Income Tax

[Pompey Lad 1938]

I had a letter today from my bank, HSBC,  querying my Tax status.  

 

I have a Non-Immigrant O Visa (Retirement Stamp).   I receive UK pensions which are taxed at source.  I have no other income except the interest from my Thai Bank Savings account.

 

The letter is a follow-up to a request from them for me to state my tax status.  They say they cannot understand how I say I pay tax in the UK, yet live in Thailand.   I explained that retirees are not residents of Thailand and are not required to pay tax on UK pensions.  They refused to accept my explanation and said that they required me to provide an authorative document setting out the position of retirees.

I also provided them with my UK UTR number and my current tax code.  They further state that if I live in Thailand for more than 180 days, then I am considered to have Thai residence for tax purposes.

 

I addition they asked if I had a Thai bank account and if so, did I pay tax on the interest gained on the savings in the account.  I said I did have a savings account and that the interest was taxed at source.  they then requested a letter from my Thai bank to confirm this.

 

They say that they are complying with an HMRC directive.

 

I can see many blogs on the web regarding this subject but have not been able to find an authorative document.

 

Can anyone refer me to such a document?

 

 

 

[NoDisplayName]

Maybe reference Thai-UK tax treaty?

 

https://www.gov.uk/government/publications/thailand-tax-treaties

[nigelforbes]

"I explained that retirees are not residents of Thailand and are not required to pay tax on UK pensions". 

 

Yes and no! Residency and tax residency are two very different things, as you appear to know hence your visa doesn't have anything to do with it, neither does Thailand's unwillingness to call you resident. This is about the number for days you spend in any one country. AND where your income arises. If you stay in Thailand for more than 183 days each year you are deemed to be Thai resident for tax purposes. In that case, potentially, you could tell the UK's HMRC that you are not UK resident for tax any longer and you wont have to declare income that arises outside the UK. BUT if your income arises in the UK you are still obliged to file a UK tax return, albeit you wont have to pay tax on any income that doesn't arise there, eg interest on Thai bank savings (we'll come back to this in a moment). 

 

Your UK pensions are not taxable in Thailand as long as the income you receive from them is brought into Thailand during a different year in which it was earned (Thai tax year is the calendar year). If you bring the money into Thailand during the same year, that income IS taxable in Thailand, subject to tax rules and tax tables, unless the pension is a UK Civil Service pension which is exempt by tax treaty. UK State Pension is not exempt by the Dual Tax Treaty Agreement (DTA) and IS potentially taxable in Thailand, subject to Thai Revenue limits and rules.

 

If you want to reclaim tax paid on Thai bank interest you must file a Thai tax return, if you do so you must declare ALL other qualifying income, eg overseas pension income received during the year it was earned, plus any property rental income earned in Thailand, along with any other income earned inside Thailand. None of this has anything to do with UK tax and HMRC which is subject to its own set of rules, depending on whether you are UK resident or not for tax purposes. 

 

Given all those things I can understand your banks concern  about your tax residency, given that you say you stay in Thailand for over 183 days each year.

 

Note 1: UK tax residency and the need to file a UK tax return because of the income you received from within the UK are different things. You can easily be not resident for UK tax and still need to file a UK tax return, I am/do.

 

Note 2: I understand that lots of people have strong feelings about the taxation of UK pensions in Thailand and have all kinds of reasons why they believe they are not taxable here, they're already taxed, DTA's etc. The onus is on readers to point out where the DTA says UK State pension income is exempt from Thai tax, it doesn't. It only says that pensions in the service of government are covered. UK citizens continue to have a Personal Allowance under UK tax code, even if they are not resident for UK tax purposes but must still file a tax return.

[proton]

Very complicated issue then

[nigelforbes]

56 minutes ago, proton said:

Very complicated issue then

Not really, I just wanted to try and explain all aspects as fully as possible. The basic steps are:

 

Thailand

 

1) Decide if you are tax resident in Thailand, ie, >183 days per year. If yes, and:

2) If you have offshore pensions remitted here during the year it was earned, and/or,

3) You have rental income from Thailand, and/or,

4) You have other income that arises in Thailand such as savings interest....

