This means that on the one hand the employee and employer no longer have to pay into the German social security sys-tem, but on the other hand the employee’s social security protection also ceases.
The only exception is if the employee is se-conded abroad in accordance with § 4 SGB IV. In this case, the German social security regulations pursuant to § 4 SGB IV contin-ue to apply to an employee during his em-ployment in Thailand.
The prerequisite for this is that
– it is a posting within the framework of a continuing employment relationship in Germany;
– the duration of the employment abroad is limited in advance or by its nature in terms of time (preferably precisely regu-lated in the secondment contract); and
– the employment relationship continues in Germany. This requires in particular that the employee temporarily em-ployed abroad remains organisationally integrated into the business of the German employer sending him/her abroad and that essential elements of an employment relationship are ful-filled. In addition, it is a prerequisite that the employment contract entitle-ment to remuneration is directed against the seconding employer and that the seconding employer actually al-so bears the final economic cost of the remuneration and is entitled to claim it as an operating expense for tax purpos-es.
Usually, therefore, the social security obli-gations cease in case of a secondment, since the employment relationship in Ger-many ceases (or is made dormant).
Only if the above conditions are fulfilled, the obligation to be insured as an employee in the German social security system con-tinues (so-called “Ausstrahlung”, § 4 I SGB IV).
It is important to check and agree with the authorities in each individual case whether the “Ausstrahlung” applies.
In cases where no “Ausstrahlung” applies, other options can be considered to remain in the German social security system (e.g. voluntary insurance).
It is important to note that this has to be decided prior to the employee’s reloca-tion to Thailand, since otherwise the em-ployee may lose his/her right to voluntarily contribute.
As there is no social security agreement be-tween Thailand and Germany, a possible exemption from contribution payments in Thailand is only possible according to na-tional regulations. This may lead to double insurance.
In Thailand, compulsory contributions must be paid into the social security sys-tem.
The minimum monthly contributions for both the employer and the employee are 5% of the employee’s gross income. The maximum amount for both parties is THB 750 (approx. EUR 20) per month. The en-tire contribution must be submitted by the employer.
Social security issues should be discussed with the employee as early as possible be-fore the secondment begins. If the “Aus-strahlung” is desired, the contract must be drafted accordingly. It is also advisable to clarify this with the social security institu-tion in order to avoid surprises later on.
If the “Ausstrahlung” is not desired (which can be the case especially with longer-term secondment), this is also possible in the case of a corresponding contractual ar-rangement.
Last but not least, if “Ausstrahlung” is not desired, voluntary continued insurance in the German social security system or on a purely voluntary basis with private insurers should always be considered in order to avoid gaps in the insurance process.
7. Aspects of tax law
a) For the employee
The following types of (employment) in-come are taxable in Thailand:
– Income received for work performed in Thailand
– Income received from a Thai employer
– Income received by a tax resident (= minimum stay of 180 days per calendar year in Thailand), if such income is brought into Thailand within the same tax year
If the employee continues to maintain a tax residence in Germany and is thus subject to unlimited tax liability, double taxation is avoided through the double taxation agreement between Germany and Thailand.
The details are quite complex, however, in principle, the salary of the employee is tax-able in Thailand as soon as the Thai subsid-iary or branch bears the cost.
In cases where the salary is (partially) con-tinued to be paid by the German employer and charged back to the Thai entity, the German employer can apply for a waiver to deduct tax on the employee’s salary (“An-trag auf Befreigung von der Lohn-steuerabzugspflicht”).
b) For the seconding company when the employee is seconded to a subsidiary
Usually, in cases where the employee works for a subsidiary, salary payment is handled by the subsidiary directly.
However, in some cases (in particular in cases where the employer and employee want the employee to remain in the Ger-man social security system), the parties agree on continuing the salary payment in Germany.
In such cases, the cost of the employee (plus a reasonable surcharge) should be charged back under an intercompany agreement between the German home company and the Thai subsidiary. The un-derlying contract should not refer to a spe-cific service (this would lead to further complications on a corporate level, such as permanent establishment considerations and foreign business licence requirements), but to a secondment of personnel only, whereby the seconding entity is only liable for sending a person being qualified, not for the provision of a specific service.
The secondment of personnel is quite a complex task. It is important to consider all the aspects involved, ranging from labour law matters in both countries, social securi-ty considerations and visa issues to per-sonal and corporate income tax matters. Often, it is not possible to find a solution which is ideal in all aspects and compro-mises are sometimes necessary. Companies who do not have experience with seconding staff to Thailand should get proper advice prior to seconding staff, since some of the decisions taken prior to the start of the se-condment are very difficult or even impos-sible to reverse once the employee left Germany.