JimGant

On 10/9/2023 at 5:23 PM, Time Traveller said:

On 10/8/2023 at 1:32 PM, TallGuyJohninBKK said:

Would  Thailand here be trying to make tax-free U.S. distributions from a U.S. Roth IRA account suddenly taxable in Thailand if remitted there???

 

Possibly.  I don't think that's their intention, but the US international Tax Treaties appear to apply based on residence.  So tax free retirement vehicles in the US suddenly are not tax free if living in Thailand.   

That's not unusual as it seems to be the same for other countries treaties with the US for their retirement accounts.

The OECD and UN Model intent is shown in the US-UK DTA, note this quote from the Technical Explanation:

Quote

However, the State of residence, under subparagraph (b), must exempt from tax any
amount of such pensions or other similar remuneration that would be exempt from tax in the State in which the pension scheme is established if the recipient were a resident of that State. Thus, for example, a distribution from a U.S. "Roth IRA" to a U.K. resident would be exempt from tax in the United Kingdom to the same extent the distribution would be exempt from tax in the United States if it were distributed to a U.S. resident.

The US-Thai DTA was written before this OECD/UN Model sentiment, so such language isn't found in that DTA; but the later written US-UK DTA *did* incorporate such language.

Now, Tax Treaties can be modified with with "exchange of notes" and "protocols." No doubt a lengthy ordeal, so, I guess, the Thais could tax your Roth during the years needed to change the treaty. Not too sure I'd worry about this wrinkle -- I'd just not declare my Roth distribution --knowing the current OECD sentiment -- along with non declaration of my Air Force pension and other non assessable income, per DTA.

6 minutes ago, Mike Lister said:

Back home, do you have to back out of the parking spot? Because if you do, backing in is quite similar, except you'll be coming instead of going

Pretty stupid response. Backing out, you're heading into the wide expanse of the non-parking apron; not a lot of poles and adjacent cars to maneuver around. The best parking design is the angled parking slots, where it's even easier to back out than from a square one. Not sure why we don't see more of those, 'tho I guess it does reduce available parking slots by one.

What's the parking situation now?

By the way, is it mandatory in Thailand to back into these square parking slots? Never had to do that back home, thus my reverse-into-a-tight-spot skills suck.

23 hours ago, Etaoin Shrdlu said:

In the instructions for form 8833 there appears to be a carve-out of reporting requirements for individuals who claim relief under a tax treaty for, among other things, pensions. What is your take on this? Does this mean that form 8833 is not required if claiming tax credits under form 1116 for Thai taxes paid on remittances of private pensions or IRA/401k withdrawals?

My read is that the Form 8833 would be required, if you filed the Form 1116, where you would check the box, "Income resourced by treaty." Doing so begs for a Form 8833.

If I ever have to do this, I'd probably be below $600 in Thai taxes as a credit, which (filing jointly) means no Form 1116 required -- only a single line item entry on Schedule 3, Form 1040.

If I had to file a Form 1116, with the Form 8833, I couldn't file electronically (at least with TurboTax). But, I love filing electronically, so I would; I'd just mail the Form 8833 separately, with an explanation (this avenue is not advertised, but you can mail a Form 8833 by itself, if you have no tax obligation but are taking advantage of a tax credit).

The following link is a good description of how a DTA treats an IRA. Just replace "Switzerland" with "Thailand" -- and you have a good picture of how things may become.

Quote

You claim the foreign tax credit on Form 1116.  Since all of this is happening by way of the income tax treaty between the United States and Switzerland, you attach Form 8833 to your Form 1040, making the relevant elections to invoke the treaty provisions to protect you from the IRS.

https://hodgen.com/ira-distribution-to-u-s-citizen-living-in-switzerland-which-country-taxes-it/

1 hour ago, Ben Zioner said:

If you're paying income tax in your home countries, then Thailand has no claim to tax the income twice.

quote from connda

Strictly speaking, if the DTA says Thailand has primary taxing rights on said income, then they can tax it -- and as primary taxing authority, they get to keep all the tax collection but provide a credit to the home country's taxation. Of course, if you've already paid full up tax to your home country, you'd either have to file an amended return, or carry the credit over to the next year (at least under US tax guidance).

Pretty messy and involved. I like the original posts to all these threads that said, "If you have a DTA and you pay taxes in your home country, Thailand will leave you alone." But, I guess we never saw anything official along those lines. But that would be nice and simple, at least for those of us that do pay taxes in our home country.

16 minutes ago, Ben Zioner said:

Any money earned before that date  is subject to the old rule i.e taxed if remitted the year of earning.

Well, yeah. But we're talking about remittances made post Jan 1, 2024 from a pot of money established pre-Jan 1, 2024. Ergo, certainly not remitted in year earned.