5) File a Thai tax return to pay/reclaim tax.

 

UK

 

1) Decide if you are tax resident in the UK, ie >183 days per year. If yes, business as usual. If no:

2) Declare yourself to HMRC as not UK tax resident.

3) If not resident but you are still required to file a UK tax return, because your UK income exceeds the personal allowance and/or you have rental income, declare only the income that arises in the UK and pay/reclaim UK tax accordingly.

 

[MRToMRT]

Its a confusing question, are the HSBC questioning your tax status or questioning your residence status in the UK, as non-residents are not necessarily allowed to open/have a UK bank account. 

 

Seems strange they are questioning you based on HRMC, when its all part of the regulatory requirement of KYC (know your customer) which is the banks responsibility. 

HSBC are particularly strong on KYC as they have been fined billions for issues associated with "dodgy dealings with dodgy customers", thats why I left them ... the KYC process was exhaustive and intrusive I found. I found that UK internet based banks have very simple KYC (as in nearly none) compared to HSBC (which was about 8 pages long and required a telephone interview and many back and forths for me).

 

 

 

 

[nigelforbes]

Thailand is slowly tightening up its money laundering rules, AMLO regulations are popping up everywhere and as usual, Thailand has gone overboard. Also, Thailand will begin to exchange banking information with the other countries, beginning in 2024 I believe. I don't think either Thai banks or banks in the UK want to be caught out as a result of the new regs. and suddenly find out, as the  veil of secrecy is lifted, that some of their local trusted customers had dodgy bank accounts in Thailand and were not paying tax appropriately.  The penalties for banks in this area are likely to be harsh.

[MRToMRT]

22 minutes ago, nigelforbes said:

Decide if you are tax resident in the UK, ie >183 days per year.

The SRT is a bit more complicated than that :+)

Its wording and explanatory notes have tied me up in knots for years.

I found it even more complicated as a retiree trying to figure out how many days I could get. I am still not sure :+)

[nigelforbes]

1 minute ago, MRToMRT said:

The SRT is a bit more complicated than that :+)

Its wording and explanatory notes have tied me up in knots for years.

Yes I agree that the table of ties can be confusing,  but for first time expats it's very straight forward, 183 is the magic number, either way. Even for more complicated tax affairs, less than 30 days in the UK in a tax year and you are automatically not UK resident for tax, regardless of other ties and past year activity. It's the area in the middle that can get complicated, especially where a person has been borderline resident in previous year.

[Pompey Lad 1938]

The UK/Thai DTA is quite clear to me, having just found it.  for the purpose of Income Tax it was effective from 1981 and Article 4 (fiscal domicile) states:

 

Article 4
Fiscal Domicile

(1) For the purposes of this Convention, the term "resident of a Contracting State"
means, subject to the provisions of paragraphs (2) and (3) of this Article, any person
who, under the law of that State, is liable to taxation therein by reason of his domicile,
residence, place of management, place of incorporation, or any other criterion of a
similar nature.
(2) Where by reason of the provision of paragraph (1) of this Article an individual is a
resident of both Contracting States, then his status shall be determined in accordance
with the following rules:
(a) he shall be deemed to be a resident of the Contracting State in which he has
a permanent home available to him. If he has a permanent home available to
him in both Contracting States, he shall be deemed to be a resident of the
Contracting State with which his personal and economic relations are closer
(centre of vital interests);
(b) if the Contracting State in which he has his centre of vital interests cannot be
determined, or if he has not a permanent home available to him in either
Contracting State, he shall be deemed to be a resident of the Contracting State
in which he has an habitual abode;
(c) 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;
(d) if he is a national of both Contracting States or of neither of them, the
competent authorities of the Contracting States shall endeavour to settle the
question by mutual agreement.
(3) Where by reason of the provisions of paragraph (1) of this Article a person other
than an individual is a resident of both Contracting States, then the competent
authorities of the Contracting States shall endeavour to settle the question by mutual
agreement.

