Tax Specialist in Chiang Mai

[JimGant]

54 minutes ago, suzannegoh said:

I tried reading the Tax Treaty and didn't get the same meaning out if it as that guy but I'm not an accountant and I verified with the IRS that he is in fact an IRS enrolled agent. 

Nothing magical about being an EA. However, most are well versed in taxes, as that, by definition, is their specialty. Plus, like CPA's, they're required to take continuing professional education courses, to include two hours per year of "ethics or professional conduct." This guy flunked that aspect.

 

This EA in Bangkok, who, reportedly, charges quite a bit, has quite a racket going. That what he offers hasn't been widely reported in respectful publications says it all to me..... His scheme would allow someone with a large IRA nestegg to relocate to Thailand for over a 180 days, sell his 6-figure traditional IRA, have this EA file his taxes, and thus avoid a 5-figure tax bill. Then, move back to the States. Wow! Makes converting to a Roth a complete joke.

 

Anyway, his current volume of tax returns is apparently low enough to keep him below the radar. That may change, if he's able to recruit enough folks who don't believe in "too good to be true."

[jeffandgop]

7 hours ago, JimGant said:

Nothing magical about being an EA. However, most are well versed in taxes, as that, by definition, is their specialty. Plus, like CPA's, they're required to take continuing professional education courses, to include two hours per year of "ethics or professional conduct." This guy flunked that aspect.

 

This EA in Bangkok, who, reportedly, charges quite a bit, has quite a racket going. That what he offers hasn't been widely reported in respectful publications says it all to me..... His scheme would allow someone with a large IRA nestegg to relocate to Thailand for over a 180 days, sell his 6-figure traditional IRA, have this EA file his taxes, and thus avoid a 5-figure tax bill. Then, move back to the States. Wow! Makes converting to a Roth a complete joke.

 

Anyway, his current volume of tax returns is apparently low enough to keep him below the radar. That may change, if he's able to recruit enough folks who don't believe in "too good to be true."

Jim- I just can't see in the tax treaty w/Thailand that my private pension is taxable by the IRS. I believe that the Treaty considers me to be a resident of Thailand as defined in Article 4, as I reside here 365 days a year and do not maintain a domicile in the U.S.  (I haven't renounced my US citizenship & have not engaged in perpetuating a "loss of residence status (for) purposes (of) avoidance of tax".

 

Having said that, Article 20, para 1 states:

"1. Subject to the provisions of paragraph 2 of Article 21 (Government Service), 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."

And

The Department of Treasury Technical Explanation document states for Article 20, para 1:

"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."

 

So please, if you would, explain where I am still subject to payment of taxes to the U.S. for the ordinary income derived from my private pension. Thanks....

[JimGant]

3 hours ago, jeffandgop said:

Jim- I just can't see in the tax treaty w/Thailand that my private pension is taxable by the IRS. I believe that the Treaty considers me to be a resident of Thailand as defined in Article 4, as I reside here 365 days a year and do not maintain a domicile in the U.S.  (I haven't renounced my US citizenship & have not engaged in perpetuating a "loss of residence status (for) purposes (of) avoidance of tax".

 

Having said that, Article 20, para 1 states:

"1. Subject to the provisions of paragraph 2 of Article 21 (Government Service), 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."

And

The Department of Treasury Technical Explanation document states for Article 20, para 1:

"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."

 

So please, if you would, explain where I am still subject to payment of taxes to the U.S. for the ordinary income derived from my private pension. Thanks....

It's called the "saving clause" found in every US tax treaty, allowing the US to tax your worldwide income as if there was no treaty in effect. There are a few exceptions to the saving clause, but private pensions and IRAs aren't among them.

Read the below thread for clarification; article 84 may be helpful:

https://forum.thaivisa.com/topic/1008555-tax-specialist-in-chiang-mai/page/6/

 

[suzannegoh]

56 minutes ago, JimGant said:

It's called the "saving clause" found in every US tax treaty, allowing the US to tax your worldwide income as if there was no treaty in effect. There are a few exceptions to the saving clause, but private pensions and IRAs aren't among them.

