News Forum - Thailand to tax residents’ foreign income irrespective of remittance

[Thaiger]

The Revenue Department of Thailand will amend a law to tax individuals with foreign income, even if that income is not brought into Thailand. Director-General of the Revenue Department, Kulaya Tantitemit stated that the current tax law mandates individuals residing in Thailand for over 180 days per year to pay taxes on foreign income if … …

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[MrStretch]

I read this story in the Post this morning and noted two things.

1) Kulaya mentioned plans to expand the tax base by requiring platforms with an income of 1 billion baht or more to report their sources of income.

She's referring to companies and corporations, as surely there aren't that many individuals earning 1 billion baht a year.

2) Previously, the department revised the criteria for tax residency, mandating that individuals residing in Thailand for at least 180 days per year and earning foreign income must pay personal income tax if that income is brought into the country within the same year it was earned.

For individuals, this is the only measure that would be relevant, and they still have no mechanism, at last word to track or verify.  If I'm not mistaken, this is solely based on voluntary reporting.

 

[AussieBob]

My read is that after the current 12 month rule change settles in (2025/2026), is that Thailand is going to implement worldwide (global) personal income taxation for its tax residents - including Expats. The current 12 months rule change and this impending change, will not affect USA Citizens who will continue to pay income taxes on their income worldwide because they have a Citizen based taxation. But for the rest of us who have a Resident based taxation system, it will have an impact. That is because it will not only be the income remitted in Thailand that is taxable - when they implement a global taxation system, it will be any income earned anywhere in the world by a Thai tax resident.

[AussieBob]

On 6/5/2024 at 12:40 PM, MrStretch said:

1) Kulaya mentioned plans to expand the tax base by requiring platforms with an income of 1 billion baht or more to report their sources of income.

She's referring to companies and corporations, as surely there aren't that many individuals earning 1 billion baht a year.

I believe that she is referring to all financial institutions with an income of 1 Billion baht (banks etc.) must report to TRD all the sources of their income - deposits received - both nationally and internationally. This is common in the west, and it is how the western countries Tax Depts/Offices track people's incomes.

Thailand has not done this in the past - they are clearly moving forward to a system that will allow them to track people's income more easily. As to whether they have the resources or expertise to make this happen and when - who knows.  They certainly dont have those skilled resources yet - nor do they have a lot of resources to chase Thais (and non-Thais) who should, but dont even lodge a tax return.  They say AI is going to make this sort of thing a lot easier and quicker - probably true. 

[Marc26]

12 hours ago, AussieBob said:

My read is that after the current 12 month rule change settles in (2025/2026), is that Thailand is going to implement worldwide (global) personal income taxation for its tax residents - including Expats. The current 12 months rule change and this impending change, will not affect USA Citizens who will continue to pay income taxes on their income worldwide because they have a Citizen based taxation. But for the rest of us who have a Resident based taxation system, it will have an impact. That is because it will not only be the income remitted in Thailand that is taxable - when they implement a global taxation system, it will be any income earned anywhere in the world by a Thai tax resident.

If they are adopting worldwide income

It will truly only negatively impact those residents in Thailand that have been working in Thailand for an outside source and not paying income taxes there(anywhere)....

 

If it's a worldwide income system, then tax treaties will come into play 

 

 

 

[AussieBob]

On 6/18/2024 at 11:26 PM, Marc26 said:

If they are adopting worldwide income

It will truly only negatively impact those residents in Thailand that have been working in Thailand for an outside source and not paying income taxes there(anywhere)....

If it's a worldwide income system, then tax treaties will come into play 

They are going to implement global taxation - and IMO it will happen soon (2025/26).  At the moment they only tax money earned worldwide, when that money is remitted into Thailand. When they make the change, income tax will be liable on all income earned worldwide.  The current tax system is full of holes and unknowns, and a global taxation system is 'alien' to the Thailand legal system (which is not 'common law' based).  Lots of things need to be clarified and decided now, and then going forward many things will need to be sorted and managed centrally.  Localised Provincial interpretations and decisions will have to controlled, and they will need to have the ability to be over-ruled by TRD centrally.

It is not necessarily about only working Expats. According the the tax code and TRD advices, an Expat's Pension is taxable income - as is the interest/earnings he/she gets from money invested outside Thailand - when it is brought into Thailand.  This has never been enforced in the past and TRD just 'let it go' and assumed all money earned overseas was only remitted after 12 months (tax free).  Now that has changed, there is a while can of worms about what is taxable and when and where. Countries like Philippines and Malaysia have specifically excluded all forms of income that Expats earn overseas - as long as the money has been subjected to the tax system of the country in which it was earned. The Malaysian Finance Minister stated it best something like this - 'we are not going to penalise retirees who come here and bring their money here to spend it here'. 

