Tax Specialist in Chiang Mai

[OneZero]

Quote JimGant: "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."

"Tax treaties were never meant to provide an expat with paying no taxes -- their main intent was to prevent double taxation"  "-- 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 -- "

 

Quote jeffandgop:  "The treaty defines the right to tax pensions to be Thailand's only."

 

My comment:  I cannot agree with jeffandgop's personal interpretation of the savings clause.

I don't believe the USG  would be so stupid as to allow a 180 day+ retiree to claim the right to tax an IRA to be Thailand's only. 

[JimGant]

Sigh. You forget the savings clause. From the technical explanation:

Quote

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.

I could try and explain it to you -- again -- but I'll let you dig through the Technical Explanation to discover what are, and what are not, exceptions to the savings clause. Private pension are NOT -- not in Thailand, not with any country.

https://www.irs.gov/pub/irs-trty/thaitech.pdf

[gamb00ler]

1 hour ago, JimGant said:

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.

I agree with Jim.  Perhaps we should re-phrase the text from the TE statement quoted above.

That quote means:

A U.S. citizen living in Thailand may be subject to U.S. tax on the payment even if the rules in those three paragraphs give Thailand the exclusive taxing right.

[gamb00ler]

My Line conversation with AITAX:

 

AITAX: Good morning Gamb00ler. Do you have any specific questions regarding American taxation? Thomas Carden is currently holding meetings in Chiang Mai.

 

Me: I was just wondering how Mr  Carden was interpreting the Thai - USA tax treaty such that IRA and 401(k) disbursements to US citizens residing in Thailand were not subject to US taxation due to the “savings” clause in said treaty?

I will be retiring in Thailand later this year and do hold IRA’s.

 

AITAX:  I'm happy to arrange for Thomas to give you a call directly to discuss your IRAs and tax position, and the treaty language he uses on the tax treaty disclosure. Perhaps we can arrange a Skype or LINE call this week if you'd like.

 

Me: That should be fine

==============================

The Line call with Mr. Carden is set for 7PM PST on Wed.

[jeffandgop]

21 hours ago, JimGant said:

Sigh. You forget the savings clause. From the technical explanation:

I could try and explain it to you -- again -- but I'll let you dig through the Technical Explanation to discover what are, and what are not, exceptions to the savings clause. Private pension are NOT -- not in Thailand, not with any country.

https://www.irs.gov/pub/irs-trty/thaitech.pdf

It's you that needs to stop selecting pieces of the treaty and Treasury explanation that fit your contentions.  Treasury explanation for Article 20 para 1 states "For example, a pension paid to a surviving spouse who is a resident of Thailand would be exempt from tax by the United States on the same basis as if the right to the pension had been earned directly by the surviving spouse."  The savings clause does not supersede this exclusivity as both have to be read collectively to to appreciate where and when one clause supersedes another. There would be no cause to cite the exclusivity for Thailand to tax pensions in the Treaty if the intent of the savings clause was to globally render null and void it and all other articles in the Treaty defining when and where a Contracting State reserves the exclusive right to tax on a particular matter.

[jeffandgop]

21 hours ago, OneZero said:

Quote JimGant: "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."

"Tax treaties were never meant to provide an expat with paying no taxes -- their main intent was to prevent double taxation"  "-- 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 -- "

 

Quote jeffandgop:  "The treaty defines the right to tax pensions to be Thailand's only."

 

My comment:  I cannot agree with jeffandgop's personal interpretation of the savings clause.

I don't believe the USG  would be so stupid as to allow a 180 day+ retiree to claim the right to tax an IRA to be Thailand's only. 

My "personal interpretation"? OK.  As is yours and Jim's. But the difference in my "personal interpretation" is that it does not exist in a vacuum without the evidence that the IRS has accepted tax payer income tax returns exempting payment of taxes on private pensions to the US on the basis of the treaty giving Thailand the exclusive right to do so (as long as the the tax payer meets the residency requirements).  People can go on and on as to their opinion on what the treaty's intents are or are not, what one can do or not; but in the end, factual evidence or results on how it is actually being applied by the IRS remains the proof of what is or is not allowable.

[jeffandgop]

21 hours ago, OneZero said:

Quote JimGant: "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."

"Tax treaties were never meant to provide an expat with paying no taxes -- their main intent was to prevent double taxation"  "-- 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 -- "

 

Quote jeffandgop:  "The treaty defines the right to tax pensions to be Thailand's only."

 

My comment:  I cannot agree with jeffandgop's personal interpretation of the savings clause.