Read the below thread for clarification; article 84 may be helpful:

https://forum.thaivisa.com/topic/1008555-tax-specialist-in-chiang-mai/page/6/

 

That’s great info.   I guess that if one is thinking of hiring that EA for purposes of invoking that tax treaty that the first thing that they should do is ask him how he’s getting around the “saving clause”.  I suspect that he’d have a ready answer for that, though I’m not sure that I’d be able to distinguish between a valid one and one based on some pseudolegal theory.

[jeffandgop]

1 hour ago, JimGant said:

It's called the "saving clause" found in every US tax treaty, allowing the US to tax your worldwide income as if there was no treaty in effect. There are a few exceptions to the saving clause, but private pensions and IRAs aren't among them.

Read the below thread for clarification; article 84 may be helpful:

https://forum.thaivisa.com/topic/1008555-tax-specialist-in-chiang-mai/page/6/

 

Article 84 does not really help me as I will not assume that the Switzerland Treasury explanation is and must be applied to the Thai treaty. Similarity in treaties does not make one treaty's explanation applicable to another. However, I did read in the Swiss Treaty Treasury Explanation (pg. 7) "Paragraph 1 provides that private pensions and other similar remuneration derived and beneficially owned by a resident of a Contracting State in consideration of past employment are taxable only in the State of residence of the recipient." That seems to me that private pensions are not necessarily taxable by the US. for U.S. citizens residing in Switzerland.

So my question, in light of my specific Thai-U.S. Tax Treaty & Treasury citations, remains either unanswered.

 

In the US-Thailand Tax Treaty Article 1 para. 2 is where the "savings clause" is found.  But Article 1 para. 3 "sets forth certain exceptions to the saving clause that preserve these benefits for citizens and residents of the Contracting States" (US Treasury Explanation). The Treaty itself states at Article 1 para. 3 "The provisions of (Article 1) paragraph 2 shall not affect: a) the benefits conferred by a Contracting State ...under paragraphs 2 and 5 of Article 20 (Pensions and Social Security Payments)".  I conclude the opposite of your statement that "private pensions and IRAs" are not an exclusion to the "savings clause".  I believe that they are.  Or am I mis-interpreting that "the benefits" means my pension & "Contracting State" means Thailand based on my meeting the residency test defined in the Treaty?

 

Thank you.

[NancyL]

Mr. Carden will be in Chiang Mai this weekend and on Monday for consultations.  I know at least a dozen people who have filed amended returns with him and received refunds and will continue to utilize his services in the future.

 

Jim Gant, you've been a persistent critic of Mr. Carden.  Have you actually had a meeting with him and permitted him to review your tax returns?  An initial consultation is free.

 

Personally, I think we have more to worry about with the Thai gov't deciding that the 65,000 baht/month from a foreign source that we now have to deposit in a Thai bank to justify our retirement visa extensions should be taxed.

[luther]

I taught at an international school in Thailand for a number of years.  In the late 90's a group of us consulted a lawyer about getting refunds for taxes paid to the Thai government during our first two years of employment. We were successful and got fairly large checks, but the lawyer made it clear that the refund was worth pursuing because there was an exception to the "savings clause" which applied specifically to income earned by teachers. The treaty has since been amended by both countries to say that the tax exemption for those first 2 years only applies to teachers who leave before they begin their third year. Many new teachers now have a big decision to make, because if they decide to stay beyond two years and the school has not withheld taxes, the teacher must cough up two years of tax.

 

The only thing the whole experience taught me was that very few people dig or read very deeply into tax law including school lawyers, administrators, and tax officials, the folks who have a vested interest.  Almost all of these folks were confident or pretended to be confident they knew what was what, because they had consulted the ministry of education, the American embassy, and tax officials back in the states.  All of them were wrong

[Bill97]

 
Personally, I think we have more to worry about with the Thai gov't deciding that the 65,000 baht/month from a foreign source that we now have to deposit in a Thai bank to justify our retirement visa extensions should be taxed.

That decision has not been made, has it?

Also that monthly deposit is not a requirement, it is one of the options.



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[JimGant]

Quote

That seems to me that private pensions are not necessarily taxable by the US. for U.S. citizens residing in Switzerland.

