Paying Tax on Overseas Investments

[2009]

So, I'm a bit confused ????

 

Some details:

 

- I am an investor in American stocks.

- I am not an American national.

- My tax residence is Thailand.

- I use a European broker

 

I am sure I don't need to pay any tax to my home country.

 

I am under the impression I don't have to pay capital gains tax to America. Correct?

 

But I think I do have to pay tax on dividends to America? Correct? And if so, is the tax withheld or do I have to pay it myself yearly? And is it paid from the first dollar or only when you earn over a certain amount?

 

I believe I would have to pay capital gains tax to Thailand if I brought the money into the country within the same tax year as the gains were realized. Otherwise, no capital gains tax in Thailand. Correct? And is the same true with dividends? (If you don't bring them into the kingdom, no tax?)

 

Anything else I've missed? Or have I made a total hash of my above assumptions? ????

 

 

[tomazbodner]

In same boat. Waiting to see if I get some answers.

 

There's W-8BEN form that needs to be sent to your broker to confirm you're a foreign tax resident, else "your payments will be subject to additional backup withholding". Looking at my statements, there are definitely taxes deducted from dividends. In my case I don't need to pay dividend taxes directly, as they are handled by my broker (Merrill Lynch) and just show on statements as deductions.

 

And no, as foreign tax resident, with that form on file, you are exempt from capital gains taxes in the US.

 

The rest - waiting for answers.

Edited January 16, 2023 by tomazbodner

[nigelforbes]

There is no capital gains tax in Thailand

[tomazbodner]

56 minutes ago, nigelforbes said:

There is no capital gains tax in Thailand

Meaning if I sell shares in NASDAQ and transfer the amount to my bank account, I don't need to declare anything?

[nigelforbes]

16 minutes ago, tomazbodner said:

Meaning if I sell shares in NASDAQ and transfer the amount to my bank account, I don't need to declare anything?

The taxable gain usually arises based on where the sale took place. If you're a US citizen you are taxable on your world wide income so it doesn't matter where it took place, you have to pay US tax although you might be able to reclaim that when you file a return. As far as Thai tax on that transaction is concerned, .no, you are not subject to tax Thai tax, unless you remit the income bla blah.

[fdsa]

1 hour ago, nigelforbes said:

There is no capital gains tax in Thailand

source plz?

 

"Guide to Personal Income Tax Return 2021 (ภ.ง.ด.90)" states:

 

Quote

 If you receive one or more of the following incomes, specify the type of incomes you received and enter the sum on line “Others”.
 ...
- an increase of capital holdings in a company or juristic partnership for the amount determined from profits and reserves
 ...
- gains received from transfer of partnership holdings investment units or shares, debentures, bonds, or bills or debt instruments issued by a company or juristic partnership or by any other juristic person

 

[RupertIII]

My understanding is that there is no liability to Thai income tax (capital gains is taxed as income) on foreign sourced income provided the income is not brought into Thailand in the same calender year as it is received. 

 

I would suggest advisable to have the funds, upon receipt, paid into a bank a/c overseas and then transfer into Thailand the following year.

 

Not sure if it is acceptable to post here links to 3rd party web sites but if you Google - thailand overseas investment income tax for foreigners - you should find something of use.

Edited January 16, 2023 by RupertIII

[nigelforbes]

1 hour ago, fdsa said:

source plz?

 

"Guide to Personal Income Tax Return 2021 (ภ.ง.ด.90)" states:

 

 

The tax office, go ask them, I already did, Capital Gains is charged to tax as income. 

 

Here, it's not difficult to find this stuff on the web, PWC, Sherrings, Mazars, they all have info,: https://sherrings.com/capital-gains-personal-income-tax-thailand.html

Edited January 16, 2023 by nigelforbes

[2009]

Cheers guys, good answers in here.

 

So far the feedback here is:

 

- no tax liability for Thailand 

- no American capital gains if you filed a W8BEN

 

But dividends are taxable (America), right? 

 

Still not clear if it's withholding tax or we need to file a return each year (how does a foreigner do that?) and if there's an amount of dividend income that's tax free or is every dollar taxed?

