I reached out to an Australian friend here in Bangkok a while ago to suggest that we catch up over a beer. “Too late, mate” came the response. “I was up to 160 days so I split to Singapore for a month and now I’m in Sydney. I’ll see you when I’m back in January”. Another victim of the latest coming crisis, apparently. This was in August, but there’s still a lot of that sort of stuff going on and here’s why.
Back in September, 2021 the local authorities announced a new interpretation (rather than an entirely new law) of the personal income tax portion of the Revenue Code B.E. 2454, requiring foreign-earned income remitted into the Kingdom to now be reported and taxed. Whereas such funds had always been exempted from taxation in Thailand – making it one of the more favored havens throughout the world in which to hide out – this new rule understandably prompted concern.
The previous administration at that time said further details would be forthcoming. But elections were held in 2022, and the ensuing political fallout throughout 2023 effectively postponed all further progression. But in September of this year, the new Thaksin administration confirmed that, with retrospective effect from January 1, 2024, income earned outside of Thailand but brought in for expenditure here would now and henceforth be taxable.
This set a lot of expatriates scurrying about fervently and has given all of us something new to talk about in the bars that we frequent. Brits and Aussies, many of whom have spent the better part of their adult lives avoiding tax collectors like a plague, were the first to react by musing (arguing?) aloud about which machinations they’d go through as their preferred work-around. Most of the Indian expats I know over here don’t even bat an eye when the subject comes up; they simply query which numbered form(s), specifically, now needed to be filled out and by when, exactly, they need to be filed. My continental European friends have mostly chuckled and offered clever one-liners about existentialism, while the Russian expats with whom I drink usually make a stinky-face expression, spit on the ground, and mutter things that I never quite understand. My fellow Americans and I have pretty much just shrugged our shoulders unconcernedly and ordered another round of beers for the table. Uncle Sam has been screwing us (and our parents, and our grandparents) for the past 100+ years, and we’re already subject to even more onerous taxation requirements.
The United States is one of a handful of countries that taxes its citizens and residents on all income earned anywhere in the world by whatever means, regardless of where the money ends up going. While not bragging (nor moaning excessively), my US tax return filings run well in excess of 100 pages annually, including more than ten separate schedule forms with accompanying explanatory statements, as well as the infamous FBAR listing of each and every bank account located anywhere in the world for which I have any signing authority and reporting the highest balance amount on deposit at any point on all of them throughout the year. God bless America!
That’s in addition to the personal income taxes I pay in Thailand by virtue of my employment here, and the annual filings in New Zealand for property rental income earned down there, as well as business tax returns each year in Singapore. But over the years I’ve learned a few handy tricks of the trade which I zealously employ to minimize my liability however and wherever I legally can. So here are a few observations from someone who’s been there and done that, subject to the disclaimer that I am by no means a qualified tax expert, and that no reader should take my words as gospel without separately conferring with someone who is.
Everyone’s situation is different and the new rules only apply if you are in fact resident in Thailand for tax purposes. Anyone who spends 179 days or less in Thailand during any given year – as my pal from Sydney chose to do – is usually completely exempt from income tax requirements here altogether. But if you are a Thai tax resident and you have reason to worry about the new rules, the first thing to consider is what is (and isn’t) classified as foreign-sourced income. Broadly speaking and for the purposes of this article, it means income that is (a) earned outside of Thailand but then (b) brought into or used in Thailand through whatever means, including electronic funds transfers, credit card spending, withdrawals from ATM machines, and even cash or assets stowed in your luggage when you cross the border into the Kingdom, all of which are now considered to have been “remitted” and therefore subject to declaration on your tax return.
However, income is not defined to include inheritances, losses, annual gifts to spouses and non-spouse individuals of up to 20 million baht (roughly 600,000 USD at the time of this writing) and 10 million baht respectively, and earnings accumulated before becoming a Thai tax resident. Such funds need not be declared to the tax authorities and bear no liability whatsoever. Exemptions are also extended to particular categories of Long-Term Residents, including so-called “Wealth Pensioner” LTR visa holders. Business and personal loans – even ones that you make to yourself – are also exempt since loans are not considered to be earned income. That said, loans should in every instance be evidenced and structured properly (including, for example, the payment of some nominal interest as would normally be expected). Consistently undocumented weekly or monthly electronic funds transfers or withdrawals from ATMs probably would not pass muster. There are certainly ways to do it right, though, so it’s no surprise that one of the hottest tickets in town for business advisors right now is drafting and preparing loan agreements for their clients.
Double Taxation Agreements that Thailand presently maintains with more than 60 foreign countries may also be relevant and preclude the payment of local taxes against income that has already been taxed elsewhere. Here again, its worthwhile to consult with qualified experts for a better understanding of whether, and how, such DTAs might affect your individual situation. Company expenses and dividends may also provide relief, where applicable, to help minimize your exposure.
Furthermore, the normal range of deductions and allowances for individuals and families, and for things like health and medical expenses, home mortgage interest payments, educational expenses, and charitable contributions all remain in effect, and the tax rates in Thailand for most individuals, compared to other jurisdictions around the world, are quite favorable anyway.
There’s a lot of devils in the detail, and the foregoing is merely a broad-stroke summary. But since the interpretations are considered retrospective to the beginning of this year (2024) taxpayers will be expected to deal with all it, one way or another, as part of their upcoming filings which are typically due no later than April 8th of the following year. Penalties for non-compliance can be significant, and the authorities are almost certain (i.e., duty-bound) to make an example out of someone if Thailand expects to be taken seriously in the world financial arena.
On the other hand, anyone familiar with Thailand already appreciates that everything here – and I do mean everything – is always subject to potential change at a moment’s notice, and that even under the best of circumstances Thai bureaucracy is never terribly swift, precise, logical, or efficient. There’s likely to be some type of phased implementation and/or a grace period of sorts, so when, how, and upon whose head the sky falls here all remain to be seen. As American Express used to say in their advertisements back in the 1970’s “an educated consumer is our best customer”, so my closing advice for now is to wise up and stay tuned.
© 2024 Frank Rittman. All Rights Reserved
