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Proposing a new future for Digital Nomads and Thailand


Last edited: May 26, 2017 at 08:31:44

In May 2017, the Chiang Mai Work Permit Office requested Chiang Mai Locator to put together a proposal on how the situation of Digital Nomads in Thailand could be improved and how in return Thailand could better benefit from the presence and work of Digital Nomads.
 
This request followed after a series of interviews by CM Locator with officials of the Work Permit Office to clarify if and how Digital Nomads can work legally online in Thailand.
 

BACKGROUND AND PARAMETERS OF THE PROPOSAL

Both the national Thai government and local Thai governments acknowledge modern developments such as remote online work and how it will continue to play a more important role in our future economy. On a national level, the Thai government is working on the so-called Thailand 4.0 plan*, which aims to propel Thailand into the next economic age. On a local level, the government has noticed large communities of Digital Nomads in places such as Chiang Mai and Phuket.
 
So far, these communities have been left alone but things might change in the future. Right now, the government is already checking on Thai nationals who generate a large online income without paying taxes.
Until now, Digital Nomads and their activities have remained more or less invisible, most of them are seen or classified as long-term tourists. Besides the visa class issued, there is simply no other way to register Digital Nomads.
 
As Chiang Mai has become the largest hub of Digital Nomads in the world, some people within the government wish to take a more pro-active role in what is happening. This has lead to some in-depth interviews between CM Locator and the Chiang Mai Provincial Employment office. The idea is to seek ways to improve things by creating a win-win situation for both Thailand and Digital Nomads. In this context, the Chiang Mai Provincial Employment office requested CM Locator to come up with a detailed proposal to be forwarded to the national government.
 

At this moment, end of June 2017, the national government has replied that it is not ready to adopt the proposals put forward by CM Locator, but this might change in the future.


If you have more realistic and workable ideas on how things could be improved for Digital Nomads, based on a give-and-take principle, please leave it as a comment below. The more realistic and workable a proposal with clear benefits for Thailand, the more chance that one day it may be seriously considered by the authorities.

(Proposals such as "We, Digital Nomads, contribute a lot to the local economy already because we spend money on food, lodging and co-working spaces, so Thailand should be grateful and issue us a special Digital Nomad Visa" will not be considered.)
 

SUMMARY OF POSSIBLE PROPOSALS

CM Locator has drafted and discussed a few possible proposals with representatives of the Chiang Mai Provincial Employment Office.  Any realistic proposal must aim at creating benefit on both sides, Thailand and Digital Nomads, compared to the current situation.
The current situation is that most Digital Nomads operate in Thailand more or less invisibly and enjoy Thai facilities without paying taxes. Unfortunately, there is not much economic spill-over to the Thai economy or Thai workers, in terms of employment or knowledge transfer.
At the same time, many Digital Nomads may feel they are operating in a grey zone of what is legally allowed in Thailand and many of them see the short-term visas as a problem.
 
CM Locator proposes to find ways how to generate real benefits for Thailand in terms of employment, knowledge transfer or development, in return for a better work and visa status for Digital Nomads.
 

PROPOSAL A - REDUCING RED TAPE TO START UP A COMPANY FOR FOREIGNERS

It is widely acknowledged that Foreign Direct investment (FDI), in other words foreigners setting up a company, creates benefits for the hosting country. FDI in Thailand will create employment for Thai workers and will to some extent lead to knowledge transfer.

 
However, the current requirements to set up a starting company in Thailand are too high barriers for Digital Nomads:
 
  • the paid up capital to start up company is substantial (2 million baht !)
  • the company needs to be registered with 7 Thai shareholders (!)
  • for each work permit per foreigner, 4 local Thai need to be employed
  • there are additional requirements with regard to accounting and annual reporting.
These requirements are too strict and do not induce many Digital Nomads to really set up a starting company in Thailand. Those who get to a more serious stage than just freelancing on the internet often set up companies in other places such as Hong Kong or Singapore instead.
 
The Thai government could consider making it easier for foreigners to start up a small company, without employing (so many Thai staff), without a huge paid up capital and fully foreigner-owned. One work permit should be provided for the founder in the first year, and a second work permit for a partner of the company in the second year.
This would alllow a serious Digital Nomad to stay in Thailand for one full year with a Work Permit and even ask a partner to join and help him. A gradual growth would mean that perhaps a secretary or project manager would be hired when the time is right.
 
It is expected that this could lead to a certain % of Digital Nomads leaving the "freelance phase" to really set up an entity.
 
