Seeking advice regarding 183-day rule / double taxation agreement

[arigold42]

Hi there,

 

I've done a lot of research here and elsewhere, but that still left me with some unanswered questions. I hope you guys can help me with that. 

 

Regarding my individual situation:

I'm a German citizen and have been traveling for two years now, mostly in SE Asia. I have no residency in my home country anymore and travel back for merely six weeks per year. However, I still run a business in Germany as a sole proprietorship, which is my single source of income. I'm working as a freelance Software Developer and file a tax return in Germany each year to pay income tax. All of my clients so far have been from Germany and payments go to a German bank account. I get my cash via credit card / foreign ATMs. I have a steady stream of work, so I'm regularly working from my hotel / AirBnb room.

 

So far, I've been traveling on tourist visas only and never stayed in a country for more than 6 months per year, while always keeping a low profile about my work situation. This year though I would like to stay in Thailand for more than 183 days, but not necessarily at one place only - i.e. I won't really have a permanent address here.  

 

Since the double taxation agreement between Thailand and Germany goes all the way back to 1967, I find it difficult to apply it to the typical online freelancer scenario. One article (7) says, you're only liable to tax in the country of your corporate site / permanent establishment (in my case Germany), another article (14) says you're liable to tax where you execute the work (unclear if they mean the physical presence). 

 

This confuses the hell outta me...

- do I still owe tax money to Thailand (full or partly) if I stay for more than 183 days or won't this be necessary because I already pay all my taxes in Germany?

- if the latter is the case, do I still have to file a tax return in Thailand (because they see me as a tax resident) and prove that I already paid taxes in Germany? Will this raise more questions / issues because I work "under the radar" on tourist visas? 

 

Is my undertaking possible without too much hassle or is the general advice that I'm better off avoiding to stay here for more than 183 days?

 

 

Thank you and all the best!

  

 

 

 

 

 

 

[ubonjoe]

Moved to here. Not directly visa related.

[topt]

20 minutes ago, arigold42 said:

Is my undertaking possible without too much hassle

I would think so - but that is just my opinion

If you continue to stay "under the radar" here, pay due taxes in Germany and none of your work is directly to Thai based companies in Thailand no reason (at the moment) for the Thai tax man to be interested - or for you to get them interested by filing a return.

 

Supposedly if you don't bring in income earned in the current Thai tax year then you are even safer. IE money earned between Jan and Dec 2018 should not be remitted to Thailand before Jan 1 2019. In practice proving whether money comes from current year "income" or "savings" means that this is not that important - again at the moment.

(NB Thailand is not planning to sign up to implementing CRS { https://en.wikipedia.org/wiki/Common_Reporting_Standard } for a good few years)

 

I don't know your age so you may have some issues from the visa perspective but I would guess there are a lot doing what you do.

[topt]

Just to reinforce some of that have a look at this if you have not seen it especially the latter comments -

 

[arigold42]

4 hours ago, topt said:

I would think so - but that is just my opinion

If you continue to stay "under the radar" here, pay due taxes in Germany and none of your work is directly to Thai based companies in Thailand no reason (at the moment) for the Thai tax man to be interested - or for you to get them interested by filing a return.

 

Supposedly if you don't bring in income earned in the current Thai tax year then you are even safer. IE money earned between Jan and Dec 2018 should not be remitted to Thailand before Jan 1 2019. In practice proving whether money comes from current year "income" or "savings" means that this is not that important - again at the moment.

(NB Thailand is not planning to sign up to implementing CRS { https://en.wikipedia.org/wiki/Common_Reporting_Standard } for a good few years)

 

I don't know your age so you may have some issues from the visa perspective but I would guess there are a lot doing what you do.

 

Thanks for your helpful answer!  

 

I'm 33 years old. So far I've been entering the kingdom on visa exempt stamps and single entry tourist visas (60 days). 

 

I think it will be hard to prove (both ways) whether the money I spend here is derived from the current year's income or past savings, since I use one single bank account for private and corporate purposes and everything gets mixed up quite heavily. But my savings are definitely sufficient enough to argue that way. 

 

What kind of questions could I possibly be asked by an immigration officer when entering the country again after already being here for 6 months? I don't necessarily plan to stay here for 11 months in total, more like in the 9 months area. 

 

All the best!

 

 

[DUS]

Well, even if you were liable to pay tax in Thailand, I fail to see how you could pay it without telling the Thai authorities that you’re working illegally in this country (by filing a tax return showing your income)? I mean, working illegally “under the radar” whilst being here on TR Visas, isn’t that mutually exclusive? 

 

 

[arigold42]

1 hour ago, DUS said:

Well, even if you were liable to pay tax in Thailand, I fail to see how you could pay it without telling the Thai authorities that you’re working illegally in this country (by filing a tax return showing your income)? I mean, working illegally “under the radar” whilst being here on TR Visas, isn’t that mutually exclusive? 

 

 

 

Yeah, that's what I worrying about when I asked "Will this (filing a tax return) raise more questions / issues because I work "under the radar" on tourist visas?"

 

In the case I don't owe Thailand any taxes because I already pay them in Germany, then I assume I could just continue doing this (without filing a tax return here). But I don't know how deep they will proactively evaluate my case, should I stay for more than 183 days.