I don't believe the USG  would be so stupid as to allow a 180 day+ retiree to claim the right to tax an IRA to be Thailand's only. 

BTW. It's NOT the savings clause that I am "interpreting". And I never said in filing a tax return that you are not required to declare (pension) proceeds. You are.

[Bill97]

My "personal interpretation"? OK.  .... People can go on and on as to their opinion on what the treaty's intents are or are not, what one can do or not; but in the end, factual evidence or results on how it is actually being applied by the IRS remains the proof of what is or is not allowable.

So you think the IRS will not tax pension distributions to people who come and live in Thailand for 6 months or a year? So a very easy way to avoid taxes?


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[gamb00ler]

I believe that we are better served by referring to the ACTUAL text of the Thai-USA tax treaty.  Sometimes the language of treaties can be hard to decipher but in this case it’s fairly easy.

 

The use of “notwithstanding” can make this treaty difficult to understand.  So here is the definition from Webster:

 

without being prevented by (something) : despite — used to say that something happens or is true even though there is something that might prevent it from happening or being true

 

 

Since we are only considering the case of a US citizen (or long-term resident) that now lives in Thailand we can use country names instead of “Contracting State”, etc.  I will also use Treaty instead of Convention.

 

 

 

Article 1, Paragraph 2  of the Thai-USA Tax Treaty

 

2. Notwithstanding any provision of the Convention except paragraph 3 of this Article, a Contracting State may tax its residents (as determined under Article 4 (Residence)), and by reason of citizenship may tax its citizens, as if the Convention had not come into effect.

 

 

That sentence “translated” using the simplifications and clarifications given above, becomes:

 

Despite an other provisions of this Treaty the USA may tax its citizens or long-term residents as if this Treaty had not come into effect.  The exceptions to this rule are given in paragraph 3.

=========================

I think this gives JimGant's interpretation the nod.

 

[JimGant]

Quote

jeffandgop said:

but in the end, factual evidence or results on how it is actually being applied by the IRS remains the proof of what is or is not allowable.

There has apparently never been a precise look, by an IRS expert, on how the Thai-US tax treaty addresses the taxation of IRAs. But, there has been for the Swiss-US tax treaty. I don't know the circumstances of that request, but the question was asked by the "tax attache" assigned to Paris, and answered by the "senior technical reviewer" in the Office of Chief Counsel, Internal Revenue Service. Certainly a major step above a cursory audit, if any, of a tax filing by Mr Carden.

 

Yes, there are no two tax treaties exactly alike. But they all follow the OECD and/or UN Model Tax Treaty example. And for all US tax treaties (except with Pakistan), there is a saving clause, most with the same exceptions (e.g., child support and alimony) -- but none with an exception for pensions.

 

So, jeff, as we now seem to be going in circles, could you scrutinize the Swiss-US tax treaty in comparison with the Thai-US treaty, read the senior technical reviewer's findings, and comment on why a senior auditor at the IRS would not conclude that the same findings apply to Thailand. Thank you.

 

Quote

Because Taxpayer is a U.S. citizen, the saving clause permits the United States to tax his IRA distributions. Furthermore, Article 1(3) does not contain any exception from the saving clause for private pensions within the jurisdiction Article 18. Thus, the United States can tax Taxpayer’s IRA distributions under the Code as if the Treaty had not come into effect.

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

Of course, Mr Carden, as a tax professional, has already asked for a comprehensive review from the Office of Chief Counsel, IRS -- just to confirm that he's on solid, ethical grounds with his Form 8833 conclusions. ????

[suzannegoh]

1 hour ago, gamb00ler said:

That sentence “translated” using the simplifications and clarifications given above, becomes:

 

Despite an other provisions of this Treaty the USA may tax its citizens or long-term residents as if this Treaty had not come into effect.  The exceptions to this rule are given in paragraph 3.

=========================

I think this gives JimGant's interpretation the nod.