This goal could be achieved in various ways:
 

A1. INCLUDE DIGITAL NOMAD WORK IN BOI

Digital Nomads who can prove an online income of at least THB 40,000 per month could apply to be approved by BOI (Board of Investment) under relaxed and special conditions (to be specified later).
 

A2. ALLOW SOLE OWNERSHIP COMPANY BY DIGITAL NOMAD UNDER SPECIAL CONDITIONS

Thai government could wave the strict conditions for setting up a solely owned company, perhaps in a similar way as is done in Hong Kong and Singapore. Income requirement would be THB 40,000 per month.
 
 
The benefits of proposal for the Thai government would be that:
  • Tax revenue that can be collected, perhaps at special rates (to be determined later).
  • Activities by 'more serious' Digital Nomads is now registered (those with income under THB 40,000 still remain out of scope).
  • In time, some new employment and some knowledge transfer could be achieved.
  • Digital Nomads could actively become a force in the Thailand 4.0 plan, with Chiang Mai as a leading hub that integrates the digital world with the creative and media sector (Chiang Mai Creative City).
     
The benefits for Digital Nomads would be:
  • 1 year Digital Nomad Visa with work permit
  • Official legal status, no more "erring in the grey zone".
  • No need to complicate business by setting up an entity in Hong Kong or Singapore.
  • By officially paying (low) taxes in Thailand, you can avoid paying usually much higher taxes in your home country.
To some Digital Nomads, the idea of paying taxes for your online income might not sound so attractive. Right now, many Digital Nomads probably don't pay taxes, anywhere. However, paying taxes is only fair, and you'll get a lot of benefits back. Any proposal to the Thai government could only work with a give-and-take.
But taxes in Thailand are probably much lower than in your home country and you'd be able to officially report that.
 
In Proposal A1, normally there is a tax-exempt period for a few years in the BOI scheme.
 
 
A challenge to this proposal could be that many Digital Nomads prefer not to settle in one place but to remain free (they are supposedly 'nomads' after all).
 
For this reason, the procedures to set up a company should be light and suitable for Digital Nomads' activities. For example, a company should be allowed to operate offshore (at low tax rate) like in Hong Kong. Thailand could also learn from the example of e-residency in Estonia, which has attracted many businesses to set up a digital office in that country, but this would be a giant step for mankind in Thailand.
 
 

PROPOSAL B - DIGITAL NOMAD MENTOR PROGRAM

An experimental idea that could perhaps suit the lifestyle of Digital Nomads more and focuses more on knowledge transfer than on employment is the so-called "Digital Nomad Mentor Program".
 
A Digital Nomad would get a 1-year visa + work permit if he/she is able to train a local Thai person to set up and run an online business that generates a minimum of for example THB 40,000 / month.
 
In essence the focus here is on pure knowledge transfer rather than on (modest) employment such as in Proposal A.
 
The benefits for Thailand would be that:
  • tax revenue that can be collected, perhaps at special rates (to be determined later)
  • activities by 'more serious' Digital Nomads is now registered (those with income under THB 40,000 still remain out of scope)
  • pure knowledge transfer could be achieved, enabling some Thai to join in the worldwide scene of the digital age.
  • Digital Nomads could actively become a force in the Thailand 4.0 plan, with Chiang Mai as a leading hub that integrates the digital world with the creative and media sector (Chiang Mai Creative City).
     
The benefits for Digital Nomads would be:
  • 1 year Digital Nomad Visa with work permit
  • Official legal status, no more "erring in the grey zone".
  • No need set up any business entity, remain free.
  • By officially paying (low) taxes in Thailand, you can avoid paying usually much higher taxes in your home country.
 
This program could also be seen as 'micro management development aid' or an one-on-one way of 'giving back'.
 
Challenges to this program are that:
  • This program depends on the teaching ability of the Digital Nomad on the one hand, and the learning ability of the Thai worker on the other hand.
  • Digital Nomads who are successful in doing their business might not be good at teaching someone else.
  • It may be hard to recruit talented and motivated local Thai who have time to start their online business, next to their job.

Also, many details would need to be worked out in order for such program to work, for example:

  • Cheating must be avoided and checked.
  • There must be some monitoring progress of the Digital Nomad as a mentor and the Thai person as a student, perhaps during the 90-day reporting.
     