[nigelforbes]

9 minutes ago, 2009 said:

Cheers guys, good answers in here.

 

So far the feedback here is:

 

- no tax liability for Thailand 

- no American capital gains if you filed a W8BEN

 

But dividends are taxable (America), right? 

 

Still not clear if it's withholding tax or we need to file a return each year (how does a foreigner do that?) and if there's an amount of dividend income that's tax free or is every dollar taxed?

Go to the Thai Revenue office, of all the government departments here, the tax people are the most helpful. They will help you complete your tax return, actually they will do it for you, they are used to hapless farangs asking them to do that.  ???? 

 

Here is a link to Thailand Revenue Department tax rules, they are in English and very simple and easy to read. Everything you wanted to know, from the horses mouth.

 

https://www.rd.go.th/english/6045.html

 

https://www.rd.go.th/english/37748.html

Edited January 16, 2023 by nigelforbes

[TravelerEastWest]

1 hour ago, nigelforbes said:

Go to the Thai Revenue office, of all the government departments here, the tax people are the most helpful. They will help you complete your tax return, actually they will do it for you, they are used to hapless farangs asking them to do that.  ???? 

 

Here is a link to Thailand Revenue Department tax rules, they are in English and very simple and easy to read. Everything you wanted to know, from the horses mouth.

 

https://www.rd.go.th/english/6045.html

 

https://www.rd.go.th/english/37748.html

Do not rely on the Thai Revenue department to look out for your best interests. Find a good Thai CPA and have them guide you and file your tax return - not expensive at all.

 

I remember when I first moved to Thailand the local Revenue department manager tried to tell me all my income in America was taxable in Thailand. I tried to explain to her that I had no same year income in Thailand - she did not understand - or want to ?

 

In America it is the same, IRS agents are not trained to help you and most of them are not highly trained. You also often can't trust IRS publications they interpret the law in their favor; a good tax accountant will often see the law differently and win when you are audited.

Edited January 16, 2023 by TravelerEastWest

[FarAngMoh]

2 hours ago, 2009 said:

Cheers guys, good answers in here.

 

So far the feedback here is:

 

- no tax liability for Thailand 

- no American capital gains if you filed a W8BEN

 

But dividends are taxable (America), right? 

 

Still not clear if it's withholding tax or we need to file a return each year (how does a foreigner do that?) and if there's an amount of dividend income that's tax free or is every dollar taxed?

Most non-US investors I know who live outside the US invest in ETFs traded on the London Stock Exchange, and most use Interactive Brokers which usually has the best pricing.
 

These London traded ETFs are typically domiciled in Ireland and have lower 15% treaty rate of withholding on US stocks. For example, CSPX is the symbol for iShares S&P 500 ETF traded on the LSE. VWRA is another popular one on the LSE that includes the entire world’s stocks (US+Int’l) in one simple investment. 

[nigelforbes]

25 minutes ago, TravelerEastWest said:

Do not rely on the Thai Revenue department to look out for your best interests. Find a good Thai CPA and have them guide you and file your tax return - not expensive at all.

 

I remember when I first moved to Thailand the local Revenue department manager tried to tell me all my income in America was taxable in Thailand. I tried to explain to her that I had no same year income in Thailand - she did not understand - or want to ?

 

In America it is the same, IRS agents are not trained to help you and most of them are not highly trained. You also often can't trust IRS publications they interpret the law in their favor; a good tax accountant will often see the law differently and win when you are audited.

Nonsense, the Thai tax system is nothing like the US or other Western tax systems. Firstly, less than 3% of the population pay taxes via tax return, audits are extremely rare because they are focused on business returns, which represent the bulk of the tax burden. Whilst you may have had a bad experience with one Revenue staff, I have never experienced anything remotely inaccurate or unhelpful from any of the Revenue offices in over 20 years of dealing with them. Yes it helps to have a basic grounding in the tax laws but that is true of any country. The cost of tax consultancy here far outweighs the benefit to be derived from using them, unless the returns are in the many millions. And frankly, the tax rules here are so straight forward that paying for tax preparation, unless you're a real dolt, is a complete waste of time and money. There's then the question of the quality of tax prep. advice. If you were to use PWC or similar I would say fine, if your affairs are of a size and complexity to warrant using them. For the vast majority of people however, such things are no necessary here.

