The Revenue Department shakes things up with new rules on taxing foreign income
What’s New?
Previously, Thai residents were only required to pay personal income tax on foreign income if the money was remitted into Thailand in the same year it was earned. The new guidelines close the loophole that allowed residents to defer the transfer of their overseas income to a different year to possibly avoid or minimize tax liability.
Summary:
* Effective from the year 2024 (Thai year 2567)
* Applicable to all cases involving foreign income
* Pertains to those residing in Thailand for 180 days or more
* Foreign income, irrespective of when it was earned, must be taxed in the year it is brought into Thailand
Important Notes:
* The Revenue Department’s directive is not a legally binding document but serves as guidance for tax officials and taxpayers to interpret the law clearly.
* For issues of double taxation, where income tax has already been paid in the foreign country, consideration must be given to the tax treaty between Thailand and that country.
* If tax has been paid in a country that has a double taxation agreement with Thailand, the amount can be credited (deducted from the tax payable) according to the provisions of the tax treaty.
* Thailand is currently a member of the Global Forum on Transparency and Exchange of Information for Tax Purposes. The country has signed agreements for Mutual Administrative Assistance in Tax Matters (MAC) and Automatic Exchange of Financial Account Information (MCAA CRS), necessitating the update of tax collection guidelines to be more equitable.
Legal Context
Article 1 of the new directive states: Individuals residing in Thailand under section 41, paragraph 3 of the Revenue Code, who earn income abroad must include such income for taxation in Thailand under section 48 of the Revenue Code, in the year that the income is brought into Thailand, irrespective of the year in which it was earned.
Example Scenarios:
- Expat Scenario: If an expat living in Thailand earns income from freelance projects in the U.S., they now must consider that income for Thai tax purposes whenever they transfer that income to Thailand, not just if they do it in the year it was earned.
- Thai Resident Scenario: A Thai national who has investments in the U.K. will also be affected. Dividends or interest earned will be subject to Thai tax whenever the money is transferred to Thailand.
- Double Taxation: If you’re a Thai resident who has already paid tax on your foreign earnings in another country, you might be able to offset this against your Thai tax liability under the double taxation agreement, if applicable.
By understanding these new rules and planning accordingly, individuals can better manage their tax obligations in Thailand. Always consult a tax advisor for personalized advice.
Disclaimer: The above information has not been independently verified. This investment brief is given for information only and does not represent an investment proposal, recommendation or advice to invest in the shares or business of the subject company. Additional information shall be made available to interested parties subject to the execution of the requisite confidentiality undertakings. The financial information, actual and/or forecast, provide herein is based on management representation.