 

What's confusing me about that is that in paragraph 3 it specifically mentions pensions.  Doesn't that mean than pensions (and IRAs) are NOT taxable by the US as if there was not treaty in effect?  This is what paragraph 3 says:

"3. The provisions of paragraph 2 shall not affect:

a) the benefits conferred by a Contracting State under paragraph 2 of Article 9

(Associated Enterprises), under paragraphs 2 and 5 of Article 20 (Pensions and Social Security

Payments) and under Articles 25 (Relief from Double Taxation), 26 (Non-Discrimination), and

27 (Mutual Agreement Procedure); and.... "

[gamb00ler]

27 minutes ago, suzannegoh said:

What's confusing me about that is that in paragraph 3 it specifically mentions pensions.  Doesn't that mean than pensions (and IRAs) are NOT taxable by the US as if there was not treaty in effect?  This is what paragraph 3 says:

"3. The provisions of paragraph 2 shall not affect:

 

a) the benefits conferred by a Contracting State under paragraph 2 of Article 9

 

(Associated Enterprises), under paragraphs 2 and 5 of Article 20 (Pensions and Social Security

 

Payments) and under Articles 25 (Relief from Double Taxation), 26 (Non-Discrimination), and

 

27 (Mutual Agreement Procedure); and.... "

You're correct in that paragraph 3 specifically mentions pensions.  However it also restricts the exceptions to those cases dealt with in paragraphs 2 and 5 of Article 20.  Paragraph 2 refers to Social Security payments and paragraph 5 refers to child support payments.  There is no mention of private pensions in either of those paragraphs.

 

I really, really want to escape paying any tax on my IRA and 401(k) disbursements....but that is very, very unlikely to be a realizable goal.

[JimGant]

17 minutes ago, suzannegoh said:

What's confusing me about that is that in paragraph 3 it specifically mentions pensions.  Doesn't that mean than pensions (and IRAs) are NOT taxable by the US as if there was not treaty in effect?  This is what paragraph 3 says:

"3. The provisions of paragraph 2 shall not affect:

 

a) the benefits conferred by a Contracting State under paragraph 2 of Article 9

 

(Associated Enterprises), under paragraphs 2 and 5 of Article 20 (Pensions and Social Security

 

Payments) and under Articles 25 (Relief from Double Taxation), 26 (Non-Discrimination), and

 

27 (Mutual Agreement Procedure); and.... "

From the TE:

Quote

Paragraphs 2 and 5 of Article 20 (Pensions and Social Security Payments) deal with
social security benefits and child support payments, respectively. 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 exclusions from the saving clause, i.e., the US can't tax any social security payments received from Thailand; and child support payments. Private pensions, including IRAs are NOT excluded from the saving clause.

[JimGant]

10 minutes ago, gamb00ler said:

 

I really, really want to escape paying any tax on my IRA and 401(k) disbursements....but that is very, very unlikely to be a realizable goal.

Just hire Carden. What possibly could be the downside, since nobody appears to be home at the IRS?

[jeffandgop]

16 minutes ago, JimGant said:

There has apparently never been a precise look, by an IRS expert, on how the Thai-US tax treaty addresses the taxation of IRAs. But, there has been for the Swiss-US tax treaty. I don't know the circumstances of that request, but the question was asked by the "tax attache" assigned to Paris, and answered by the "senior technical reviewer" in the Office of Chief Counsel, Internal Revenue Service. Certainly a major step above a cursory audit, if any, of a tax filing by Mr Carden.

 

Yes, there are no two tax treaties exactly alike. But they all follow the OECD and/or UN Model Tax Treaty example. And for all US tax treaties (except with Pakistan), there is a saving clause, most with the same exceptions (e.g., child support and alimony) -- but none with an exception for pensions.

 

So, jeff, as we now seem to be going in circles, could you scrutinize the Swiss-US tax treaty in comparison with the Thai-US treaty, read the senior technical reviewer's findings, and comment on why a senior auditor at the IRS would not conclude that the same findings apply to Thailand. Thank you.

 

Of course, Mr Carden, as a tax professional, has already asked for a comprehensive review from the Office of Chief Counsel, IRS -- just to confirm that he's on solid, ethical grounds with his Form 8833 conclusions. ????

Jim- I want to first express my admiration and respect for all of your extensive comments and articulate arguments you have so diligently offered in this discussion. I took all of your writings and read and re-read the applicable documents you posted links to and commented on as well.  I am not in a position to conclude what a senior auditor at the IRS may or may not conclude based on other findings.  Only the senior auditor can; and until such time that he/she does conclude that the same (Swiss-US Treaty) findings apply to Thailand, I can only conclude that the IRS, by their actions in currently providing refunds to people for these taxes collected by the IRS is the IRS conclusion.

 

Regards....

[suzannegoh]

37 minutes ago, JimGant said:

Just hire Carden. What possibly could be the downside, since nobody appears to be home at the IRS?

I assume that’s sarcasm.  The downside is that if the IRS wakes up and retroactively disallows the exclusion that people who took the exclusion might get an unexpected bill for back taxes and if they had used exclusion the to shelter a lump sum distribution of $600K or more the tey might find that they’ve been pushed into the 37% tax bracket.