 

I have a permanent home available in the UK whereas I do not have such in Thailand where I rent a condo as a tenant on a  temporary yearly basis plus my connection with the UK is stronger because I have immediate family connections there.  So in my book, I am a UK Tax Resident.

[cleopatra2]

25 minutes ago, Pompey Lad 1938 said:

The UK/Thai DTA is quite clear to me, having just found it.  for the purpose of Income Tax it was effective from 1981 and Article 4 (fiscal domicile) states:

 

Article 4
Fiscal Domicile

(1) For the purposes of this Convention, the term "resident of a Contracting State"
means, subject to the provisions of paragraphs (2) and (3) of this Article, any person
who, under the law of that State, is liable to taxation therein by reason of his domicile,
residence, place of management, place of incorporation, or any other criterion of a
similar nature.
(2) Where by reason of the provision of paragraph (1) of this Article an individual is a
resident of both Contracting States, then his status shall be determined in accordance
with the following rules:
(a) he shall be deemed to be a resident of the Contracting State in which he has
a permanent home available to him. If he has a permanent home available to
him in both Contracting States, he shall be deemed to be a resident of the
Contracting State with which his personal and economic relations are closer
(centre of vital interests);
(b) if the Contracting State in which he has his centre of vital interests cannot be
determined, or if he has not a permanent home available to him in either
Contracting State, he shall be deemed to be a resident of the Contracting State
in which he has an habitual abode;
(c) 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;
(d) if he is a national of both Contracting States or of neither of them, the
competent authorities of the Contracting States shall endeavour to settle the
question by mutual agreement.
(3) Where by reason of the provisions of paragraph (1) of this Article a person other
than an individual is a resident of both Contracting States, then the competent
authorities of the Contracting States shall endeavour to settle the question by mutual
agreement.

 

I have a permanent home available in the UK whereas I do not have such in Thailand where I rent a condo as a tenant on a  temporary yearly basis plus my connection with the UK is stronger because I have immediate family connections there.  So in my book, I am a UK Tax Resident.

I do not think this section is of any benefit to you. 

This section would only apply in cases of being tax resident in both states.  ( is this the case) 

  If I understand correctly the payment of tax on the pensions is because the income arises in the UK ( no concession in DTT) and not due to any tax residency. 

 

[nigelforbes]

47 minutes ago, Pompey Lad 1938 said:

The UK/Thai DTA is quite clear to me, having just found it.  for the purpose of Income Tax it was effective from 1981 and Article 4 (fiscal domicile) states:

 

Article 4
Fiscal Domicile

(1) For the purposes of this Convention, the term "resident of a Contracting State"
means, subject to the provisions of paragraphs (2) and (3) of this Article, any person
who, under the law of that State, is liable to taxation therein by reason of his domicile,
residence, place of management, place of incorporation, or any other criterion of a
similar nature.
(2) Where by reason of the provision of paragraph (1) of this Article an individual is a
resident of both Contracting States, then his status shall be determined in accordance
with the following rules:
(a) he shall be deemed to be a resident of the Contracting State in which he has
a permanent home available to him. If he has a permanent home available to
him in both Contracting States, he shall be deemed to be a resident of the
Contracting State with which his personal and economic relations are closer
(centre of vital interests);
(b) if the Contracting State in which he has his centre of vital interests cannot be
determined, or if he has not a permanent home available to him in either
Contracting State, he shall be deemed to be a resident of the Contracting State
in which he has an habitual abode;
(c) 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;
(d) if he is a national of both Contracting States or of neither of them, the
competent authorities of the Contracting States shall endeavour to settle the
question by mutual agreement.
(3) Where by reason of the provisions of paragraph (1) of this Article a person other
than an individual is a resident of both Contracting States, then the competent
authorities of the Contracting States shall endeavour to settle the question by mutual
agreement.

 

I have a permanent home available in the UK whereas I do not have such in Thailand where I rent a condo as a tenant on a  temporary yearly basis plus my connection with the UK is stronger because I have immediate family connections there.  So in my book, I am a UK Tax Resident.