Actually, double tax treaties come into play now - and will more under this new 12 month rule change - and more so under the global tax system.  But your point is very much 'nail on the head' and it is the biggest problem with how TRD implements this new system, and the global system. How and where and when is TRD going to manage income tax returns for Expats, when there are 61 separate tax treaties. How can Somchai in the Provisional TRD Office deal with an Expat's claim made under their home country's DTA. A bloke recently had a meeting with the local TRD Office, with his Thai tax lawyer with him, and the TRD Official said they dont use DTAs and dont know how they will work. TRD HQ has a lot of work ahead of it, because they never enforced PIT rules before for Expats (and many Thais).  Hopefully the Thai Govt will do what Malaysia and Philippines did and exclude retired Expats - which I hope includes married ones too.

 

[Marc26]

23 hours ago, AussieBob said:

They are going to implement global taxation - and IMO it will happen soon (2025/26).  At the moment they only tax money earned worldwide, when that money is remitted into Thailand. When they make the change, income tax will be liable on all income earned worldwide.  The current tax system is full of holes and unknowns, and a global taxation system is 'alien' to the Thailand legal system (which is not 'common law' based).  Lots of things need to be clarified and decided now, and then going forward many things will need to be sorted and managed centrally.  Localised Provincial interpretations and decisions will have to controlled, and they will need to have the ability to be over-ruled by TRD centrally.

It is not necessarily about only working Expats. According the the tax code and TRD advices, an Expat's Pension is taxable income - as is the interest/earnings he/she gets from money invested outside Thailand - when it is brought into Thailand.  This has never been enforced in the past and TRD just 'let it go' and assumed all money earned overseas was only remitted after 12 months (tax free).  Now that has changed, there is a while can of worms about what is taxable and when and where. Countries like Philippines and Malaysia have specifically excluded all forms of income that Expats earn overseas - as long as the money has been subjected to the tax system of the country in which it was earned. The Malaysian Finance Minister stated it best something like this - 'we are not going to penalise retirees who come here and bring their money here to spend it here'. 

Actually, double tax treaties come into play now - and will more under this new 12 month rule change - and more so under the global tax system.  But your point is very much 'nail on the head' and it is the biggest problem with how TRD implements this new system, and the global system. How and where and when is TRD going to manage income tax returns for Expats, when there are 61 separate tax treaties. How can Somchai in the Provisional TRD Office deal with an Expat's claim made under their home country's DTA. A bloke recently had a meeting with the local TRD Office, with his Thai tax lawyer with him, and the TRD Official said they dont use DTAs and dont know how they will work. TRD HQ has a lot of work ahead of it, because they never enforced PIT rules before for Expats (and many Thais).  Hopefully the Thai Govt will do what Malaysia and Philippines did and exclude retired Expats - which I hope includes married ones too.

They will do what the rest of the countries do or they would sort of be blackballed from the Global system

 

Now I don't personally have to worry about it, so it's easy for me to say

 

But I don't think any expats need to worry about getting taxes twice on their pensions 

[Marc26]

23 hours ago, AussieBob said:

They are going to implement global taxation - and IMO it will happen soon (2025/26).  At the moment they only tax money earned worldwide, when that money is remitted into Thailand. When they make the change, income tax will be liable on all income earned worldwide.  The current tax system is full of holes and unknowns, and a global taxation system is 'alien' to the Thailand legal system (which is not 'common law' based).  Lots of things need to be clarified and decided now, and then going forward many things will need to be sorted and managed centrally.  Localised Provincial interpretations and decisions will have to controlled, and they will need to have the ability to be over-ruled by TRD centrally.

It is not necessarily about only working Expats. According the the tax code and TRD advices, an Expat's Pension is taxable income - as is the interest/earnings he/she gets from money invested outside Thailand - when it is brought into Thailand.  This has never been enforced in the past and TRD just 'let it go' and assumed all money earned overseas was only remitted after 12 months (tax free).  Now that has changed, there is a while can of worms about what is taxable and when and where. Countries like Philippines and Malaysia have specifically excluded all forms of income that Expats earn overseas - as long as the money has been subjected to the tax system of the country in which it was earned. The Malaysian Finance Minister stated it best something like this - 'we are not going to penalise retirees who come here and bring their money here to spend it here'. 

