Contract and Tax Basics for Fractional Professionals in Thailand

What a fractional contract should include and the income tax basics to know, based on Revenue Department information, with a reminder to consult a professional.

You have landed your first fractional client. They send a six-page draft contract and ask, "Will you invoice as an individual or a company?" You realise you have never thought about it. This article gathers the basics so you can talk confidently with clients and your accountant.

Note: This is general information, not legal or tax advice for your specific case. Rules can change, so check with the Revenue Department and consult an accountant or lawyer before deciding.

What is a fractional contract?

It is the agreement that sets out what service you provide, for how much time, how you are paid, and what rights and duties each side has. Fractional work is usually independent service, not employment, so how you actually work should match the status written in the contract.

What the contract should include

Scope and deliverables

Your role, responsibilities, approximate days or hours, deliverables and KPIs. If there is a performance bonus, specify clearly how it is measured and the baseline.

Fees and payment

The monthly fee, invoicing cycle, payment terms, currency, and who is responsible for which part of withholding tax.

Intellectual property

Who owns the work you create during the contract, and whether you can keep using your own tools, templates and prior know-how with other clients.

Confidentiality and personal data

Terms on confidential information, and compliance with Thailand's Personal Data Protection Act (PDPA) if you need access to customer or employee data.

Termination and restrictions

Notice period, how work is handed over at the end, non-compete or non-solicitation clauses, and limits of liability.

Income tax: the basics

Type of income

According to the Revenue Department's table, income under Section 40(2) is "income from duties or positions held, or from work performed for others, fees and commissions", the category many independent service arrangements fall under. The correct classification depends on how the work is actually done: some work may instead count as liberal profession income under Section 40(6) or business income under Section 40(8), which have different expense deduction rules. Let an accountant assess it.

Expense deduction

The Revenue Department states that from tax year 2017 (B.E. 2560), income under Sections 40(1) and 40(2) can deduct expenses at 50%, with a combined cap of 100,000 baht. If you have both a salary and fractional income, they count together towards this cap.

Withholding tax

Corporate clients often withhold tax before transferring payment. Keep every withholding tax certificate (50 Tawi) for your year-end filing.

Filing

Everyone whose income reaches the threshold must file an annual personal income tax return. If you have Section 40(2) income and no income under Sections 40(5) to 40(8), you file once a year using P.N.D. 90 (P.N.D. 91 is only for people whose sole income is under Section 40(1)), not P.N.D. 94. People with income under Sections 40(5) to 40(8) are also required by the Revenue Department to file the half-year return, P.N.D. 94.

Value added tax

The Revenue Department requires businesses whose regular revenue from selling goods or services exceeds 1.8 million baht a year to register for VAT. If your income is approaching this threshold, plan ahead.

Individual or company?

Some people start as individuals, then register a company as income and client numbers grow. This choice affects tax, accounting workload and how corporate clients see you. There is no single right answer for everyone, so have an accountant compare the options using your real numbers, and ask your client first which documents their procurement team requires.

Watch out for

• Never sign a contract without reading the intellectual property and non-compete clauses.
• Keep complete records of income, invoices and 50 Tawi certificates from the very first month.
• Set money aside for tax; do not spend all your revenue.

A clear contract protects the relationship. Complete paperwork protects your money.

What to do next

1. Turn the contract topics in this article into a checklist and use it before signing anything.
2. Open a separate account for work income.
3. Create a folder for invoices and 50 Tawi certificates, organised by tax year.
4. Book a session with an accountant to estimate your annual income and tax options.
5. Review the latest information on the Revenue Department website every year.

If you are setting your fees, read Retainer Pricing for Fractional Leaders, and if you also sell online, see Tax Essentials for Online Sellers.