 

 

[Thailand J]

6 hours ago, 2009 said:

 

But dividends are taxable (America), right? 

 

Still not clear if it's withholding tax or we need to file a return each year (how does a foreigner do that?) and if there's an amount of dividend income that's tax free or is every dollar taxed?

For you the dividends are taxed from the first dollar without exemption. Your broker is supposed to withhold the tax and send it  to the IRS. You have no tax filing obligation if the withholding is correct. If not, file form 1040NR.

 

If you have other US income or receive form 1099B from your broker, you may need to file 1040NR.

To see if you have to file Form 1040-NR, please read the instruction for Form 1040NR under Filing Requirements, Do you have to file starting page 6.

 

https://www.irs.gov/pub/irs-dft/i1040nr--dft.pdf

 

Form 1040NR looks complicating but if the filing purpose is wrong withholding, use the simplified procedure ( Page 8).

Edited January 16, 2023 by Thailand J

[Kaptain Asia]

6 hours ago, 2009 said:

My tax residence is Thailand

When you say your "Tax Residence is Thailand" did you have a Thai tax number when you registered with your broker?

[Kaptain Asia]

4 hours ago, FarAngMoh said:

most use Interactive Brokers which usually has the best pricing. 

IB are good in some areas but they charge for data so they may be more expensive depending on how you trade.

[TravelerEastWest]

14 hours ago, nigelforbes said:

Nonsense, the Thai tax system is nothing like the US or other Western tax systems. Firstly, less than 3% of the population pay taxes via tax return, audits are extremely rare because they are focused on business returns, which represent the bulk of the tax burden. Whilst you may have had a bad experience with one Revenue staff, I have never experienced anything remotely inaccurate or unhelpful from any of the Revenue offices in over 20 years of dealing with them. Yes it helps to have a basic grounding in the tax laws but that is true of any country. The cost of tax consultancy here far outweighs the benefit to be derived from using them, unless the returns are in the many millions. And frankly, the tax rules here are so straight forward that paying for tax preparation, unless you're a real dolt, is a complete waste of time and money. There's then the question of the quality of tax prep. advice. If you were to use PWC or similar I would say fine, if your affairs are of a size and complexity to warrant using them. For the vast majority of people however, such things are no necessary here.

 

 

Actually the Thai tax system is very similar to the US tax system - some small differences such as different depreciation rates and years and they have a simple system for some small businesses where you don't need to do much bookkeeping - they give you a set percentage of revenue as expenses. In the US we don't have that but instead we have things like S corps which do away with taxation at the corporate level. Probably a wash in the end... But both systems overall are very similar.

 

You are correct that there is a big difference at the country level more VAT and less individual taxes. I have never worked with European taxes but I think they are similar to Thailand in terms of VAT type taxes.

 

As for one bad experience, no more than that but I don't let it bother me as I am trained in taxation and understand how to look at tax issues. Unless you are trained in taxation how would you know if you have had a problem in the last 20 years in Thailand - note I am not being rude with the question I am actually very curious...

 

A small Thai CPA firm - not large CPA firm as in your example (note I am not against the large CPA firms and worked in the tax department for one right out of business school a long time ago), is not expensive and if you have a small business here in Thailand  is normally a very good idea for more than one reason. Example they know more than almost all non CPAs about taxes and that includes Revenue staff and can save you money - more than you pay them. Many other reasons...

 

The above is my opinion after almost 20 years in Thailand running a business and filing both personal and business tax returns. I am trained as a professional in American taxation and would never consider doing my own taxes here as I would lose a lot of money.

[topt]

On 1/16/2023 at 7:09 PM, TravelerEastWest said:

Do not rely on the Thai Revenue department to look out for your best interests. Find a good Thai CPA and have them guide you and file your tax return - not expensive at all.