The ruling on the Swiss situation is well-defined: Yes, Switzerland gets "first dibs" on taxation of the US IRA -- but the US citizen, because of the savings clause, must file a US return, and include the IRA income. Yes, he gets a tax credit against any US taxes owed -- and if Swiss tax rates are higher than US tax rates, then no money owed to the US. If the other way around, he pays, in taxes, the difference between his US tax bill, and the credit received for taxes paid to Switzerland. Bottom line: His IRA must be included on his US tax return and he'll pay in total the higher of the US tax, or the Swiss tax -- no savings en total.

 

Does this ruling apply to the US-Thai situation? No, it's like an IRS letter ruling, which are case specific. But they can be used as precedent in similar rulings (but, yeah, in such a situation, Carden, or whoever, could ask for their day in court.....). But, the similarity in the Thai and Swiss situations should give pause as to which way any ruling would favor. (But, hey, Carden apparently has such a wonderfully convoluted Form 8833, whose State Dept treaty lingo has the IRS scratching their heads, that why not go for it...? To me, it's not really a grey area -- so I see it as abuse. But that's me -- Carden probably could convince me it's somewhat grey -- and I might be tempted to cash in my $200,000 in traditional IRAs. But, probably not.)

 

Quote

The inclusion of paragraph 2 in the exceptions to the saving clause means that the grant of exclusive taxing right of social
security benefits to the paying country applies to deny, for example, to the United States the right to tax its citizens and residents on social security benefits paid by Thailand. The inclusion of paragraph 5, which exempts child support payments from taxation by the State of residence of the recipient, means that if a resident of Thailand pays child support to a citizen or resident of the United States, the United States may not tax the recipient

These are the only exceptions to the savings clause in the Thai-US treaty. Nothing about private pensions/IRAs being excluded. In fact, nothing in any of the 80+ US tax treaties excluding private pensions/IRAs. So, Thailand remains the only country you can move to if you believe you can thus escape taxation on your traditional IRA. Sound too good to be true...? You think..

[jeffandgop]

41 minutes ago, JimGant said:

The ruling on the Swiss situation is well-defined: Yes, Switzerland gets "first dibs" on taxation of the US IRA -- but the US citizen, because of the savings clause, must file a US return, and include the IRA income. Yes, he gets a tax credit against any US taxes owed -- and if Swiss tax rates are higher than US tax rates, then no money owed to the US. If the other way around, he pays, in taxes, the difference between his US tax bill, and the credit received for taxes paid to Switzerland. Bottom line: His IRA must be included on his US tax return and he'll pay in total the higher of the US tax, or the Swiss tax -- no savings en total.

 

Does this ruling apply to the US-Thai situation? No, it's like an IRS letter ruling, which are case specific. But they can be used as precedent in similar rulings (but, yeah, in such a situation, Carden, or whoever, could ask for their day in court.....). But, the similarity in the Thai and Swiss situations should give pause as to which way any ruling would favor. (But, hey, Carden apparently has such a wonderfully convoluted Form 8833, whose State Dept treaty lingo has the IRS scratching their heads, that why not go for it...? To me, it's not really a grey area -- so I see it as abuse. But that's me -- Carden probably could convince me it's somewhat grey -- and I might be tempted to cash in my $200,000 in traditional IRAs. But, probably not.)

 

These are the only exceptions to the savings clause in the Thai-US treaty. Nothing about private pensions/IRAs being excluded. In fact, nothing in any of the 80+ US tax treaties excluding private pensions/IRAs. So, Thailand remains the only country you can move to if you believe you can thus escape taxation on your traditional IRA. Sound too good to be true...? You think..

What about Article 1 para 3 and Article 20 para 2 as I wrote. Pensions ARE specifically discussed 

[suzannegoh]

1 hour ago, jeffandgop said:

What about Article 1 para 3 and Article 20 para 2 as I wrote. Pensions ARE specifically discussed 

I see pensions mentioned there but not distributions from retirement accounts.  Is it a given that for the purposes of the treaty that a lump sum distribution from an IRA account would considered to be a pension?

