Hello Barry,
Here's a response to your question which I received from
Wayne Manna
Manager, Tax Consulting PKF Adelaide
http://www.pkf.com.au/
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A brief response to your question is set out below. Please note that
the
comments below are general only; are not advice and are based solely
upon the details in your question. If you need more definitive
advice, please contact me. My direct number is 8274 5828 if you need
to discuss this further.
Broadly, you are correct in stating that where a consultant has the
authority to conclude contracts in Thailand, it is likely or at least
possible there is a PE in accordance with Article 5 of the
Australia/Thailand DTA.
A PE can arise under the two scenarios you refer to and they are
basically
separate rules although the practical outcome may be the same in
either
case, depending upon the circumstances. The critical issue is whether
the PE arises under Article 5(2)(i) or Article 5(5). Please note that
all
relevant facts need to be assessed to determine whether there is or is
not
a PE and whether a person is or is not an agent will also be a factual
issue. Article 5(2)(i) appears to give a better potential outcome
than
Article 5(5).
Where 5(2)(i) applies, so the employee(s) or personnel is/are in
Thailand
for more than 183 days in 12 months, the PE would arise from day one,
but whether the personel can conclude contracts is not specifically
an issue under this Article. However, where personnel could conclude
contracts is there a risk that (eg) Article 5(2)(a) could apply even
if Article 5(2)(i) did not?
The situation is slightly different if the PE arises under 5(5), ie
where
there also could be a PE from day one, but again this depends on the
facts. Article 5(5) does not have a 183-day test. The issue
ultimately is not one of whether the person or person acting in
Thailand is or are called agents or consultants, but the substance of
the arrangement. A person authorised to conclude contracts may well
be an "agent" at law in some instances. Article 5(5) does appear to be
more directed to an agency/independent personal service type
arrangement, but is probably not limited in scope to such
arrangements.
Where there is a PE, there may also be issues for
employees/personnel/consultants in Thailand in terms of whether their
Thai-sourced income is subject to tax in Thailand. We note also that
where there is a PE, the individual might be subject to tax in
Thailand
(because Articles 14(2) and 15(2) would not be satisfied), and you
would
need to consider whether sec 23AG might also apply to the individuals
to
exempt the Thai-sourced income from Australian tax. This would need
to be examined further.
Yours sincerely
Wayne Manna
Manager, Tax Consulting PKF Adelaide
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I hope this helps you. |
Request for Answer Clarification by
barryn56-ga
on
02 Dec 2002 06:44 PST
Thanks for this response - for clarification, the consulting is for
petroleum companies and the consultant will be providing analysis and
interpretation services in client's offices (i.e. not his own - so no
asset PE applies). Should the need arise to arrange work with other
clients, then a contract is needed, and the consultant will have the
authority to sign them. At no time will more than 6 months time in
country per year be required. The consultant will come in to work on a
project and then leave if no other work is available. No monies will
be paid in Thailand, only to the Australian company, so no tax (other
than 15% withholding) will be due in Thailand. Corporate tax would be
paid in Australia, and relief for dual taxation (15% paid in Thailand)
should be offset against it. This is my understanding, at least. I
feel the answer given, which basically says "it depends" is not
definitive - so hopefully the further details supplied will suffice,
but let me know if not.
|
Clarification of Answer by
jackburton-ga
on
03 Dec 2002 04:47 PST
hi Barry
Response received from PKF (Sydney office)
http://www.pkf.com.au
------------------------------------------------
"Article 5 of the Thai agreement states that a person acting on behalf
of an
enterprise that has, and habitually exercises an authority to conclude
contracts on behalf of an enterprise shall be deemed to be a PE of
that
enterprise (unless the person's activities are limited to the purchase
of
goods or merchandise) where that person manufactures or processes
goods, maintains stocks of goods or secures orders wholly for the
enterprise.
However if that person is an independent agent, where they are acting
in
the ordinary course of that person's business then they would not be
considered to be a pe of that enterprise. An agent would not be an
independent agent where they carry on activities wholly or almost
wholly
for the enterprise or any related enterprises.
We are not aware of a six month rule for consultants and do not agree
that
agents are deemed to be an indication of a PE. If you would like to
discuss this matter further, then please contact me on 02 9240 9920.
Regards
max
------------------------------------------------
I hope this helps.
|
Request for Answer Clarification by
barryn56-ga
on
13 Dec 2002 00:58 PST
Hi,
and thanks again for the clarification - I iwll try to call to
discuss, as suggested later.
I am thinking it would be easier to frame the question differently to
get a clearer idea:
- A company, registered in Thailand, has a project fro which they need
the services of an overseas company for, say, 1 month. That overseas
company sends someone to work on the project - what do they need to do
to be lawfull in Thailand?
I do not believe it would be necessary for the overseas company to set
up a company in Thailand for this sort of thing - so, if not, what
would they, or the Thai registered company need to do?
If the issue is the Thai registered company needs to arrange a work
permit (i.e. as if the person coming in was an employee) what stops
them from saying this person will get no salary from them (true) so no
tax is due?
If no work permit is required, what type of visa is, and for what
duration could the project last?
Thanks and regards,
Barry
|
Clarification of Answer by
jackburton-ga
on
28 Dec 2002 07:23 PST
Received another response to your original question, from Garry
Addison / Senior Taxation Adviser - CPA Australia :
------------------------------------------------------
The Australia/Thai Double Tax Agreement (DTA) effectively provides
that an enterprise of one country will be regarded as carrying on a
permanent
establishment (PE) of that enterprise in that other country if the
conditions specified in either of the following provisions of the DTA
are
met:
* Article 5(2) which includes the furnishing of consultancy services
by the enterprise in the other country for a period (or periods) of
more
than 183 days in any 12 month period;
* Article 5(4) which deems a PE to exist if the enterprise is using
substantial equipment in the conduct of the enterprise;
* Article 5(5) which deems a PE to exist if a person (other than an
agent) acting on behalf of the enterprise has authority (and
habitually
exercises such authority) to sign contracts for the enterprise, unless
the
activities are limited to the purchase of goods, etc for the
enterprise.
In light of the above, the furnishing of consultancy services would
appear to constitute a PE under Article 5(5) separately from 5(2), eg.
where the furnishing of services is for less than the 183 days
requirement but the person has and exercises the authority to sign
contracts. It should be noted here though that (as per Article 5(6))
if the person is merely
acting as an agent then a PE will not be considered to exist. To
confirm
the position, however, you would need to provide further details of
the
arrangements envisaged and seek professional advice either from CPA
TechniCALL (which operates on a user-pays basis and can be contacted
on 1300 360 880) or some other appropriate source.
Regards,
Garry Addison FCPA
Senior Taxation Adviser
CPA Australia
Ph. (03) 9606 9771
------------------------------------------------------
|