Do you happen to know what happened in the Swiss case.  Did the IRS sent people bills for back taxes?

[JimGant]

22 minutes ago, suzannegoh said:

I assume that’s sarcasm.  The downside is that if the IRS wakes up and retroactively disallows the exclusion that people who took the exclusion might get an unexpected bill for back taxes and if they had used exclusion the to shelter a lump sum distribution of $600K or more they they’ve been pushed into the 37% tax bracket.

Do you happen to know what happened in the Swiss case.  Did the IRS sent people bills for back taxes?

Yes, sarcasm, based on the position you know I take on this subject. But those who have -- or will -- avail themselves of the services of Mr Carden are, I believe, acting in good faith: He's a licensed professional; he talks a good talk; and he uses the obscure tax code and treaty convention languages to write a convincing Form 8833. Who knows -- he may actually believe he's on solid ground, albeit through literal misinterpretation. So, if after reading this thread, you still think Carden is legit, that would be quite understandable. Thus, why not -- in good faith -- take the plunge and save thousands of dollars in taxes. Worst case: you pay back-taxes with interest. For me, however, I still think he's a scam artist.

 

Don't know what the results of the Swiss ruling were. The requester was a "tax attache" based in Paris. Maybe he wanted confirming information before publishing a taxation pamphlet for expats..... Anyway, nothing available to suggest the ruling was used to reach back and tap tax offenders.

 

 

[JimGant]

45 minutes ago, jeffandgop said:

I can only conclude that the IRS, by their actions in currently providing refunds to people for these taxes collected by the IRS is the IRS conclusion.

Bad conclusion. Except in obvious egregious tax filings, refunds are issued before review (you think every tax refund being issued this year is being reviewed before the check is cut?). Maybe somewhere down the line, one of these tax returns will pass the eyeballs of someone who has heard of the savings clause...  Or, maybe one already has -- and the reviewer was dazzled by Carden's 8833 language. But maybe the next reviewer won't be -- and the issue will pushed upstairs.

[NancyL]

9 hours ago, gamb00ler said:

My Line conversation with AITAX:

 

AITAX: Good morning Gamb00ler. Do you have any specific questions regarding American taxation? Thomas Carden is currently holding meetings in Chiang Mai.

 

Me: I was just wondering how Mr  Carden was interpreting the Thai - USA tax treaty such that IRA and 401(k) disbursements to US citizens residing in Thailand were not subject to US taxation due to the “savings” clause in said treaty?

I will be retiring in Thailand later this year and do hold IRA’s.

 

AITAX:  I'm happy to arrange for Thomas to give you a call directly to discuss your IRAs and tax position, and the treaty language he uses on the tax treaty disclosure. Perhaps we can arrange a Skype or LINE call this week if you'd like.

 

Me: That should be fine

==============================

The Line call with Mr. Carden is set for 7PM PST on Wed.

Now if Mr. Gant would just do the same, rather than continue to argue his points on the internet.

[OneZero]

I would like to see JimGant continue to argue his points on the internet, if for no other reason than to see the counter argument reply.  JimGant's points appear to me to be well founded, so why should his experience not be continued?  How about Mr Cardon? I would also like to see him put in writing here, his possible rebuttal to JimGant. 

Come on Mr Cardon show us the error in JimGants arguments. 

 

If Cardon is correct we should spread the word to all our friends in the US that if they anticipate an IRA withdrawal they should spend at least 6 months a year in Thailand, and they will not have to pay any US tax on it.  

[gamb00ler]

1 hour ago, JimGant said:

Just hire Carden. What possibly could be the downside, since nobody appears to be home at the IRS?

I probably won't be making IRA/401(k) withdrawals for a year or two, so I have a while before deciding how to file.  I intend to wait and see if Mr. Carden's strategy manages to survive.  If it does, I can always file up to three years of amended tax returns as NancyL and husband have done.

 

Do you have any idea how I could follow up with the IRS to see if Carden's method has been determined to be legal?

[OneZero]

Good question ganb00ler: "Do you have any idea how I could follow up with the IRS to see if Carden's method has been determined to be legal?"

 

How do we get an official answer?  Who to contact at the appropriate level at the IRS?

[luther]

1 hour ago, OneZero said:

Good question ganb00ler: "Do you have any idea how I could follow up with the IRS to see if Carden's method has been determined to be legal?"