If the OP has no earned Thai income; does not remit earned income during current year and is not trying to offset anything against a specific country DTA why would he even need to consider filing a tax return in Thailand....... 

 

There may be a reason but @2009 certainly didn't give any info in his posts that suggests he wants to invite any closer scrutiny into his financial affairs whether warranted or not.

[TravelerEastWest]

56 minutes ago, topt said:

If the OP has no earned Thai income; does not remit earned income during current year and is not trying to offset anything against a specific country DTA why would he even need to consider filing a tax return in Thailand....... 

 

There may be a reason but @2009 certainly didn't give any info in his posts that suggests he wants to invite any closer scrutiny into his financial affairs whether warranted or not.

Sounds about right...

[2009]

On 1/17/2023 at 12:18 AM, Kaptain Asia said:

When you say your "Tax Residence is Thailand" did you have a Thai tax number when you registered with your broker?

Yeah

[tubby johnson]

I'm an EU national, invest in mainly US stocks and some European stocks via a European broker. Dividend tax is withheld on these stocks. Once a year I transfer my dividend income to my Thai bank account, and subsequently use it to fund my retirement here in Thailand and qualify for my annual extension from immigration.

 

I've never had any queries from either the tax authorities or immigration. No hassle.

[LivinLOS]

On 1/16/2023 at 7:12 AM, nigelforbes said:

There is no capital gains tax in Thailand

Realized gains are (by law) taxed as income, if remitted to the kingdom in the year received and if you are here over 180 days per year. 

As the revenue dept has a near impossible task proving year received this is not chased. 

[nigelforbes]

29 minutes ago, tubby johnson said:

I'm an EU national, invest in mainly US stocks and some European stocks via a European broker. Dividend tax is withheld on these stocks. Once a year I transfer my dividend income to my Thai bank account, and subsequently use it to fund my retirement here in Thailand and qualify for my annual extension from immigration.

 

I've never had any queries from either the tax authorities or immigration. No hassle.

Very few people ever do.....so far. I don't intend or want to appear alarmist but things are slowly changing on the tax front. Their objective is to get more people into the tax net and to get more people paying tax. At present, less than 10% of the population is in that net and only about 3% actually pay tax. 

 

I saw for the first time last year, the Revenue begin to talk to me about what pensions I received and when, in 20 years of dealings with them they had never raised that before. Their message to me was crystal clear, if I want to reclaim tax paid on savings interest at banks, I need to file a tax return and in doing so, I'd better declare all my income received in Thailand that year, including overseas pensions. That's fine by me, but others may be less OK with it. Key message: store any income you receive overseas, until the calendar year changes.

[2009]

On 1/16/2023 at 5:18 PM, 2009 said:

Cheers guys, good answers in here.

 

So far the feedback here is:

 

- no tax liability for Thailand 

- no American capital gains if you filed a W8BEN

 

But dividends are taxable (America), right? 

 

Still not clear if it's withholding tax or we need to file a return each year (how does a foreigner do that?) and if there's an amount of dividend income that's tax free or is every dollar taxed?

So, it seems from the further feedback, that:

 

- American dividends are taxed from the first dollar (not above a threshold)

 

- and the brokers withhold the tax when the dividend is paid (and I assume they pay it on our behalf?)

[jayboy]

On 1/18/2023 at 5:22 PM, nigelforbes said:

Their message to me was crystal clear, if I want to reclaim tax paid on savings interest at banks, I need to file a tax return and in doing so, I'd better declare all my income received in Thailand that year, including overseas pensions.

I believe your summary of the overall position is correct.However, as a point of detail, for most retirees the reclamation amount of tax on savings accounts is so modest as to be almost negligible.If therefore retirees (or in fact anyone not generating taxable income in Thailand) are not already submitting income tax returns, probably best to let matters be.

 

If the Tax Authorities turn their attention to expatriates overseas pension income (no sign of this yet) it could be problematic for those deemed to be resident for more than six months a year.Many rely on the advice that overseas income is only taxed if remitted in the year it is earned but is this enshrined in any Thai tax regulation? At present there are no checks of any kind nor would they be at all easy to implement.In short no need to worry now but it makes sense to be aware of the background.

