Declaring pension 'income' and creating a tax liability..

[LivinLOS]

As I have been saying this in another thread.. And have been saying this for years, while various retirees who dont understand DTAs argued against it, DTA agreements do not guarantee you never pay tax twice, in fact its not at all common to (temporarily) pay tax twice, DTAs enable you to claim back tax from countries you are not resident in, once you submit tax returns at the end of the tax period. 

The only reason retiree pensions have been untaxed in Thailand is weak enforcement. Do we really think enforcement will continue to remain weak ? Why would it ?? 

 

Everyone rushing to 'prove' to Thailand that they live both here and have an 'income' of greater than 65k a month.. Should have a long hard think about that.. If you 'live here' and you have a pension 'income' of 65k. That 'income' is taxable here. No argument. You can (if there is a DTA in place with your home country) claim back any, if there is any, taxes due at source, but that does not stop the local liability in your country of residence. 

http://www.rd.go.th/publish/37749.0.html#section42

 

Quote

 

Section 40 Assessable income is income of the following categories including any amount of tax paid by the payer of income or by any other person on behalf of a taxpayer.

(1) Income derived from employment, whether in the form of salary, wage, per diem, bonus, bounty, gratuity, pension, house rent allowance, monetary value of rent-free residence provided by an employer, payment of debt liability of an employee made by an employer, or any money, property or benefit derived from employment.⁴

 

 

Thailands tax code is written incredibly generously (to benefit wealthy Thai hiso types with offshore business interests) where all you have to do is not remit it the same calender year and its squeaky clean.. And yet so many pensioners are signing statutory declarations, swearing affidavits and doing EXACTLY that which would make them liable for Thai tax. 

 

Do you really believe, given the entrenched mindset, they will let let slide forever ?? 

[GeorgeCross]

thats put a new spin on things ???? 

[UKresonant]

Well written OP, I've just provided my financials to support a Visa application, to an Embassy,  three income sources, proportion of a 2018 capital sum effectively divided by 12 years, a pension that is definitely under the DTA, another which is likely to be under DTA (but may be challenged initially), but no transfers to Thailand from that account! Just in case I become Thai tax resident at the tail end of the Calendar year. Also included 2018 remitted cash still in Thailand.

I was almost going to start 40k THB equiv. transfers to Thailand, but your post reminded me why I'm not, need to ring fence this years income in an account, for transfers to Thailand next year. 

So I look on it that if you need 400k/800k in Thailand, you have to have an account overseas with that amount, populated the previous Calendar year, to send it from in the current year.

 

I would love to pay tax to Thailand, if I was employed there, or had investments there, but alas not the situation.... 

 

 

 

 

 

 

Edited February 6, 2019 by johnwf1963

[55Jay]

Commendable that you've peeled the onion a bit further. 

 

At this point, conflicted as to the advisability of highlighting soft spots in policy on social media, and further, speculating if the Thai Gov might take action. 

 

 

Edited February 6, 2019 by 55Jay

[ThomasThBKK]

Here's an example from Norway how everything would have to be taxed as a norwegian getting his pension monthly here: http://download.rd.go.th/fileadmin/download/nation/Norwegian_answer.pdf

 

It's hosted on the revenue department website, so i guess it's a guidline that should be followed ????

 

But imho this is quite unique for norway, normally your pension is already taxed in your home country and then they shouldn't be able to tax it again.

 

 

 

Edited February 6, 2019 by ThomasThBKK

[yang123]

UK Civil Service/Local Government pensions appear to be exempt from tax in Thailand.

 

Article 19 'Governmental Services' of the UK/Thailand Double Taxation Convention signed 18 February 1981 states in Section 2 (a):

"Any pension paid by the Contracting State or a political sub-division or a local authority thereof to any individual in respect of services of a governmental nature rendered to that State or sub-division or local authority thereof shall be taxable only in that state"

 

Section DT 18718 of  HM Revenue & Customs Internal Manual: Double Taxation Relief Manual DT 18650PP contains an identical provision.

 

Worth looking at this:  https://www.pwc.com/th/en/publications/assets/thai-tax-2017-18-booklet-en.pdf

 

 

[ThomasThBKK]

It prolly depends on the treathy each and every nation has signed with thailand - if your country signed one at all.

 

Here's an overview of the ones who have: http://www.rd.go.th/publish/766.0.html

 

 but the only easy to find answer is the norwegian one, so you have to read the whole contract of your home country and thailand.

 

Looking at the german one as an example: http://download.rd.go.th/fileadmin/download/nation/germany_e_221057.pdf

in Article 18 it states that normal german pensions shall be tax exempt and of course the other way around for thais getting their pension in germany from thailand.