 

How do we get an official answer?  Who to contact at the appropriate level at the IRS?

Was going to wait until I was back in the US and the phone call was free and could be made during business hours.

 

From the IRS...

 

"I can provide you with the prompts for the Individuals Tax Assistance Line. Please dial 1-800-829-1040 to put you into queue to speak to a live representative. Fist select your language. Once you have selected your language please press prompt 2 in the first menu, 2 in the second menu, 4 in the third menu, and 1 in the fourth menu. Keep in mind the prompts are subject to change without notice."

[Mapguy]

Three things could be done:

 

Mr. Camden  could join the discussion here with substantive information and facts to support his interpretation.

 

Qualified tax specialists, especially CPAs with recognized notable academic credentials and active experience in tax work and highly knowledgeable in tax law could be consulted. More than the treaty is involved including ajudicated tax law (including various findings, whatever the formal term is for them)

 

Consult IRS experts directly

(if any are not totally exhausted, especially by examining Donald Trump’s tax returns)!

 

Or all three!

 

 

[Bill97]

Or, four, don’t give a damn.


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[Mapguy]

Well, Bill97, a number of people DO "give a damn" and have a personal interest in this matter!  Indeed, this discussion, with very few exceptions, is the most extended substantive discussion I think I have ever read on ThaiVisa Chiang Mai.  Kudos to those who have made valuable contributions. But where is Mr. Carden?  Why shouldn't he speak up, both about tax-sheltered pensions and pensions generally?  None of us is apparently an IRS senior tax reviewer, nor sitting on the bench in tax court.  And I hardly think that a telephone inquiry to an IRS representative of the first instance answering the phone is equipped to answer effectively.

[OneZero]

33 minutes ago, Mapguy said:

.......  And I hardly think that a telephone inquiry to an IRS representative of the first instance answering the phone is equipped to answer effectively.

Agree.  Your likely to get an answer that would NOT hold up to higher level scrutiny.

Also, this is not an instance where one should ask an intentionally biased question or present only a portion of all appropriate background / references.  

 

[Bill97]

Well, Bill97, a number of people DO "give a damn" and have a personal interest in this matter!  Indeed, this discussion, with very few exceptions, is the most extended substantive discussion I think I have ever read on ThaiVisa Chiang Mai.  Kudos to those who have made valuable contributions. But where is Mr. Carden?  Why shouldn't he speak up, both about tax-sheltered pensions and pensions generally?  None of us is apparently an IRS senior tax reviewer, nor sitting on the bench in tax court.  And I hardly think that a telephone inquiry to an IRS representative of the first instance answering the phone is equipped to answer effectively.

Okay you said there were three alternatives and have eliminated the third. The first is out, if he were going to join in he would have done it long ago. So that leaves the second one which means pAying for an opinion. Do any of those who give a damn care enough to buy an opinion ? Do you?


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[gamb00ler]

This horse may very well be dead, but I'm not going to give up just yet.

 

============

Article 1, Paragraph 2  of the Thai-USA Tax Treaty

2. Notwithstanding any provision of the Convention except paragraph 3 of this Article, a Contracting State may tax its residents (as determined under Article 4 (Residence)), and by reason of citizenship may tax its citizens, as if the Convention had not come into effect.

=============

Mr. Carden may have one rather wobbly leg to stand upon.  The above paragraph does use the word "may" instead of a more definite verb.

 

I believe the authors of this Treaty merely wished to establish the US's authority to impose taxation in the circumstances described in the Treaty.   It seems clear to me that they effectively accomplished that. 

 

It appears likely that the authors also intended that the precise details of that taxation be stated in the Internal Revenue Code.  In other words one should not make a final decision on tax strategy using only the Treaty.

 

For my own peace of mind I would prefer a tax strategy with a more solid foundation.  I also believe that everyone should pay the minimum tax that they are legally obliged to pay.  Sometimes the IRS regulations leave a gap in coverage through which a sharp citizen can evade taxation in contravention of the obvious intent.  That seems legal to me.

 

 

 

 

[JimGant]

6 hours ago, gamb00ler said:

Mr. Carden may have one rather wobbly leg to stand upon.  The above paragraph does use the word "may" instead of a more definite verb.

That's because is you used the word "will", it would read: "will tax its citizens, as if the convention had never come into effect." Then, there would be no place for exceptions to the savings clause, like child support. But, as we've seen, private pensions are NOT an exception to the savings clause, thus they become an affirmative part of the "may" be taxed (while child support are an excepted part). Clear as mud, no? ????