[nigelforbes]

40 minutes ago, jayboy said:

I believe your summary of the overall position is correct.However, as a point of detail, for most retirees the reclamation amount of tax on savings accounts is so modest as to be almost negligible.If therefore retirees (or in fact anyone not generating taxable income in Thailand) are not already submitting income tax returns, probably best to let matters be.

 

If the Tax Authorities turn their attention to expatriates overseas pension income (no sign of this yet) it could be problematic for those deemed to be resident for more than six months a year.Many rely on the advice that overseas income is only taxed if remitted in the year it is earned but is this enshrined in any Thai tax regulation? At present there are no checks of any kind nor would they be at all easy to implement.In short no need to worry now but it makes sense to be aware of the background.

Yes, it is enshrined in Thai tax law.

[jayboy]

3 hours ago, nigelforbes said:

Yes, it is enshrined in Thai tax law.

If it's not too much trouble could you supply a reference.I've seen the point covered in advice from PWC and other such advisers, but have never seen a reference in Thai law or regulations.

[wordchild]

1 hour ago, jayboy said:

If it's not too much trouble could you supply a reference.I've seen the point covered in advice from PWC and other such advisers, but have never seen a reference in Thai law or regulations.

Fwiw , in the distant past, I  had parts of the  law translated line by line and explained to me by a Thai tax lawyer and, unfortunately,(as far as I remember)  there is no single passage that one could quote that makes the exemption on (prior year) overseas income clear and explicit.

As was explained to me then,  the reason such income is not taxable is because it falls outside the definition of what constitutes Thai taxable income. Also some  of the subtlety (of this definition) gets lost when translated from Thai.

 

Income earned outside the Thai tax system in prior tax years is not regarded as income ,that could  be taxed , rather it it is regarded as now being capital that was earned in the past ie so no longer subject to current year taxation.

 

Actually  it is in the countries interest that this capital can come back into Thailand rather than being held offshore.

 

Also remember it is not just a narrow group of expats who have benefited from this treatment: major Thai corporations and wealthy Thai individuals also benefit from the treatment.

 

There are plenty of excellent summaries of the situation by the likes of PWC et al.

 

 

 

 

 

Edited January 21, 2023 by wordchild

[nigelforbes]

"Income earned outside the Thai tax system in prior tax years is not regarded as income ,that could  be taxed , rather it it is regarded as now being capital that was earned in the past ie so no longer subject to current year taxation".

 

As wordchild says, the tax year is clearly defined and previous years earnings do not fall within those boundaries. 

[jayboy]

42 minutes ago, wordchild said:

Fwiw , in the distant past, I  had parts of the  law translated line by line and explained to me by a Thai tax lawyer and, unfortunately,(as far as I remember)  there is no single passage that one could quote that makes the exemption on (prior year) overseas income clear and explicit.

As was explained to me then,  the reason such income is not taxable is because it falls outside the definition of what constitutes Thai taxable income. Also some  of the subtlety (of this definition) gets lost when translated from Thai.

 

Income earned outside the Thai tax system in prior tax years is not regarded as income ,that could  be taxed , rather it it is regarded as now being capital that was earned in the past ie so no longer subject to current year taxation.

 

Actually  it is in the countries interest that this capital can come back into Thailand rather than being held offshore.

 

Also remember it is not just a narrow group of expats who have benefited from this treatment: major Thai corporations and wealthy Thai individuals also benefit from the treatment.

 

There are plenty of excellent summaries of the situation by the likes of PWC et al.

 

 

 

 

 

Thanks - very interesting and not a little confusing.There are some obvious issues to contend with here, most notably that a retrospective examination would show current income that should have been taxed but was not.Almost certainly not worth worrying about at all but for the record (1) If the tax authorities took a serious interest in the matter and (2) if some smart lawyers/officials were put to work on the matter, a theoretical problem could very quickly become a practical one. But it won't happen so we can all relax (I think).

 

None of the many guides including PWC that I have seen make any attempt to explain the background.