Thai American Tax Treaty for Teachers

[Jadam]

I'm wondering if anyone else has taken advantage of the treaty allowing for some people to work in Thailand tax free for two years.  http://library.siam-legal.com/thai-law/u-s-thai-tax-treaty-teachers-and-other-income-articles-23-24/

 

Several teachers at my school have taken advantage of the treaty and worked tax-free for their first two years and then paid income tax as normal after that.  The Thai revenue office in my province has now sent them letters saying that they owe back taxes for their first two years and in some cases interest.  Apparently they have interpreted the treaty differently than we did.

 

So the question is about interpretation of the following:

Quote

An individual who visits a Contracting State for a period not exceeding two years for the purposes of teaching ...shall be exempted from tax....for a period not exceeding two years from the date he first visits that State for such purpose.

Does this mean that you are only exempt from paying income tax if you are employed for less than two years (their interpretation) or that you are exempt from paying tax for the first two years of your employment (our interpretation)?

 

Full treaty attached.

 

tax treaty thailand america_e.pdf

[ubonjoe]

Not visa related. Moved to here.

[blackcab]

I read it differently to you. I read it as two years from the date you enter the country on a non B visa or two years from the date your tourist visa was changed to a non B visa.

 

Your date of entry will obviously be before you officially start work, because at this point you would still need to apply for a work permit.

 

Out of 2 year exemption period you might get 22 or 23 months worth of tax free employment, as the days between entering the country and the start date on your work permit will be days that are "lost".

 

The 2 year countdown clock is ticking, but you can't work until you have a work permit.

 

That's how I see it, anyway.

[Monomial]

That is a matter of interpretation, but reading the context around the clause would seem to indicate the intent was to exempt temporary visiting professors and the like. If you are contracted for longer than 2 years you are not a visiting teacher, but have apparently moved to the new country for permanent employment.

 

I would actually be inclined to agree with the interpretation of the Thai Revenue Department here. If your contract exceeds 2 years, you are not exempt for any of it.

 

But my opinion isn't the one that matters.

 

As I see it, the reasoning behind the clause "for a period not exceeding two years from the date he first visits that State for such purpose" would be to clarify the time frame in the case where a visiting professor flies home for a brief period. In that case, the 2 year period does not reset, but is counted from the time he first started to work. It seems to be clearly written to indicate that only teachers visiting temporarily are exempt.

 

 

Edited November 18, 2017 by Monomial

[fletchsmile]

I've known teachers that have worked in Thailand for short periods and claimed back their tax. Though haven't really gone into the details. One happened to be originally from UK with now Aussie citizenship. So I guess there is possibly other legislation out there which might be worth exploring, but that's an aside. That was also teaching in international schools on a decent salary.

 

Based on what you've posted only, though, I'd say the Thai Revenue department interpretation is a reasonable one.

 

The first sentence says it applies to people visiting for a period not exceeding two years. A logical assumption from there is that if you exceed two years then it doesn't apply to you. 

 

The second sentence says you can be tax exempt for a period of up to 2 years, so 2 years is the maximum exemption you can get. One reason this is probably included is that the visit year(s) may not correspond exactly to the tax years. Plus simply stating that you can't claim longer than 2 years come what may.

 

Based only on what you've written, your interpretation isn't really supported.

 

What you are saying is that if you visit for more than 2 years, then you can claim an exemption for the first two years. For you to be allowed to do that, I'd expect there to be more paragraphs specifically addressing that situation. If there aren't then you'd be lucky to get away with your interpretation.

 

Now if you changed the purpose of your visit, or left and came back to do something else, I think you'd have a reasonable claim. But carrying on teaching, pretty hard to claim.

 

So in the absence of anything else, it's reasonably clear it applies to people who visit for less than two years. Presumably to "encourage short time in Thailand" LOL