[JimGant]

"Relation to Other Articles
Paragraphs 1, 3 and 4 of Article 20 are subject to the saving clause of paragraph 2 of
Article 1 (Personal Scope). Thus, a U.S. citizen who is resident in the other Contracting State,
and receives either a pension, annuity or alimony payment from the United States, may be
subject to U.S. tax on the payment, notwithstanding the rules in those three paragraphs that give the State of residence of the recipient the exclusive taxing right. Paragraphs 2 and 5 are excepted from the saving clause by virtue of paragraph 3(a) of Article 1. Thus, the United States will allow U.S. citizens and residents the benefits of paragraph 5."

 

Paragraph 5 deals with child support.
 

[JimGant]

51 minutes ago, suzannegoh said:

I see pensions mentioned there but not distributions from retirement accounts.  Is it a given that for the purposes of the treaty that a lump sum distribution from an IRA account would considered to be a pension?

From the Swiss ruling, yes.

 

Quote

Although the Convention does not make explicit the fact that the term “pensions and other similar remuneration” includes both periodic and lump-sum payments, it is understood that this would be the case under the domestic law of both Contracting States.  The term “pensions and other similar remuneration” includes amounts paid by all private retirement plans and arrangements in consideration of past employment, regardless of whether they are qualified plans under U.S. law, including plans and arrangements described in section 457 or 414(d) of the Internal Revenue Code. It also includes an Individual Retirement Account.

 

[NancyL]

Jim Gant, you've never answered my direct question of why don't you just make an appointment, bring your tax returns and talk directly with Thomas Carden? Neither he nor his staff is going to get into an argument with an anonymous person on an internet forum.

 

Back when Hubby and I had a greenhouse/nursery business we lived on the property and had a very aggressive tax accountant who specialized in such businesses.  She maintained that greenhouse/nursery businesses (very common in our area) were farmers and entitled to all the tax advantages given to farmers.  Most years we didn't owe any federal taxes, wrote off just about everything associated with our lives except groceries, enjoyed accelerated depreciation, income averaging, etc.  Was it "too good to be true"?  We're we "taking advantage" of the situation?  And did we get into any trouble?  Nope.  There's nothing wrong with utilizing tax regulations that are in your favor.

[JimGant]

Quote

There's nothing wrong with utilizing tax regulations that are in your favor.

You're correct. Unfortunately, the saving clause (savings, in some vernacular), plugged into all US tax treaties (except with Pakistan), makes sure that US citizens pay taxes, either to their country of residence or to the US. There are no exceptions for private pensions or IRAs -- in any treaty. (Although Carsten seems to think there is.) But, if a licensed EA is holding out the ability to cash in your IRA tax free, why not go for it. The worst that can happen is that you'll have to pay back-taxes, with interest. No jail time. And no jail time for Carsten -- his University of Phoenix diploma (with honors, for an additional charge) will give him a pass.

 

Can't wait until the word gets out about being a resident of Thailand means no tax on that pesky annual Required Minimum Distribution from your IRA. Heck, just move to Thailand for a 180 day vacation and cash in your entire IRA. And this is all possible with the Carsten methodology of taxation. Should prove interesting.

[Scott]

Unhelpful post and reply removed.

 

[NancyL]

3 hours ago, JimGant said:

You're correct. Unfortunately, the saving clause (savings, in some vernacular), plugged into all US tax treaties (except with Pakistan), makes sure that US citizens pay taxes, either to their country of residence or to the US. There are no exceptions for private pensions or IRAs -- in any treaty. (Although Carsten seems to think there is.) But, if a licensed EA is holding out the ability to cash in your IRA tax free, why not go for it. The worst that can happen is that you'll have to pay back-taxes, with interest. No jail time. And no jail time for Carsten -- his University of Phoenix diploma (with honors, for an additional charge) will give him a pass.

 

Can't wait until the word gets out about being a resident of Thailand means no tax on that pesky annual Required Minimum Distribution from your IRA. Heck, just move to Thailand for a 180 day vacation and cash in your entire IRA. And this is all possible with the Carsten methodology of taxation. Should prove interesting.

Jim Gant, again you refuse to address my question about why don't you just make an appointment and have a personal meeting with Thomas Carden.  Perhaps you're not actually resident in Thailand.

 

Mr. Carden and his associates prepare U.S. tax returns for U.S. citizens living in other countries in the region besides Thailand.  One of his associates told me recently that they've attempted to "test" the tax treaty between Indonesia and the U.S. by doing some amended returns for free for U.S. citizens living in Indonesia.  Their amended returns were not accepted by the IRS and it was very obvious that the IRS reads the Form 8833 very carefully and found their assertions didn't apply with that particular. 