Edited February 6, 2019 by ThomasThBKK

[UKresonant]

46 minutes ago, 55Jay said:

At this point, conflicted as to the advisability of highlighting soft spots in policy on social media, and further, speculating if the Thai Gov might take action. 

 

Agreed, it is a concern, unless that soft spot is already being scrutinized. however there would be an offsetting loss of VAT generation if it does raise it's head, as you would motivated to try and bring in less than the 500k-750k 15% tax band.

 

But reading the Norway answer (though not from there), it seems better than I though may be. It sways me to think ME Visa is the only way for me indefinitely,  and reading that I think I will always primarily be home country resident, no doubt "economically" 95% and "Personally" probably 50/50

[gentlemanjackdarby]

I'm an American, so I'm looking at this from an American perspective.

 

There is a copy of the tax treaty between the U.S. and Thailand available on the IRS website and it appears to be the same as the treaty with Indonesia, with which I'm more familiar.

 

The treaty between the U.S. and Thailand specifically exempts 'public pensions' from taxation in Thailand, specifically:

 

2. Notwithstanding the provisions of paragraph 1, social security benefits and other similar public pensions paid by a Contracting State to a resident of the other Contracting State or a citizen of the United States shall be taxable only in the first-mentioned State.

 

The 'first - mentioned state' being the 'Contracting State' that paid the pension, for my example, the U.S.

 

So that seems quite clear that U.S. Social Security retirement benefits would not be taxable by Thailand.

 

By using the words 'public pension', that would likely exclude from Thailand taxation as well pensions paid by public employee retirement systems at both the Federal and State level which, at the state level, would also include police & fire pension systems, state teacher retirement systems, special district systems, etc.

 

In the U.S., very few folks are still covered by employer 'pensions' - most employers offer what are generally referred to as '401 (k)' plans (although there are many other types), which are a form of deferred compensation plans into which employees contribute a portion of earnings and which, although not required, are matched by the employer; these amounts are permitted to grow tax-free until the employee 'retires', at which point distributions are made as taxable income and the piper (Uncle Sam) is paid.

 

As 'LivinLOS' pointed out in his OP, Thailand doesn't tax income so long as it isn't remitted in the year earned.

 

So it's an easy day at the office for any accountant or financial planner worth his salt to take advantage of THAT:

 

All that has to happen is, prior to coming to Thailand, a retiree segregates (and pays taxes in the U.S. on) one year of previous deferred compensation plan distributions or other earnings.

 

IF it ever gets to the point where Thailand is attempting to tax income that is not exempt by treaty, all the taxpayer need do is point out that the money to which he is swearing for retirement visa purposes was earned two (or many, in the case of a pension) years before, received last year, and is being remitted for the remainder of this year and part of next year, depending on the retirement extension date. 

 

Edited February 6, 2019 by gentlemanjackdarby
grammar

[gentlemanjackdarby]

1 hour ago, johnwf1963 said:

 

Agreed, it is a concern, unless that soft spot is already being scrutinized. however there would be an offsetting loss of VAT generation if it does raise it's head, as you would motivated to try and bring in less than the 500k-750k 15% tax band.

 

But reading the Norway answer (though not from there), it seems better than I though may be. It sways me to think ME Visa is the only way for me indefinitely,  and reading that I think I will always primarily be home country resident, no doubt "economically" 95% and "Personally" probably 50/50

Mentioning ME visas got me to thinking in relation to the Thailand Elite visa (I know it's hated, but bear with me).

 

If someone holds a TE, he must be a tourist (temporary visitor) because by definition a TE is a tourist visa - so if one is a tourist, he can't be a resident now can he?

 

It's very wise if one is concerned about becoming a tax resident to run the numbers on what one's tax liability might be if subject to another country's income tax

 

I was considering a retirement visa in Indonesia and once I ran the numbers, I gave up on that idea quick-smart.

 

Although the Indonesian tax rates, in and of themselves, are not scary, when applying them to a reasonable Western retirement income (not USD 500 - 1,000 'live like a king' per month), I have to say that I'm glad I pay taxes in the U.S. There wasn't enough 'foreign tax credit' in Uncle Sam's playbook to offset what I would have paid there.

 

It's likely I'll take the same route and just be a temporary visitor to the Kingdom when I retire.

[ubonjoe]

Not directly visa related. Moved to here.

[Emdog]

"Income derived from employment, whether in the form of salary, wage, per diem, bonus, bounty, gratuity, pension  ..."

Seems key bit is "employment"... they should have said "in Thailand" but didn't. I'm retired, no employment, no work permit. They tried to cover every way a person could be paid for employment at some sort of job. Surprised they didn't include "sexual favors" as form of remuneration for services rendered....

 

[Shiver]

Where Section 40 says "Pension" isn't that a pension derived in Thailand rather than source country?