Actually, double tax treaties come into play now - and will more under this new 12 month rule change - and more so under the global tax system.  But your point is very much 'nail on the head' and it is the biggest problem with how TRD implements this new system, and the global system. How and where and when is TRD going to manage income tax returns for Expats, when there are 61 separate tax treaties. How can Somchai in the Provisional TRD Office deal with an Expat's claim made under their home country's DTA. A bloke recently had a meeting with the local TRD Office, with his Thai tax lawyer with him, and the TRD Official said they dont use DTAs and dont know how they will work. TRD HQ has a lot of work ahead of it, because they never enforced PIT rules before for Expats (and many Thais).  Hopefully the Thai Govt will do what Malaysia and Philippines did and exclude retired Expats - which I hope includes married ones too.

One scenario where people might get royally screwed is an American living in Thailand and earning money outside the US/Thailand

 

The US has a very generous foreign income tax exclusion that you don't pay taxes on up to $120k

 

So I'd imagine if the US hasn't taxed that $120k and Thailand deems you a tax resident then Thailand may tax that because you didn't pay tax on it so no double tax is in play on that 

[AussieBob]

On 6/24/2024 at 9:12 AM, Marc26 said:

They will do what the rest of the countries do or they would sort of be blackballed from the Global system

Now I don't personally have to worry about it, so it's easy for me to say

But I don't think any expats need to worry about getting taxes twice on their pensions 

Right now we dont know either way - it all depends on how the TRD implement things. But not worrying about it and dismissing it, is not a wise move - but no need to worry too much either. All will be revealed eventually - it is something to be aware of as it could affect expats who live in Thailand and receive money from/in an overseas country. 

[AussieBob]

On 6/24/2024 at 9:15 AM, Marc26 said:

One scenario where people might get royally screwed is an American living in Thailand and earning money outside the US/Thailand

The US has a very generous foreign income tax exclusion that you don't pay taxes on up to $120k

So I'd imagine if the US hasn't taxed that $120k and Thailand deems you a tax resident then Thailand may tax that because you didn't pay tax on it so no double tax is in play on that 

Yep - one of many scenarios and even more unanswered questions that TRD will hopefully one day provide clarity about.  But as one bloke said a while ago - he thinks they may just let it run its course and get things sorted out in the Appeals Tribunal and Courts, rather than trying to provide an answer to every possible scenario and situation.  TRD started to do that in October last year, and they are either still working on it, or have thrown up their hands when realising all the complications this rule change made.

[AussieBob]

It is now November and Thai Tax Office (TRD) has still not released clarifications or details, nor have they released their annual 'How to complete PIT Tax Guides'.  Talk about incompetent and disorganised - the biggest change to income taxation is this country for many decades, and they still have not provided what in every western country would be mandatory BEFORE the new taxation rule was changed - details on how the change will impact people, and training for the tax professionals, and detailed Q&A for all. 

 

A mate I know in Pattaya is planning a move with some friends there, to Cambodia or Vietnam. They want to spend time in Pattaya, because they are all very 'comfortable' there - lots of Expats and services and they know what is where and when etc.. So what they plan to do, if this goes ahead and Expats are 'nailed to the cross', is to base themselves over there and visit Thailand 2 times a year (maybe 3 if OK) for 3 months at a time.

They reckon and I agree, that if you come in as a Tourist they cannot hit you with income taxes - under the Income Taxation Act Tourists are not subject to income taxation - only residents living here. It looks like how it will work is that if TRD is made aware (by Thai banks) of a Foreigner receiving over X Million Baht is foreign deposits (X = 2, 5, 10?) and they have no tax return/s in that name, they will verify with Immigration if they are a long-stay Expat (retired, married, working, etc). If they are on a long-stay Non-Immigration Visa then they may get in contact and ask why do tax return/s.

Many people think it is all too hard and TRD will just continue to 'let it go' for Expats, but there is also the concern that the Govt is hammering the TRD to introduce a new taxation system and to enforce compliance a lot more.  They need more taxation in order to meet the Budget shortfall due to a declining economy, ageing population, and the need to pay for all the 'stimulus programs' (vote buying) they have been doing and will do it the future.  Reducing the public service and slowing waste and corruption is never mentioned of course.

Unfortunately, Expats would be caught up in that new system and new enforcement. No one knows for sure what will happen (still) but I do know this, any retired/married Expat who willingly raises their heads so TRD can see them (lodges a tax return) is IMO risking a lot of trouble. Wait and watch is my plan - wait and watch.