29 minutes ago, Jingthing said:

If those funds would be exempt, you may need to file and then prove they are exempt.

Or just prevent any new inputs to that savings or checking account that you were filtering your remittances through. And open a new one for post Dec 31st inputs. Then, just remit from that old account, which you could clearly show only held pre 2024 inputs.

Again, under this new rule about pre 2024 funds, not sure how you'd work this into a tax filing, since by definition, these are non assessable monies. But, I guess, if someone really wanted these monies identified, they would have to design some kind of reporting form or instruction.

This has all become so mind boggling, I can't believe the Thais haven't cried "uncle" yet.

16 minutes ago, TroubleandGrumpy said:

Anyone bringing in a large amount of money in 2024 is obviously either brave, stupid or a gambler.....

..... or wants to buy a condo. No, the Thais aren't going to kill FDI, a golden goose, the pride of the BoI, who works directly for the Prime Minister's office. And to screen all remittances as income is not only self-defeating and stupid -- it's impossible to parse income from capital. Nope, this scheme will either be dropped; or put on hold until they can regroup and tax foreign income, not remittances. FDI would be saved, and CRS and FATCA information, worthless for remittance reporting, could now be used to flush out tax avoiders. Stay tuned.

10 minutes ago, jerrymahoney said:

Because there would be 2 types of expats not filing: Those who would not be filing because they are below the minimum assessible income filing level and those who just do not file regardless because they consider themselves below the Revenue radar

Doubtful the filing threshold was established well below the taxable income level due to sneaky farangs....

14 hours ago, Guavaman said:

Currently, the RD tax code under Section 42 does not specify that any category of income is exempt from taxation under DTAs.

If push came to shove between a country's Tax Code and a Tax Treaty, the treaty would prevail. As an example. The US Tax Code says that you can get a tax credit on your US tax return for taxes paid to a foreign country IF those taxes were against foreign earned income. But, under the US DTA with Thailand, for example, if Thailand gets exclusivity (overriden by the saving clause, however) in the taxation of my IRA or private pension (which they do, if, currently remitted), the treaty says I can get a credit for those taxes paid on my IRA, even tho' this is US income, not foreign income. You simply have to attach Form 8833 to your tax credit Form 1116, which tells the IRS that their Code has been trumped by an international treaty.

Hopefully, we won't have to get the Embassy involved with the Ministry of Finance over any misunderstandings.....

13 hours ago, Guavaman said:

USA IRS: Taxable income: Generally, an amount included in your income is taxable unless it is specifically exempted by law. Income that is taxable must be reported on your return and is subject to tax. Income that is nontaxable may have to be shown on your tax return but is not taxable. 

Actually, Taxable Income (TI) is Adjusted Gross Income (AGI) less your Standard Deduction (or itemizations, if those are greater than Standard Deduction). So, AGI is equivalent to the Thai "assessable income" (AI). And in a similar fashion to the US, Thai Taxable Income would be what's left after you subtract out allowances and exemptions. Thus, if single, you automatically have at least 210,000 (150+60) subtracted out from your assessable income to arrive at Taxable Income. But, you're required to file a return if you have 120,000 in AI; but you have no Taxable Income until your assessable income exceeds 210,000..... So, why do the Thais want all these tax forms filed if there's no taxable income, thus no check attached? Are they taking a survey? Dumb.

To the US example, you don't have to file a tax return if you have no Taxable Income (unless you're self-employed). Of course, most do file, mainly to get back over withholdings of taxes.

54 minutes ago, TroubleandGrumpy said:

all those things you have to be able to 'prove' not taxable in Thailand, require you to lodge a tax return for the Thai RD to assess that claim. 

Pure conjecture. Why Thai RD would want to be inundated by a forest of paper, to prove a negative, is beyond me. Where are getting your information?

12 minutes ago, Steve2UK said:

On past form, I'm less persuaded that that class won't find/create ways to stay way ahead of any loophole-closing measures that Thai RD can come up with - and enforce.

Amen. Or just stomp on those trying to close the loophole. We may wake up tomorrow and have nothing more to discuss on this thread, as it will have all disappeared.

23 minutes ago, gamb00ler said:

The only concern I have is that the Thai RD may consider interest earned in a retirement account (401K/IRA etc) as accessable income.

Interest earned in an IRA has the same complexion as the tax deferred principal that funded the IRA, namely, it's not taxable until withdrawn. So, if you're currently not drawing down your IRA, you have no tax liability with either the US, or the Thais -- the interest is blended with the principal.

In my case, I have a Required Minimum Distribution (RMD) which is taxable, but which is an amalgamation of principal and compounded interest, but which there is no distinction needed -- it's just a glob of taxable income.

