With effect from January 1, 2024, Thailand’s Revenue Department revised its interpretation of the Revenue Code, significantly impacting personal income tax liability for Thai residents with foreign-sourced income. These changes are important for both Thai nationals and expatriates residing in Thailand. Below, we break down what these changes mean and how they could affect you.
ScandAsia has consulted the legal department of the Thai Revenue Department to bring clarity on the subject. The purpose is to cut though the gossip and give our readers the basic facts of what how the changes will affect foreigners, who are tax residents in Thailand. You are a tax resident in Thailand if you stay in Thailand at least 180 days within a given tax year.
ScandAsia has tried to translate the legal explanation of the Legal Department of the Thai Revenue Department to a language code, that should be understandable by the majority of our readers. If you have specific questions, ScandAsia encourages you not to listen to third person gossip, but contact the Revenue Department directly with your question.
Let’s give the word to the Legal Department:
The Key Change
Previously, Thai residents were only required to pay tax on foreign income if that income was brought into Thailand within the same tax year it was earned. However, under the new interpretation, foreign-sourced income will now be taxable in Thailand whenever it is remitted into the country, regardless of the tax year in which the income was earned. This amendment applies exclusively to income earned from January 1, 2024, onwards.
Income that is not remitted into the country will not be taxable in Thailand until it is remitted.
Who Is Affected?
Any Thai resident who derives income from foreign sources will be impacted. A Thai resident is defined as anyone physically present in Thailand for at least 180 days within a given tax year. Importantly, the rule applies equally to Thai nationals and foreigners who qualify as Thai residents.
Retirees or expatriates living in Thailand who bring foreign income into the country should also be aware that this income is subject to the same rules as any other foreign-sourced income. However, those earning income from a country that has a double taxation treaty with Thailand can apply for tax relief, provided they have proof of taxes paid in the foreign country.
Double Taxation Relief
Thailand has 61 double tax treaties with other countries The Nordic countries all have such a double tax treaties. If your foreign income has already been taxed in one of these treaty countries, taxpayers can apply for a foreign tax credit to avoid double taxation. It is essential to retain relevant documentation, including proof of income and taxes paid, to qualify for such relief.
What Do You Need to Do?
To comply with these changes, taxpayers should:
Maintain Accurate Records: Keep all documents related to foreign income that is remitted into Thailand, such as bank statements, contracts, and tax payment receipts from the source country.
Understand Double Tax Treaties: If your foreign income comes from a country with a double taxation agreement with Thailand, gather the necessary documentation to claim tax relief.
Maybe Consult Tax Experts: Consulting a tax advisor familiar with international and Thai taxation laws is recommended. But if your situation is not complicated, you can easily handle it yourself. Don’t be afraid to go to meet the Revenue Department covering your residence address.
Enforcement and Penalties
The Revenue Department has increased its capabilities to check your actual situation through international cooperation. Thailand is a member of the Global Forum on Transparency and Exchange of Information for Tax Purposes, enabling the exchange of financial information with other member countries.
If discrepancies are found between your own income declaration and the income information obtained through the Global Forum on Transparency and Exchange of Information for Tax Purposes, taxpayers need to explain this. If they cannot explain the difference in a satisfying way, they could face severe penalties, including:
- A fine equal to twice the tax amount that should have been paid.
- A monthly surcharge of 1.5% of the unpaid tax amount.
Broader Implications
This change reflects Thailand’s broader efforts to enhance tax transparency and compliance. To handle the situation., Thailand has established a new International Tax Affairs Center under the Revenue Department. The establishment of this center underscores Thailand’s commitment to managing cross-border tax issues effectively.
While the revised interpretation does not specifically target foreigners or retirees, its implementation highlights the importance of proper tax planning for anyone residing in Thailand with foreign-sourced income.
Final Thoughts
The recent changes to Thailand’s Revenue Code mark a significant shift in how foreign income is taxed for Thai tax residents. Whether you’re a Thai national or an expatriate, understanding these rules and ensuring compliance is crucial to avoid penalties. Staying informed and seeking professional advice will be key to navigating these changes effectively.
It is not unclear. It is very clear that retirees with pension income are also covered by the new rules if they live in Thailand over 180 days in a tax year.
What is still unclear to is whether retirees with pension income are also subject to this new ruling