 

So, wouldn't you think the IRS has also read what they've written on the Form 8833 concerning the Thai-U.S. tax treaty and retirement income and found it acceptable since I personally know several dozen retirees in Chiang Mai who have received refunds and are continuing to file with Mr. Carden?  Each country's tax treaty is different.  You keep citing the Switzerland-U.S. tax treaty.  Why not throw in the Indonesia-U.S. tax treaty for good measure?  It's doesn't apply in this situation, either. 

[Dante99]

This is not a black and white issue.  There have not been enough cases decided in Tax Court to establish conlclusive clarity.  Mr Carden and Mr Gant have different views on the shades of grey involved.  So there are issues about how grey the grey is in addition to the differing risk levels individuals are willing to take with their tax information.

 

There is no one size fits all correct answer.

 

 

[hml367]

Has anyone asked IRS directly?  There is available on their web site "Get answers to your tax questions."

 

If anyone is afraid to ask IRS directly, they probably have doubts about this.

[JimGant]

9 hours ago, NancyL said:

Jim Gant, again you refuse to address my question about why don't you just make an appointment and have a personal meeting with Thomas Carden.  Perhaps you're not actually resident in Thailand.

 

 

Mr. Carden and his associates prepare U.S. tax returns for U.S. citizens living in other countries in the region besides Thailand.  One of his associates told me recently that they've attempted to "test" the tax treaty between Indonesia and the U.S. by doing some amended returns for free for U.S. citizens living in Indonesia.  Their amended returns were not accepted by the IRS and it was very obvious that the IRS reads the Form 8833 very carefully and found their assertions didn't apply with that particular. 

 

So, wouldn't you think the IRS has also read what they've written on the Form 8833 concerning the Thai-U.S. tax treaty and retirement income and found it acceptable since I personally know several dozen retirees in Chiang Mai who have received refunds and are continuing to file with Mr. Carden?  Each country's tax treaty is different.  You keep citing the Switzerland-U.S. tax treaty.  Why not throw in the Indonesia-U.S. tax treaty for good measure?  It's doesn't apply in this situation, either. 

Nancy, I'm sure a visit with Mr Carden would involve some tap dancing by him, as he tried to explain why the "exclusive tax authority" Thailand has via treaty on my IRA is not trumped by the savings clause. His Form 8833 must be a dandy, as he probably hammers home the "exclusivity" given by treaty, then either fails to mention the savings clause -- or implies that private pensions/IRAs are somehow exempt in Thailand (they're not, nor are they anywhere else in any of the treaties with the US). No, I'm afraid I'd lose my temper with Mr Gantry, er Carden. (Oh, any chance you could give us a few tidbits about his Form 8833, like, does he not mention the savings clause, or if he does, does he say private pensions/IRAs are exempt from it?)

 

And very easy to get confused about why Thailand doesn't have exclusive taxing rights, when the treaty clearly says it does...(look at jeffandgop's head scratching on the previous page). You think a GS7 at the IRS necessarily knows about the savings clause, when he rarely, if ever, sees an attached Form 8833? And would a filing containing a Form 8833 necessarily be flagged for human review? Probably not, because there are no misplaced or omitted numbers -- the full amount of the IRA is placed on the appropriate Form 1040 line, thus there is no mismatch with the 1099R number, thus no automatic alert (the full amount of the IRA is subtracted out on a later line). That the Indonesian filing got reviewed, however, says maybe filings with 8833's *are* flagged, tho' not necessarily reviewed by someone familiar with the savings clause exception (yes, in the case with Indonesia, no with the Thai filings -- who knows?)

 

Quote

Each country's tax treaty is different.  You keep citing the Switzerland-U.S. tax treaty.  Why not throw in the Indonesia-U.S. tax treaty for good measure?  It's doesn't apply in this situation, either. 

I also threw in the British example. What do they all have in common? They all invoke the savings clause for IRAs, meaning you will include your IRA payout on your 1040, and take a tax credit for any related taxes paid to your country of residence. But, isn't it wonderful -- or curious -- that the Thai-US treaty is the only one in the world that allows Thailand to be a tax haven for your IRAs and private pensions. What could possibly be suspect with this?

