Taxation in Thailand of foreign work income

[khunPer]

A poster in a native language forum asked an interesting question that I could not suggest an answer to, so I kindly check with the experts here at ThaiVisa, if they can help.

 

It's about foreign work income taxation, when one stay in Thailand.

 

The poster originates from a Scandinavian country with a (very) high personal income taxation; however the local tax rules are, that if one lives abroad, but working in the country physically or remote – i.e. online or as digital nomad – then income tax should be paid in the country of residence, rather than the country of work and salary pay out. The home country's tax department would require a TIN (tax number) from the country where income taxation shall take place.

 

The poster considers to stay in Thailand major part of the year – more then 180 days – and would like to have his home country's personal income taxed in Thailand at the much lower income tax rates. The income originates from a Scandinavian firm only doing online-shopping business in Scandinavia – warehouse and distribution is locally there – so he is not doing any actual work related to Thailand. He considers for example a Elite Visa for his stay in the Kingdom.

 

I read in another thread about taxation of retirement pension, that Norway – presumably as an exception – allows retirement income to be taxed in Thailand, instead of Norway (would be wishful thinking for many of us).

 

Do any of you TV-posters have any experience or knowledge about staying in Thailand – not retired, or married to a Thai – obtaining a TIN, and pay Thai income tax of foreign work income..?

[TravelerEastWest]

Your situation sounds very simple - just pay tax in Thailand and show proof upon audit to your home country.

 

Example I work and pay tax in Thailand - I can get a credit on my home country tax - not as good as your situation but similar.

 

Note CPAs are not expensive here - you don't need a lawyer.

 

Edited August 7, 2018 by TravelerEastWest

[LivinLOS]

He does not need PR and as above, its very simple as stated.. Its the same as anyone getting rental income etc from abroad. 

First he gets the taxpayer number then he does his tax annual return. Also of note, his tax obligation here is legally, only money he brings into Thailand in the calendar year it is earned. If he maintains offshore savings, and brings it in the following year, it is entirely legally savings and does not incur income tax (rules made by rich Thais for Rich Thais). 

Lastly, his 'offshoreness' as relates to legally not needing a work permit is not (currently) as you see it, unless his income is 100% hands off and merely residual payments for past work / shareholder dividend. If he is working in an offshore enterprise, even without Thai clients or transactions by law he needs a work permit, enforcement is another matter entirely. There is a recent change to the work permit act which may create a relaxation of this but so far correct translations and actual interpretations by the labour department or employment office have not been fully presented. 

[NoBrainer]

Maybe he could pay a large chunk of his business profits to an offshore Co (registered in a non, or very low -taxable country), and pay himself the minimum amount needed to cover his costs in the high tax country.

The siphoned profits are invoiced as Dividends, consulting fees, advertising, marketing, web design & and a host of other legitimate expenses. I believe that is how most large corporations operate.

Edited August 7, 2018 by NoBrainer

[sikishrory]

This is kind of similar to my situation but not quite.

I am Australian and work offshore but live in Thailand where I am married to a Thai. My salary is not taxed.

I did the required final filing for tax in Australia which noted it would be my last. I also cut all ties and have no assets or accounts there. Meanwhile I have tried as best I can to build evidence of a life in Thailand as it is often requested if one returns to home country.

I have contacted numerous "professionals" and some say that if your not paying tax in oz then your expected to be paying it in your new country of residence. Others say that is not the case and you are definately a non- resident for tax and you don't need to do anything.

I had the idea that being married I am entitled to file tax returns jointly with my wife which could help my case in future. I contacted another "professional" in Bangkok who had previously worked for the Australian government and was in a similar position himself. He convinced me trying to file tax returns with my wife was unnecessary and could actually create another issue for myself by bringing it to the Thais attention.

I since have just left it all alone and done nothing.

One major point of note that your friend should consider is what livinLOS has said above. That only money he has earned in that calendar year is taxable. The other factor that is intertwined with that is that you are only eligible to pay tax if you have spent more than 6 months in Thailand in that year. Which is same as a few other countries. Also the tax rate is still going to be around 30% like other countries. All of this you can read on the governments website. It is in good English and quite clear to understand.

All of this considered. I don't have the solution and those circumstances are actually more complicated than mine. If he were married I would suggest trying to joint file with wife but he is not.

Edited August 7, 2018 by sikishrory

[khunPer]

12 hours ago, tomazbodner said:

I think he would need Permanent Residence in Thailand plus a list of things like no property in his country, etc to be given Tax non resident status in his country. He would need to show Thai tax number and proof of residence and income here as well as paying taxes here to be given that status and no longer need to pay tax there. I went through that not that long ago. But in his case of work not being for a Thai company that could be difficult. Maybe someone else has more experience on this?

Thanks for your reply. There's no problem with home country status, fully legal to be taxed abroad from work income, the questions is about tax and needed residency for Thailand.

[khunPer]

11 hours ago, NoBrainer said:

Maybe he could pay a large chunk of his business profits to an offshore Co (registered in a non, or very low -taxable country), and pay himself the minimum amount needed to cover his costs in the high tax country.

The siphoned profits are invoiced as Dividends, consulting fees, advertising, marketing, web design & and a host of other legitimate expenses. I believe that is how most large corporations operate.

Thanks for your reply and suggestion. However, it a work salary, that can legally be taxed abroad, so an offshore company is not an option; and furthermore any off-shore transaction will today immediately get all red waning lights flashing in Scandinavia...?

[khunPer]

8 hours ago, sikishrory said:

This is kind of similar to my situation but not quite.

I am Australian and work offshore but live in Thailand where I am married to a Thai. My salary is not taxed.