[DUS]

I assume that as with all other similar threads concerning tax liabilities you will receive lots of contradicting opinions and advice. The best advice you will get is: speak to a tax consultant in Germany. He/She is most likely to provide you with the correct answers. And I agree!

 

As a personal opinion, I´d say that if you have a registered business in Germany and invoice your client through this company then ("surely") tax need to be paid in Germany. I wouldn´t worry about the Thai taxman since if you are here on TR visas and work from your condo/hotel etc. then they have no idea that you are generating income somewhere else in the world. If I were you I´d be more concerned about my visa status than my potential tax liability in TH.

 

Just my 2 € cents....

Edited February 8, 2018 by DUS

[arigold42]

1 hour ago, DUS said:

I assume that as with all other similar threads concerning tax liabilities you will receive lots of contradicting opinions and advice. The best advice you will get is: speak to a tax consultant in Germany. He/She is most likely to provide you with the correct answers. And I agree!

 

As a personal opinion, I´d say that if you have a registered business in Germany and invoice your client through this company then ("surely") tax need to be paid in Germany. I wouldn´t worry about the Thai taxman since if you are here on TR visas and work from your condo/hotel etc. then they have no idea that you are generating income somewhere else in the world. If I were you I´d be more concerned about my visa status than my potential tax liability in TH.

 

Just my 2 € cents....

Thanks for the info! I will definitely contact a German tax consultant for additional advice. 

 

Could you please elaborate the visa status concern further?   

[DUS]

Just now, arigold42 said:

Could you please elaborate the visa status concern further?   

 

Sorry, "concern" might have be a misleading and too strong a term. I was just referring to the fact that staying for an extended period of time on TR visas *MIGHT* become an issue over time with an increased number of reports that people get questioned when re-entering etc etc. But I don´t expect you to run into any real issues for the foreseeable future. If you visit Germany before you plan your extended time here on the ground, trying to obtain the METV would probably be the best way forward.

 

If you get to speak to a tax advisor in Germany, it would be great if you updated this thread with the advice you got from him/her. Ta!

[arigold42]

9 minutes ago, DUS said:

 

Sorry, "concern" might have be a misleading and too strong a term. I was just referring to the fact that staying for an extended period of time on TR visas *MIGHT* become an issue over time with an increased number of reports that people get questioned when re-entering etc etc. But I don´t expect you to run into any real issues for the foreseeable future. If you visit Germany before you plan your extended time here on the ground, trying to obtain the METV would probably be the best way forward.

 

If you get to speak to a tax advisor in Germany, it would be great if you updated this thread with the advice you got from him/her. Ta!

Got it and I totally agree with your point. My intention isn't to do 1 or 2 day border runs, I will definitely travel to other countries for extended amounts of time (and probably head back to Germany two times this year) so my profile as a long-term traveller looks more credible and less suspicious.

 

And for sure I will update this thread as soon as I got the info from a tax advisor in Germany. 

 

All the best!

[JimGant]

Just a quick glance at the Thai Germany tax treaty, as with most of the OECD model tax treaties, has your tax home, for your German related income, as Germany. Even if there was some question about your German business having activity in Thailand, which apparently there is not, if your habitual abodes are both in Thailand and Germany (without regard to number of days in each), then the tie breaker is your nationality:

Quote

If he has an habitual abode in both Contracting States or in neither of them, he shall be deemed to be a resident of the Contracting State of which he is a national;

Also, as has been pointed out, the fungibility of money has you covered as to whether or not your current year's earning's are brought into Thailand in current year.

 

Plus, Thai immigration doesn't share info with Thai tax authorities as to number of days folks they have in their data base are in Thailand. Thus, another reason you would have no knock on the door -- and even if you did, you're on the up and up as far as taxes go (you paid German taxes, and weren't trying to play the no vs double tax game).

 

The last point (which you're not a part of, as said) has been a point of focus lately with OECD, namely, trying to eliminate tax havens that use double taxation treaties to attract residents, by using the treaty that gives them first taxation authority -- and then waiving that authority. Thailand could be construed as one of those countries -- by, for example, having first priority in taxation of private pensions and retirement savings accounts -- but then sidestepping such authority by the "no taxation if not brought in in year received." Some tax professionals for US tax payers have recently been using this 'out' by having the tax treaty override the savings clause, by which all income is subject to US taxes, but by treaty can be credited to avoid double taxation. Thus, they've told their clients that, due to treaty clauses, don't declare your private pensions. And, then, because not brought into Thailand in year received, no Thai taxes. Result: Not just no double taxation -- but no taxation, period. This is what the OECD has been looking at, in rewrites of treaties, to eliminate.

 

Anyway, not related to the OP's situation -- but his perfectly legal and ethical situation is an excellent contrast.

 

 

[jackdd]

If you don't need the money that you earn right now and prefer to keep it as investing capital for the future it's quite cheap to do this by founding a company in Estonia (This is 100% legal, search for it on Google, there are quite a few articles about it). If you then later need the money there are multiple ways to get it, some completely legal ways, others more in the gray zone. If you want to know more about this you can PM me your Line ID.