[LivinLOS]

8 hours ago, ThomasThBKK said:

But imho this is quite unique for norway, normally your pension is already taxed in your home country and then they shouldn't be able to tax it again.

 

 

This is the arguement many seem to make.. I can speak about every country in the world, or every pension system, but most pension systems are a form of deffered taxation, you get a tax break or put by a portion of your income today, untaxed, to draw down on it in old age, when you are under the tax brackets. 

Certainly where I come from, pensions are taxable.. You put is aside, without paying tax on it, to then claim it later and have the liability later.. Howver later you generally dont have other income and so it reduces, not eliminates the tax burden. 

[LivinLOS]

8 hours ago, ThomasThBKK said:

Here's an example from Norway how everything would have to be taxed as a norwegian getting his pension monthly here: http://download.rd.go.th/fileadmin/download/nation/Norwegian_answer.pdf

 

It's hosted on the revenue department website, so i guess it's a guidline that should be followed ????

 

But imho this is quite unique for norway, normally your pension is already taxed in your home country and then they shouldn't be able to tax it again.

This is precisely how it would work for any european.. My primary business is cross border labour supply and engagement / employment.. I am constantly sorting out the exact nature of tax residency based on a host of factors, in fact often changing the factors to suit the tax system rather than changing the tax residency per the rules. 

This ruling says exactly what I am warning against.. If you are resident here, you are then tax resident here, if you have an income (and pensions are an income) and remit that income to Thailand in the year you receive it, an EU citizen is then liable to pay Thai taxes. 

Until now thats never been an issue.. But start connecting the dots. 

[LivinLOS]

6 hours ago, gentlemanjackdarby said:

In the U.S., very few folks are still covered by employer 'pensions' - most employers offer what are generally referred to as '401 (k)' plans (although there are many other types), which are a form of deferred compensation plans into which employees contribute a portion of earnings and which, although not required, are matched by the employer; these amounts are permitted to grow tax-free until the employee 'retires', at which point distributions are made as taxable income and the piper (Uncle Sam) is paid.

 

As 'LivinLOS' pointed out in his OP, Thailand doesn't tax income so long as it isn't remitted in the year earned.

 

So it's an easy day at the office for any accountant or financial planner worth his salt to take advantage of THAT:

 

All that has to happen is, prior to coming to Thailand, a retiree segregates (and pays taxes in the U.S. on) one year of previous deferred compensation plan distributions or other earnings.

Thats on the proviso that he has enough money to set aside the income from a prior year and bring it here.. in which case he could make use of the 800k route and clearly Thais would see that as the 'savings' route. 

Its the guys who bring in 65k a month, drip fed, who might struggle to prove this. 

[LivinLOS]

6 hours ago, gentlemanjackdarby said:

Mentioning ME visas got me to thinking in relation to the Thailand Elite visa (I know it's hated, but bear with me).

 

If someone holds a TE, he must be a tourist (temporary visitor) because by definition a TE is a tourist visa - so if one is a tourist, he can't be a resident now can he?

 

While one may say tourist and one may say non imm.. Fact is its the days incountry that make the determining factor, not the stamp on the visa class you may hold. 

Of course, the mechanisms to catch people, may well evolve through enforcement of visa extensions and controls. But thats a different topic. 

[LivinLOS]

8 hours ago, ThomasThBKK said:

Looking at the german one as an example: http://download.rd.go.th/fileadmin/download/nation/germany_e_221057.pdf

in Article 18 it states that normal german pensions shall be tax exempt and of course the other way around for thais getting their pension in germany from thailand.

Thats odd to me.. As a Brit, if I have a high private pension, and I go to mainland europe, I must then declare and pay tax on my private pension. 

 

[Farang99]

Pension income  is already taxed in the sense that, if it is paid into a savings account the minimal interest has tax deducted at 15%

[LivinLOS]

12 minutes ago, Farang99 said:

Pension income  is already taxed in the sense that, if it is paid into a savings account the minimal interest has tax deducted at 15%

Thats taxing the interest earned not the deposit.

[mngmn]

I have been paying tax in several countries that have DTA agreements with Australia for quite a few years now.

 

Need to be very careful about understanding of how DTAs work. Tax paid in countries that Australia had DTAs with can be used to 'offset' any Australian tax due but will not be 'refunded' by the Australian tax authorities.

 

Using a hypothetical retiree in Thailand as an example. Bruce transfers THB 80k a month from his Australian superannuation fund to Thailand. For most, this will be tax free in Australia.

 

If the Thai authorities decided to tax these transfers, Australia would not refund the tax paid in Thailand because he does not pay any Australian tax.

 

This makes perfect sense. Why would Australia refund tax dollars they have never collected?

 

Disclaimer I am not an accountant or financial adviser and only sharing my experience for benefit of TV members. Not interested in a flame war. If you don't believe me check with a reputable financial adviser.