I agree with the previous poster, cleopatra2.

 

Even if those DTA clauses were relevant, the UK SRT still has a key role. Under SRT rules you would not be UK resident for tax purposes, assuming I have read it correctly that you spend all your time in Thailand. That would mean that you would have to file a Thai tax return and recoup from your UK tax return, whatever overage was paid, citing the DTA with Thailand.....messy to say the least.

 

FWIW I have a UK property also, plus I do not own property in my name in Thailand, our house is in my wifes name. I am obliged to file a UK tax return, because of my rental income but I'm regarded as not UK resident for tax purposes . This means I can exclude from UK tax, all my income that doesn't arise in the UK,  plus it's exempt from Thai tax if it's not remitted in the same year. The net result is that I can take advantage of two lots of Personal Allowance, UK and Thai and that I don't have to pay tax anywhere.

[Will B Good]

11 minutes ago, nigelforbes said:

I agree with the previous poster, cleopatra2.

 

Even if those DTA clauses were relevant, the UK SRT still has a key role. Under SRT rules you would not be UK resident for tax purposes, assuming I have read it correctly that you spend all your time in Thailand. That would mean that you would have to file a Thai tax return and recoup from your UK tax return, whatever overage was paid, citing the DTA with Thailand.....messy to say the least.

 

FWIW I have a UK property also, plus I do not own property in my name in Thailand, our house is in my wifes name. I am obliged to file a UK tax return, because of my rental income but I'm regarded as not UK resident for tax purposes . This means I can exclude from UK tax, all my income that doesn't arise in the UK,  plus it's exempt from Thai tax if it's not remitted in the same year. The net result is that I can take advantage of two lots of Personal Allowance, UK and Thai and that I don't have to pay tax anywhere.

No way that is correct.........you are always liable for UK tax (as a British citizen) on income earned in the UK, including pensions, dividends, interest payments..........regardless of where you live.

 

 

[nigelforbes]

3 minutes ago, Will B Good said:

No way that is correct.........you are always liable for UK tax (as a British citizen) on income earned in the UK, including pensions, dividends, interest payments..........regardless of where you live.

 

 

Sorry, I wasn't as clear as I needed to be. I did not mean to imply that the poster would not need to file a UK tax return and pay tax on any income that arises there, he does. But if he did as I proposed, he could file as UK not tax resident and potential exclude any non-uk income. In my case, I have pension income from the US social security system which I do not have to declare for UK tax because I am not UK tax resident.

[nigelforbes]

OP....just a thought.

 

If you are determined to be UK tax resident whilst living in Thailand, and you have no income that arises here, why not change your Thai bank account to a non-resident account and provide that as proof to HSBC UK of your UK residency status? A Thai non-resident bank account will also mean you have no problems transferring money backwards and forwards although you will not be allowed to earn interest on the Thai account (so no fixed deposit accounts) plus you will not be able to deposit cash into your Thai account.

 

 

 

[Pompey Lad 1938]

I have been here on and off for many years and never had this problem until I moved my account recently to First Direct.

 

I don't do self Assessment because Inland Revenue, who knows where I am, told me not necessary and haven't done one for 4 years.

[nigelforbes]

5 minutes ago, Pompey Lad 1938 said:

I have been here on and off for many years and never had this problem until I moved my account recently to First Direct.

 

I don't do self Assessment because Inland Revenue, who knows where I am, told me not necessary and haven't done one for 4 years.

I had wanted to move from HSBC to First Direct about five years ago and they wouldn't accept me as a customer because I was/had been living here for over 20 years. No question this is a FD issue.

[JackGats]

I thought this kind of predicament would be typical of the EU (because of EU compliance regulations). I now see the UK is even worse in this respect. I find it incredible that a UK bank should question your status when you are in fact paying taxes in the UK. I mean would they (the UK or the bank) be happier if you didn't pay taxes in the UK?

 

If you have a savings account or a broker's account, you could show the bank the Thai withholding tax on interests or dividends. I asked my broker to link my dividend slips to my Thai TIN but he gave me the typical Thai answer "no need to do that". As though I would be asking if there were no need.