Now, if the Thais go to taxing "income" (and not income remitted), then I'll have a very reportable income amount from my RMD (here's where FATCA and CRS reporting comes in -- with income, not remittances). And per the DTA, Thailand has first dibs on taxing that. So be it -- the credit for this against my US taxes will make this neutral.

But if they stick to the "remitted" fiasco, I can just play games with the fungibility of the savings account from which all Wise transfers are made -- and claim FIFO and Aunt Martha's original funding as the source of remittances. That could prove interesting, but I doubt they're sophisticated enough, or adequately funded, to go down this road. We'll see....

8 hours ago, CartagenaWarlock said:

He parks the money in a US bank and brings it back the following year to avoid Thai taxes. It's closed now, of course. As usual, Thailand did not take into account the thousands of people living in Thailand because they had to travel 10,000 miles for a decent living in a foreign land. What about them? It is not sorted out yet.  

Not sure I understand your logic.... Yes, many Thais work abroad to get a decent wage. That their country of employment doesn't tax them, and that Thailand doesn't tax them (because of the next year remitted rule), has been a nice bonus. Now, apparently, they'll have to pay Thai income taxes on that nice wage earned abroad. But what's unfair about that? The tax is at the same rate as their Thai neighbors with jobs in Thailand. Why should they get the added bonus by working abroad of no income tax? I guess this is why we're seeing the new ruling proposal -- the Thai working abroad, who has a fatter paycheck than his hometown neighbor, should also be subject to Thai taxes.

21 minutes ago, TroubleandGrumpy said:

Unless the Thai RD declares that the type of money you are remitting into Thailand is not taxable income, then it would be wise to lodge a tax return and state that you owe zero income taxes and why.

The DTA already says the type of money I'm remitting is not taxable. And, where on a Thai tax return would I put my Air Force and Social Security income, and designate it as "exempt per treaty?" No, declaring to Thai RD my "non assessable income" just opens up more areas for confusion. A poster here has been declaring his non assessable income on his return for years, and has gotten nods, "yes, no taxable income -- thank you very much white man (snickers in the background)."

In one of these threads, someone asked about Thailand's taxation rights on Roth IRA distributions (which are tax exempt in the US), since Thailand has exclusive taxation rights on ordinary IRA distributions (remitted, of course -- for now). Here, in the first quote, is what the IRS says:

Quote

As a general rule, the pension/annuity article of most income tax treaties allows for exclusive taxation of pensions or annuities under the domestic law of the resident country (as determined by the residence article). This is generally true unless a treaty provision specifically amends that treatment. For example, some treaties provide that the country of residence may not tax amounts that would not have been taxable by the other country if you were a resident of that country.

https://www.irs.gov/businesses/the-taxation-of-foreign-pension-and-annuity-distributions

Well, unfortunately, there's nothing in the US-Thai DTA covering this, unlike in the US-UK DTA, where this, from the tech explanation, is said:

Quote

However, the State of residence must exempt from tax any amount of such pensions or other similar remuneration that would be exempt from tax in the State in which the pension scheme is established if the recipient were a resident of that State.
Thus, for example, a distribution from a U.S. "Roth IRA" to a U.K. resident would be exempt from tax in the United Kingdom to the same extent the distribution would be exempt from tax in the United States if it were distributed to a U.S. resident.

https://home.treasury.gov/system/files/131/Treaty-UK-Protocol-TE-7-22-2002.pdf

I mention this, even tho' the Thai-US DTA doesn't have such exemption language, so that folks with Roth distributions, and the like, can, with full integrity, assume the treaty intended (or would under a protocol) such exemptions. In fact, the latest OECD Model treaties include such language, meaning, if the Thai-US treaty had been written under current OECD guidance, such language would have been included.

Hey, it's never going to come to this. Thailand doesn't have the resources, but does have the smarts, to know dissecting every DTA out there for what's what in taxation priority wouldn't be worth the cost or effort. Instead, self-assessment seems to be the way forward, at least as a first step. In my case, I'd now declare my IRA distros to Thailand for taxation, take a tax credit against my US taxes, and have the same total overall tax bill as before. Multiply me by thousands of others, and Thailand could reap some impressive new tax income -- without hiring a zillion new clerks and treaty lawyers. Yeah, a little more paperwork for me -- but not much.

So, if you've got a Roth distribution, use the OECD consensus that it's not taxable in Thailand (and that the DTA just hasn't caught up). No integrity issues here -- and it would be an interesting Perry Mason moment if it ever got to that, which it wouldn't.

6 hours ago, jerrymahoney said:

and a US citizen is ALWAYS a tax resident of the US -- can only be taxed in US.