I did the required final filing for tax in Australia which noted it would be my last. I also cut all ties and have no assets or accounts there. Meanwhile I have tried as best I can to build evidence of a life in Thailand as it is often requested if one returns to home country.

I have contacted numerous "professionals" and some say that if your not paying tax in oz then your expected to be paying it in your new country of residence. Others say that is not the case and you are definately a non- resident for tax and you don't need to do anything.

I had the idea that being married I am entitled to file tax returns jointly with my wife which could help my case in future. I contacted another "professional" in Bangkok who had previously worked for the Australian government and was in a similar position himself. He convinced me trying to file tax returns with my wife was unnecessary and could actually create another issue for myself by bringing it to the Thais attention.

I since have just left it all alone and done nothing.

One major point of note that your friend should consider is what livinLOS has said above. That only money he has earned in that calendar year is taxable. The other factor that is intertwined with that is that you are only eligible to pay tax if you have spent more than 6 months in Thailand in that year. Which is same as a few other countries. Also the tax rate is still going to be around 30% like other countries. All of this you can read on the governments website. It is in good English and quite clear to understand.

All of this considered. I don't have the solution and those circumstances are actually more complicated than mine. If he were married I would suggest trying to joint file with wife but he is not.

Many thanks for you reply and explanation.

 

The salary comes from his home country, which require a TIN from country of residence/taxation, for not being income taxed at source. Thailand has, like most countries, a 180-day rule for tax-residency. And thanks for your comment "that you are only eligible to pay tax if you have spent more than 6 months in Thailand in that year". Yes, I'm aware of the foreign income brought in during the same year as earned, but in principle that might be the case here to avoid taxation at source.

 

"Also the tax rate is still going to be around 30% like other countries."

The tax-rate in Thailand is (easily calculated) from 5% of income over 150,000 baht and stepping up to 35% of income more than 4 million baht, so in average for a (relative very) high income around 25%. However in the Scandinavian home country the tax percentage is 56% for income over equivalent to 2.4 million baht – which is "only" 30% in Thailand – that explains the interest for income taxation in Thailand.

 

So seem like a 6 month – i.e. 180+ days – stay in LoS makes one eligible for a Thai tax number (TIN)...?

[khunPer]

12 hours ago, LivinLOS said:

He does not need PR and as above, its very simple as stated.. Its the same as anyone getting rental income etc from abroad. 

First he gets the taxpayer number then he does his tax annual return. Also of note, his tax obligation here is legally, only money he brings into Thailand in the calendar year it is earned. If he maintains offshore savings, and brings it in the following year, it is entirely legally savings and does not incur income tax (rules made by rich Thais for Rich Thais). 

Lastly, his 'offshoreness' as relates to legally not needing a work permit is not (currently) as you see it, unless his income is 100% hands off and merely residual payments for past work / shareholder dividend. If he is working in an offshore enterprise, even without Thai clients or transactions by law he needs a work permit, enforcement is another matter entirely. There is a recent change to the work permit act which may create a relaxation of this but so far correct translations and actual interpretations by the labour department or employment office have not been fully presented. 

Many thanks for your reply and explanation. Sounds simple to obtain a TIN.

 

I'm aware of the Work Permit reservations, and ongoing still fairly unspecified changes.

[natway09]

I am sure Thailand would like you to do this but your home country might make it difficult for you 

if anything like mine

[khunPer]

33 minutes ago, natway09 said:

I am sure Thailand would like you to do this but your home country might make it difficult for you 

if anything like mine

Thanks – and no, the Scandinavian home country actually offers that the work income can be taxed in country of residence – the question was what Thailand would require to income tax the salary...?

[user343434]

my last job in Indo I had a contract at a Thai company but not needed a work permit because  I worked for the Thai company in Indonesia.

Tax would be applied when the money had to be paid in a Thai account but it was paid in an indo account hence tax free.

 

[JimGant]

Quote

 Your situation sounds very simple - just pay tax in Thailand and show proof upon audit to your home country.

Example I work and pay tax in Thailand - I can get a credit on my home country tax - not as good as your situation but similar.

Yeah, most sections of DTAs provide for credits for taxes paid to one country against taxes paid to the second country -- thus, no double taxation. But, sections of DTAs delineate 'exclusivity' of taxation, e.g., country of residence has exclusive taxation rights, and therefore home country has no taxation rights on this particular type of income. Look at the Norwegian example, above. This is an example of "exclusive" taxation rights, thus even if you only pay one satang of taxation to Thailand, you nevertheless pay zip to Norway. This is presumably what the OP is looking for.

 

Contrast this to the credit system. In this case, say Thailand's taxes on subject income is 50000 baht, but taxation in home country is only 20000 baht equivalent. With the credit system, you still end up paying 50000 baht in taxes -- all to Thailand, but with no taxes to home country, due to the 20000 baht credit. (contrast this with Thai tax 20k, home country 50k -- your total tax is still 50k -- 20k to Thailand, 30k to home country).

 

However, if the tax situation in the "exclusive" situation had Thai taxes higher than those of the home country, then, yeah, best avoid Thai taxes altogether by using the "year after brought in" procedure.

 

Quote

Thanks – and no, the Scandinavian home country actually offers that the work income can be taxed in country of residence – the question was what Thailand would require to income tax the salary..

Good question. Have seen examples of folks begging and shouting at Thai tax officials to 'please tax me and take my tax money.' Nope. Apparently tax officials get confused if the money is not earned in Thailand....possibly a bribe to take your money would awaken them to how things work....thus, a new definition for irony.

 

 

Edited August 9, 2018 by JimGant