 

And that Thailand doesn't take advantage of its exclusive taxation rights is a nice part of the package. However, the OECD has been working on new treaty language to address this "dual no taxation". The below is the US Treasury's effort:

Quote

On February 17, 2016, the US Treasury issued a new US Model Income Tax Convention, which is the baseline text Treasury will use in negotiating tax treaties.  According to an accompanying press release, the 2016 Model “includes a number of new provisions intended to more effectively implement the Treasury Department’s longstanding policy that tax treaties should eliminate double taxation without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance.”

The US already addresses the "dual non taxation" with its savings clause. But other countries are beginning to. Norway, for example, gives Thailand exclusive taxation rights on all pensions received by her citizens resident in Thailand. However, if Thailand doesn't avail itself and actually tax these folks, then they have to pay taxes to Norway. Thus, to be exempted from Norwegian income taxes, you have to provide a copy of your Thai tax return.

 

Anyway, loopholes are closing. Thus, better move to Thailand, cash in your IRA before it's too late, then make an appointment with Carden.

 

[Mapguy]

I'll preview this post by saying it might get a rise from some people.  Maybe some useful knowledgeable information.

 

The ongoing discussion will not apparently be settled here about the ultimate success of reporting and paying taxes in Thailand (which may or may not tax pensions by treaty agreement) or in the USA for American citizens resident for tax purposes in Thailand as an option.  The USA usually does tax pensions of non-resident citizens in part or whole.

 

It occurred to me tonight in reading the latest posts that the discussion has neglected something significant to consider.  What is being talked about is legal tax avoidance:  taking advantage of a policy/legal "tax break."  In this case it is apparently debatable.  Whatever, it is a case of a non-resident not paying the same tax as someone who is a retired citizen but not a resident for tax purposes in the USA.  That could be considered more than "reasonable adjustment" of tax policy.  Some people call it plain and simple tax avoidance.  What justifies a retired non-resident in Thailand have this advantage over a US resident?

 

It is not just among US pensioners who happen to live in Thailand where one finds this sort of situation.  There are other situations for special treatment of retired US citizens abroad.  Mexico and Israel, for example.  Probably others. Other expatriates? The UK is infamous for citizens moving to more beneficial tax countries.  France, too, is another example.  Or certain Caribbean Island nations!

 

 

Edited February 24, 2019 by Mapguy

[gamb00ler]

On their website American International Tax Advisers give a Line ID through which you may contact them.  I sent the following message to that Line ID.

 

I came across your contact information on the ThaiVisa website where a discussion of Mr. Thomas Carden's tax strategy is taking place.  You can find that discussion at:

Many participants in that discussion are interested in a tax strategy to save them on their USA taxes.

 

Edited February 24, 2019 by gamb00ler

[Bill97]

What justifies a retired non-resident in Thailand have this advantage over a US resident?
 

Do you think there is justification for the other parts of the tax code? Really?

It would be nice if there was but it seems not to be the case.



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[suzannegoh]

7 hours ago, Mapguy said:

What justifies a retired non-resident in Thailand have this advantage over a US resident?

 

If you’re fishing for a way to rationalize it on moral grounds, one reason for retirees outside the US to not be required to pay US taxes on retirement disbursements might be because if they are legitimately a  resident of a foreign country then they are unlikely to be able to take advantage of the US’s public services and infrastructure. Try to claim Medicare from Thailand, for instance, you can't do it.

Edited February 25, 2019 by suzannegoh

[Mapguy]

4 hours ago, Bill97 said:

 

Do you think there is justification for the other parts of the tax code? Really?

It would be nice if there was but it seems not to be the case.



Sent from my iPod touch using Thailand Forum - Thaivisa mobile app

Couldn't agree more.  My question is simple:  What justifies a retired non-resident in Thailand have this advantage over a US resident?  Rationalization can be a slippery slope.

[Mapguy]

3 hours ago, suzannegoh said:

If you’re fishing for a way to rationalize it on moral grounds, one reason for retirees outside the US to not be required to pay US taxes on retirement disbursements might be because if they are legitimately a  resident of a foreign country then they are unlikely to be able to take advantage of the US’s public services and infrastructure. Try to claim Medicare from Thailand, for instance, you can't do it.