 

Also rules may be different for you country.

[Guderian]

I've been saying this for several years now, and if you think giving Thai Immigration full details about your pension as it's remitted monthly to Thailand will cause a tax problem, just wait until CRS kicks in in 2022.

[mngmn]

17 minutes ago, Guderian said:

I've been saying this for several years now, and if you think giving Thai Immigration full details about your pension as it's remitted monthly to Thailand will cause a tax problem, just wait until CRS kicks in in 2022.

As far as I can see, Thailand is not involved in CRS? It would impact wealthy Thais far more than the odd retiree in LOS.

[ThomasThBKK]

Thats odd to me.. As a Brit, if I have a high private pension, and I go to mainland europe, I must then declare and pay tax on my private pension.   

 

 

Yes that's of course true. The double tax threaty mentions only state pension. 

With normal pension i meant the pension most germans get from the german government.

 

Private pensions are a different beast and very likely to be taxed on most countries. On the other hand you would not need to pay taxes on them in your home country imo.

 

Sent from my LYA-L29 using Tapatalk

 

 

 

 

 

[topt]

26 minutes ago, mngmn said:

As far as I can see, Thailand is not involved in CRS? It would impact wealthy Thais far more than the odd retiree in LOS.

They initially said they would work towards it but were not expecting to sign up for a few years (can't remember if it was 20 or 22 but there was a news article on here about it).

However that does not of course mean they will and there is a good chance it will get delayed like many things in LOS but that should not be relied on.

[jojothai]

23 minutes ago, topt said:

They initially said they would work towards it but were not expecting to sign up for a few years (can't remember if it was 20 or 22 but there was a news article on here about it).

However that does not of course mean they will and there is a good chance it will get delayed like many things in LOS but that should not be relied on.

I understood they have signed up to it last year. Need to check online.

It is going to be a serious issue for a lot of people resident here with no tax id. (Either in home country or here).

As soon as the banks start requesting the residence and tax id in the next year or two  there are going to be problems for a lot of people who need to be classed as resident.

They will have to start thinking about it now. They will not be able to maintain the bank account if they dont provide the declaration.

[jojothai]

Further to my post just above,see

https://www.hxlpartners.com/tax/taiwan-and-thailand-will-be-in-the-aeoi-crs-framework/

 

If this is correct, you can expect the banks to start issuing requests for the CRS information this year.

People may be able to stall it a short while. Say 6 to 12 months Is my experience outside other countries

But people need to start preparing NOW.

[gavlar]

40 minutes ago, jojothai said:

Further to my post just above,see

https://www.hxlpartners.com/tax/taiwan-and-thailand-will-be-in-the-aeoi-crs-framework/

 

If this is correct, you can expect the banks to start issuing requests for the CRS information this year.

People may be able to stall it a short while. Say 6 to 12 months Is my experience outside other countries

But people need to start preparing NOW.

Am I understanding this correctly..

As a UK citizen I pay tax on pensions but always ensure monies sent to Thailand are more than a year seasoned therefore not taxed in Thailand...if less than a year old Thailand could tax again and I cannot reclaim in UK as no DTT between Thailand and Uk?

CRS is related to funds sent to Thailand that have not been taxed in Home country and currently not taxed in Thailand but if Thailand starts sending details to home country you will be taxed on it in your home country?

 

[LivinLOS]

42 minutes ago, gavlar said:

Am I understanding this correctly..

As a UK citizen I pay tax on pensions but always ensure monies sent to Thailand are more than a year seasoned therefore not taxed in Thailand...if less than a year old Thailand could tax again and I cannot reclaim in UK as no DTT between Thailand and Uk?

 

You should then become non resident of the UK, and claim your pension income that is taxed back.. 

Of course it freezes state pensions, and denies you emergency access to healthcare should you return. 

[abrahamzvi]

14 hours ago, GeorgeCross said:

thats put a new spin on things ???? 

 

4 hours ago, LivinLOS said:

This is precisely how it would work for any european.. My primary business is cross border labour supply and engagement / employment.. I am constantly sorting out the exact nature of tax residency based on a host of factors, in fact often changing the factors to suit the tax system rather than changing the tax residency per the rules. 

This ruling says exactly what I am warning against.. If you are resident here, you are then tax resident here, if you have an income (and pensions are an income) and remit that income to Thailand in the year you receive it, an EU citizen is then liable to pay Thai taxes. 

Until now thats never been an issue.. But start connecting the dots. 

Even referring to EU citizens residing in Thailand, the situation differs from one EU country to another. It depends entirely on the DTA with the country involved. Some DTAs specifically state where the pension income of the person concerned is to be paid. In some EU countries income tax is deducted at source and in other countries no tax is deducted as it states in the DTA with Thailand that the pension is taxable in the country of residence, i.e. Thailand.