...... unless he's a tax resident of Thailand, and certain incomes defined in the DTA say Thailand can tax these. If you parse the language in the Code, it doesn't say all US citizens are tax residents of the US -- it says they'll be "treated" as if they're tax residents of the US, meaning, whether their residence is in Boston or Bangkok, their annual tax bill will be the same (with a few exceptions, like having an FEIC).

Anyway, yes, some of this language can be confusing. The term "derived" particularly. However, logic would dictate that para 3 is not addressing an American tax resident of Thailand's treatment of an annuity generated by a Thai insurance company. Instead, an immediate pay annuity from the US would logically be treated just like private pensions, IRAs, etc addressed in para 1, namely, Thailand has first taxation rights.

2 hours ago, jerrymahoney said:

No it doesn't.

 

You left out the words "derived' and '"only" as in:

 

Annuities derived and beneficially owned by a resident of a Contracting State shall be taxable only in that State.

Ok, replace derived with obtained or received. And as previously discussed, taxable "only" means -- in this para on annuities -- exclusivity in the Contracting State of residency, i.e., Thailand. How you arrive at the US having taxing priority over these kinds of annuities is beyond me. But why care? You're liable for taxation on an annuity by both Thailand and the US (due to the saving clause). This should be a neutral taxation situation, due to tax credits -- unless you owe no US taxes (i.e., standard deduction greater than AGI), but owe Thai taxes because your annuity exceeds the allowances and deductions. But, as you've already said -- if you do owe Thai taxes, it won't be much. Relax.

5 minutes ago, The Cyclist said:

What that says in a nutshell is that the Country where the pension arises, that Country has first dibs on taxing it.

That's what the DTA says that Ben provided. But that's not the norm, at least for private pensions. Here's what the US-Thai tax treaty technical explanation says:

Quote

Article 20 deals with the taxation of private (i.e., non-government) pensions, annuities, .........
Paragraph 1 provides that private pensions and other similar remuneration paid in
consideration of past employment are generally taxable only in the residence State of the recipient.

"Generally taxable" sounds a little wishy washy. Here's what the actual treaty language says:

Quote

Subject to the provisions of paragraph 2 of Article 21 (Government Service), [private] pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment shall be taxable only in that State.

"Taxable only in that State" implies exclusivity (but, again, there is no exclusivity in US DTAs, due to the saving clause).

Anyway, this is why advice on this forum over the years has said to not have your Boeing or IBM pension direct deposited into Thailand, since Thailand would have obvious taxation rights, to include remitted in year earned.

59 minutes ago, jerrymahoney said:

As to further interpretation of Paragraph 3, I have no further comment

Thank you.

55 minutes ago, Ben Zioner said:

Just looked at one of the 3 DTAs that may affect me  and found that 

 

"ARTICLE 18
PRIVATE PENSIONS

            Income in the nature of pensions or other remuneration for past employment arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in the first-mentioned State."

 

Doesn't say anything IMHO.

This may help define terms. It's from the Technical Explanation of the US-Thai DTA, and it pertains to Article 6, rents; but the highlighted terminology applies to all articles.

Quote

.....states the general rule that income of a resident of a Contracting State derived from real property situated in the other Contracting State may be taxed
in the Contracting State in which the property is situated. ......This Article does not grant an exclusive taxing right to the situs State; the situs State is
merely given the primary right to tax.

The language of the OECD and UN model tax treaties uses this language to define: Exclusive taxation rights, e.g., "taxable only in the first mentioned contracting state." The next level is illustrated above, where "may be taxed" defines the "primary right to tax," leaving the second contracting state with a "secondary right to tax." In the above example, the US would have first taxation rights (primary rights) on rents from property located in the US;  but Thailand, if that's where you're a tax resident, can also tax this income. In this example, the US gets to keep all the collected taxes, while Thailand's tax revenue, if any, is what's left after having to absorb the US taxes as a tax credit. Sounds like a waste of time, unless you're in a high Thai tax bracket, and a low US tax bracket..... But, how Thai RD sorts out all these DTA subtleties, if they even decide to, should be interesting.

2 hours ago, jerrymahoney said:

Article 20 Paragraph 3
Under paragraph 3, annuities that are derived and beneficially owned by a resident of a Contracting State are taxable only in that State.

We must be on different frequencies..... I was responding to your, "If the the USA-Thai DTA article 20 Pars. 2 & 3 are applied, I won't have any tax bill in Thailand at all." And, yes, para 2 will keep your Social Security from being taxed. But para 3 clearly states that any income from an annuity owned by you is taxed by the contracting state in which you are a resident. Thus, Thailand, if you're a tax resident, gets first taxation dibs on your annuity income (if remitted). If you're just saying you won't have any Thai tax bill, it's not from any protection you believe para 3 is giving you.