Easy fishing!  You are quite correct about US law having to do with Medicare.  I don't know the reasoning behind that. It seems odd considering comparative costs of health care, say, here in Thailand and in the USA.   And there are also restrictions on NHS services in the UK plus similar ones in other countries that have expatriates finding ways to circumvent the restrictions in obviously questionable ways.  But that's apples and oranges. My question isn't about the hornet nests of tax policy in any country (including Thailand to which you also referred).  Such questions have to be addressed elsewhere, and hopefully equitably.  And this thread --- and my question ---  focus on that issue.

[Bill97]

Couldn't agree more.  My question is simple:  What justifies a retired non-resident in Thailand have this advantage over a US resident?  Rationalization can be a slippery slope.

Why look for justification or rationality in the us tax code or government acts? Does any recent history give you support for your expectation of finding any?


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[suzannegoh]

1 hour ago, Mapguy said:

Easy fishing!  You are quite correct about US law having to do with Medicare.  I don't know the reasoning behind that. It seems odd considering comparative costs of health care, say, here in Thailand and in the USA.   And there are also restrictions on NHS services in the UK plus similar ones in other countries that have expatriates finding ways to circumvent the restrictions in obviously questionable ways.  But that's apples and oranges. My question isn't about the hornet nests of tax policy in any country (including Thailand to which you also referred).  Such questions have to be addressed elsewhere, and hopefully equitably.  And this thread --- and my question ---  focus on that issue.

Actually I’m not sure what you were getting at.  It sounded like you were questioning why for retirees living abroad deserve to get that tax break, and making a distinction between legitimate tax avoidance and claiming that tax break. 

To me it would be interesting to know why retirees living in Thailand get that tax break but I’m more interested in knowing if the tax break would hold up in Tax Court.  If it does, then it's only of academic interest whether that tax break is in the tax treaty because the negotiators of the treaty wanted it to be or whether it was an accident.

Edited February 25, 2019 by suzannegoh

[JimGant]

6 hours ago, suzannegoh said:

If you’re fishing for a way to rationalize it on moral grounds, one reason for retirees outside the US to not be required to pay US taxes on retirement disbursements might be because if they are legitimately a  resident of a foreign country then they are unlikely to be able to take advantage of the US’s public services and infrastructure. Try to claim Medicare from Thailand, for instance, you can't do it.

Actually, the tax treaty with Thailand (except in Carden's interpretation) is quite fair: Thailand has exclusive taxation authority on US expats' private pensions, to include IRAs. Thus, (in theory) you pay your income taxes to Thailand, who uses that money to fix potholes in Korat, not EastJesus Iowa (fair use of your taxes, right?). However, due to the savings clause, you also have to declare your IRA proceeds in a US tax filing. But, you get a tax credit for every baht you paid to Thailand; thus, if those taxes were more than what the US requires, you pay zip to Uncle Sam -- the savings clause takes nothing away from the treaty's intent of avoid double taxation.

 

But, for some reason, Thailand doesn't want to tax expat pensions. Thus, when you file your US taxes, you have no Thai taxation to use as a credit. Thus, you're in the same boat as if you never left the States (and EastJesus gets its pot holes fixed). Unless, of course you hire a certain kinf of tax "professional."

 

Unfair, I hear some say. How? Tax treaties were never meant to provide an expat with paying no taxes -- their main intent was to prevent double taxation -- and which country gets first taxation rights. But the original model tax treaties allowed for this "double no taxation", at least for countries without savings clauses -- and this is why (I gave an earlier example with the US Treasury) OECD nations are rewriting model tax treaties -- to make sure expats are either paying their mother countries, or their new resident countries. No more free lunches, offered by countries trying to attract particular types of expats by ignoring their exclusivity clauses in tax treaties. The US, with its savings clause, already guards against this -- see my earlier example with Israel, where the savings clause snagged an expat who tried to use Israel's tax holiday to pay no taxes. Sorry, fella, the savings clause applies everywhere -- except in the minds of imaginative EAs.