[Eff1n2ret]

17 minutes ago, Pompey Lad 1938 said:

I have been here on and off for many years and never had this problem until I moved my account recently to First Direct.

Now I'm confused. The OP stated HSBC, now it's First Direct. Yes, I know FD are a division of HSBC but they operate independently. I have had a First Direct current account for many years, and they raised no objections when I told them I was moving to thailand 13 years ago. However, their rules on opening new accounts have become more restrictive in recent years. For several years here I took advantage of a savings account they operate whereby existing customers could save up to 300 pounds a month over a year, earning 6% interest. All of a sudden 4 or 5 years ago they said I couldn't open a new account because I am not a UK resident. They are still my main UK bank into which my pensions and house rental income are paid, and I submit an annual return to HMRC. I have no UK residence. It looks as if the OP's problems arise because he is trying to open a new account which is pretty much a no-no unless he can show that he lives in the UK. "Tax residence" won't cut it.

[Pompey Lad 1938]

My FD account was opened in November 2021 and I told them I was going to live in Thailand and they gave me a unique reference number that I quote whenever I need to speak with them because I am living outside the UK.  

[Pompey Lad 1938]

Just come off the phone after talking with First Direct.   Seems they wanted me to provide a ceritificate of tax residency UK to confirm my tax residency.  This is because I am in Thailand and I told them I paid tax in the UK.  Obviously didn't believe me!

I quoted my UTR number and tax code.   Then I was asked why I told them I did not submit an annual Self Assessment and told them as per instructions from Inland Revenue.

 

Stupidly, well I thought so, they asked how much I earned in from income derived from employment in Thailand.   Stupid because at almost 85 years old, I am unlikely to be working and I had already told them that my permission to stay in Thailand, did not permit me to work.  Oh! said they, sorry for any inconvenience, but we needed to update our records.

[Chomper Higgot]

Get in touch with HMRC and get a statement regarding your tax status.

 

 

The risk here is that your bank closes your account, this may or may not be a problem but it may have implications down the line.

[BritManToo]

On 12/28/2022 at 11:47 PM, Pompey Lad 1938 said:

The letter is a follow-up to a request from them for me to state my tax status.  They say they cannot understand how I say I pay tax in the UK, yet live in Thailand.   I explained that retirees are not residents of Thailand and are not required to pay tax on UK pensions.  They refused to accept my explanation and said that they required me to provide an authorative document setting out the position of retirees.

Your tax status is not the banks business.

It's between you and your government.

 

Best to never let anyone know you are outside the UK.

GiffGaff SIM for UK mobile phone number (10GBP credit lasts 4 years).

SKYPE account for residential phone number(90GBP/year).

UKpostbox.com for residential street address (120GBP/year).

[nigelforbes]

11 minutes ago, BritManToo said:

Your tax status is not the banks business.

It's between you and your government.

 

Best to never let anyone know you are outside the UK.

GiffGaff SIM for UK mobile phone number (10GBP credit lasts 4 years).

SKYPE account for residential phone number(90GBP/year).

UKpostbox.com for residential street address (120GBP/year).

You would imagine that Immigration status is not the banks business in Thailand but it is. And you might imagine that immigration status is not a real estate agents business but in the UK it is. 

 

The lines of demarcation are not that clear any longer.

[Karma80]

As a side note, for HSBC, if you are a premier customer (or meet the requirements) you can open a HSBC Expat account. But I've found it to be less hassle, as it's intended market and product is designed for expat banking, and it's available to Thailand residents. https://www.expat.hsbc.com

 

Also on the subject of tax, this is one drawcard of the LTR visa.

 

The Royal Decree (No 743) gazetted on 23 May 2022 prescribes the income tax incentives for foreigners to come and reside in Thailand under an LTR Visa, as follows:

For Wealthy Citizen, Retired and Work-from-Thailand foreigners who come and reside in Thailand under an LTR Visa:

A right to exemption from tax on income that's derived from a post or an oìce outside Thailand or business outside Thailand or property outside Thailand and brought into Thailand (i.e. an exemption from the Foreign Source Income law).