Read full proposal submitted to Chiang Mai Provincial Office here
 

Sources:
* Thailand 4.0: http://thailand.prd.go.th/mobile_detail.php?cid=1&nid=3785 and www.thaiembdc.org/thailand-4-0-2/

 

COMMENTS: please submit your ideas for a proposal or add your comments below

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Dirk Posted on May 18, 2017 at 13:48:33
Digital nomads don't want to deal with red tape or set up a company. So just charge a "flat tax" of 80-100k Baht for a one-year working visa (no extra work permit). If the digital nomad hires a Thai assistant for at least 10 hours a week or 25k Baht per month, the rate is halved for the next year. It's very important that digital nomads can find other people to start larger ventures with, so they must be allowed to come out of hiding and work together in more informal settings. This can later crystalize into real companies. All measures currently in place, especially 2-million and 4 Thais per work permit and BOI promotions, are outdated and don't fit the digital economy.
Lucy Posted on April 26, 2017 at 18:45:33
How about a tutoring visa? Tutors submit credentials in order to get the visa. Centres could be set up at universities and colleges where Thais could get free one-on-one tutoring in English, computer science, design, or whatever. Foreigners volunteer a few hours a week in exchange for six month visas. Let the foreigners supply the materials and design the curriculum. Or simply charge more for the visa and let foreigners tutor for cash.
LivinLOS Posted on April 26, 2017 at 16:02:48
"The proposal of teaching someone with certain conditions doesn't appeal to me. Sounds complicated and a hassle compared to the self defence option. It needs be something good for both parties or many of us will stick with the grey options"

And theres the problem.. The basic issue is people feel entitled.. entitled to break the labor law, entitled to lie on tourist visa applications, entitled to avoid the income tax, and entitled to simply ignore getting legal and having a real visa. While that basic attitude is shown by the majority of the nomad community who work here illegally this issue wont be solved.

Making the METV applications etc so much harder for everyone, just because nomads think its acceptable to live like this.
Munly Leong Posted on April 26, 2017 at 14:13:39
I have been thinking/wanting an opportunity to work with the Thai govt on something like this if the collaboration is a real govt enquiry etc and not clickbait. I've worked with US Senator Jerry Moran's office on the Startup Visa which didnt make it Because Trump (Tm)/Tea Party but most of the work did end up in Obama'a last executive order (entrepreneur "parole") before it got overturned by the current administration. I'm also someone that may potentially be in the position to sink in a decent sized investment into a VR studio in 2-3 months but is still a bit worried if sending things like $5k Hololens units and photogrammetry equipment into Thailand via their mail without a formal local entity and business address is really such a good idea if I was to start things out here as opposed to LA.

We need to draw the distinction between nomads and potential expats/immigrants though and ensure there is a pathway between them which would ultimately be of greatest benefit to Thailand while being aware that on the nomad side there are also very competitive options like Panama, Hong Kong and other locales for tax domiciling, estonian e-residency etc. The two biggest issues in the proposal I see so far, penalties for not being able to get a nomad visa again. Why? why punish risk taking in general? can't we learn from Europe and how they've destroyed their own business creation levels because of it? the other thing is the level of investment for business residency in Thailand is virtually identical for something like the E2 visa or potential startup visa that myself and others in the US tried to create. Why would someone invest in Thailand then? Local give back / skilling up the locals to join us in mutual prosperity is something Im very interested in contributing to but at the same time we have to be careful to not destroy or disincentivize the conditions that makes Thailand attractive to begin with. I provided similar intel on VC ecosystems, immigration bureacracies and similar visas for other first world countries when I worked on that bill and I could do so for this one too expanded outwards to include online friendly domiciles and so on. Now practically every country has a startup visa since that effort except for where the idea originated, the USA and it still would be the best startup visa if it would ever go through. The US's pain could at the same time also be Thailand's gain.

Mat Posted on April 26, 2017 at 12:09:47
The proposal of teaching someone with certain conditions doesn't appeal to me. Sounds complicated and a hassle compared to the self defence option. It needs be something good for both parties or many of us will stick with the grey options. Simpler the better.

Basically, let us pay the goverment instead of visa runs, overseas bank rates and grey area visa options. Let me pay 50K for a year visa and I will do it tomorrow and dont make me go abroad to collect the paperwork. Have me do it in a personal company name which I need to use for a bank account.

So I go and apply for the visa, then open the bank account and ideally they hook their computers and tax system up to the bank account. The account needs to have 30k in it at all times to stay open. Then take 5% for tax automatically on any deposits.

Let me come and go as I please. I think there should be no requirements on earnings per month or days spent inside Thailand each year. We pay a good visa fee and they get a nice amount of money in the bank to invest, plus they get 5% or whatever the tax rate is.

In return I get karma that I am not freeloading, pay less fees that come with using a foreign bank account and far less hassle and wasted money on the current visa options and visa runs. I have no idea about tax rates and how these things work, but have always found it annoying I needlessly waste so much money which could have been given instead as income tax.



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