 

The Thai-US tax treaty has never come up for formal, final tax scrutiny by the IRS for its implications regarding first tax rights on IRAs. But the US-Swiss tax treaty has -- and, yep, the US expat has to adhere to the savings clause. And, for some reason, certain folks have said that, since each treaty is unique (model tax treaty language be damned), you can't use the Swiss example as a parallel to the Thai-US treaty.

 

So, folks, do me (and others) a favor, and hold up to the light both treaties, particularly the TE examples. Tell me what differences you see that could possibly put Thailand in the unique position to trump the savings clause. Was "happy" used instead of "glad?" Anyway, I would appreciate some feedback as to what maybe I missed in the Swiss example. Obviously, Carden isn't stupid, so maybe he did stumble on something to get his teeth into...... (but why only him -- you'd think other tax preparers would also be using this gimmick, er loophole, er whatever....)

[jeffandgop]

14 hours ago, JimGant said:

Actually, the tax treaty with Thailand (except in Carden's interpretation) is quite fair: Thailand has exclusive taxation authority on US expats' private pensions, to include IRAs. Thus, (in theory) you pay your income taxes to Thailand, who uses that money to fix potholes in Korat, not EastJesus Iowa (fair use of your taxes, right?). However, due to the savings clause, you also have to declare your IRA proceeds in a US tax filing. But, you get a tax credit for every baht you paid to Thailand; thus, if those taxes were more than what the US requires, you pay zip to Uncle Sam -- the savings clause takes nothing away from the treaty's intent of avoid double taxation.

  

But, for some reason, Thailand doesn't want to tax expat pensions. Thus, when you file your US taxes, you have no Thai taxation to use as a credit. Thus, you're in the same boat as if you never left the States (and EastJesus gets its pot holes fixed). Unless, of course you hire a certain kinf of tax "professional."

 

Unfair, I hear some say. How? Tax treaties were never meant to provide an expat with paying no taxes -- their main intent was to prevent double taxation -- and which country gets first taxation rights. But the original model tax treaties allowed for this "double no taxation", at least for countries without savings clauses -- and this is why (I gave an earlier example with the US Treasury) OECD nations are rewriting model tax treaties -- to make sure expats are either paying their mother countries, or their new resident countries. No more free lunches, offered by countries trying to attract particular types of expats by ignoring their exclusivity clauses in tax treaties. The US, with its savings clause, already guards against this -- see my earlier example with Israel, where the savings clause snagged an expat who tried to use Israel's tax holiday to pay no taxes. Sorry, fella, the savings clause applies everywhere -- except in the minds of imaginative EAs.

 

The Thai-US tax treaty has never come up for formal, final tax scrutiny by the IRS for its implications regarding first tax rights on IRAs. But the US-Swiss tax treaty has -- and, yep, the US expat has to adhere to the savings clause. And, for some reason, certain folks have said that, since each treaty is unique (model tax treaty language be damned), you can't use the Swiss example as a parallel to the Thai-US treaty.

 

So, folks, do me (and others) a favor, and hold up to the light both treaties, particularly the TE examples. Tell me what differences you see that could possibly put Thailand in the unique position to trump the savings clause. Was "happy" used instead of "glad?" Anyway, I would appreciate some feedback as to what maybe I missed in the Swiss example. Obviously, Carden isn't stupid, so maybe he did stumble on something to get his teeth into...... (but why only him -- you'd think other tax preparers would also be using this gimmick, er loophole, er whatever....)

You're almost there Jim...I believe you are correct when you write "Thailand has exclusive taxation authority on US expats' private pensions, to include IRAs".  And that's where it begins and ends.

I agree that tax treaties do have as one of their purpose- to avoid double taxation ("main intent" you state). But that is not the sole and only purpose.  It includes exclusivity of Contracting States to collect certain taxes- in the Thai-US Treaty, private pensions (included to mean retirement funds such as IRA's and 401K's) exclusivity is given to Thailand where US citizens are residents...and the savings clause does not first require payment of any tax to Thailand in order to obtain a tax credit for any tax payments to the U.S. It begins and ends with the exclusivity of Thailand to tax and collect pensions- whether Thailand does, or does not, it is not a pre-condition in order to claim exemption from payment of US tax under the treaty. The treaty defines the right to tax pensions to be Thailand's only.