 

https://sherrings.com/long-term-resident-visa-tax-concessions-thailand.html

[OJAS]

On 12/30/2022 at 9:33 AM, Chomper Higgot said:

Get in touch with HMRC and get a statement regarding your tax status.

 

 

The risk here is that your bank closes your account, this may or may not be a problem but it may have implications down the line.

I strongly suspect that HMRC would respond to any request on the OP's part for a statement by drawing his attention to the convoluted process known as the Statutory Residence Test (SRT) as already referred to in this thread - which, I think, is what his bank was driving at through his reference to an "HMRC directive".

 

https://www.gov.uk/government/publications/rdr3-statutory-residence-test-srt/guidance-note-for-statutory-residence-test-srt-rdr3

 

Broadly speaking, it strikes me that, in order to satisfy the requirements of this test as far as establishing UK tax residency is concerned, the OP would, first and foremost, need to spend at least 183 days in the UK during a given tax year - a prospect which would presumably be totally unacceptable to him. The fact that he is only liable to tax in the UK on his public sector occupational pension income as a result of the UK/Thailand Double Taxation Agreement (DTA) is completely irrelevant in this context.

 

The OP might be interested in learning that, when I received a similar request from my UK bank a couple of years ago, I responded by declaring that I was a tax resident in Thailand, even though I only paid tax on my UK public sector occupational pension income to HMRC in practice as a result of the UK/Thailand DTA. This has certainly not resulted in any further correspondence from them on this matter to date - and I would have thought it likely that, if the OP's UK bank were hell-bent on closing his account with them, they would proceed on the basis of the Thai address which he has presumably registered with them in any event.

 

[persimmon]

If residing in Thailand , does income and gains from a share portfolio ( held with a UK broker )count as UK income which needs a SA tax return ?

[topt]

On 1/1/2023 at 10:59 AM, persimmon said:

If residing in Thailand , does income and gains from a share portfolio ( held with a UK broker )count as UK income which needs a SA tax return ?

As mentioned in one of the earlier posts and presuming you are still a UK citizen - if not then gets too complicated for me.........

 

Are you registered with HMRC as non resident for tax?  If yes then any income generated in the UK above the Personal Allowance and any extra current tax allowances is taxable. Capital gains from selling shares above the price you paid are not taxable as a non resident but capital gains from physical property are. 

 

In theory you also need to file the non resident part of the tax return which currently cannot be done free online - either paper return or paid for approved software.

 

I have read some posters in the past who stated that if you give up your personal allowance you are not liable for tax on share income but I am not sure exactly how that works and you would need to be taking a big slug of income to make it worthwhile if it was an option.

 

@nigelforbes any comments/corrections to the above?

[nigelforbes]

55 minutes ago, topt said:

As mentioned in one of the earlier posts and presuming you are still a UK citizen - if not then gets too complicated for me.........

 

Are you registered with HMRC as non resident for tax?  If yes then any income generated in the UK above the Personal Allowance and any extra current tax allowances is taxable. Capital gains from selling shares above the price you paid are not taxable as a non resident but capital gains from physical property are. 

 

In theory you also need to file the non resident part of the tax return which currently cannot be done free online - either paper return or paid for approved software.

 

I have read some posters in the past who stated that if you give up your personal allowance you are not liable for tax on share income but I am not sure exactly how that works and you would need to be taking a big slug of income to make it worthwhile if it was an option.

 

@nigelforbes any comments/corrections to the above?

Not really. I might have added a comma or two into the last para but otherwise I thought it was very eloquent. ????

[UKresonant]

On 1/1/2023 at 3:59 AM, persimmon said:

If residing in Thailand , does income and gains from a share portfolio ( held with a UK broker )count as UK income which needs a SA tax return ?

Probably not if it did not exceed the dividend allowance or the Capital Gains Allowance (but keep all the details in an archive). But if doing a UK Tax return anyway of course include the detail..

Should max out ISAs before you move to Thailand and in the year you move (If not already there).