Thai gov. to tax (remitted) income from abroad for tax residents starting 2024 - Part I

[JimGant]

2 hours ago, jerrymahoney said:

Article 20 Paragraph 3
Under paragraph 3, annuities that are derived and beneficially owned by a resident of a Contracting State are taxable only in that State.

 

We must be on different frequencies..... I was responding to your, "If the the USA-Thai DTA article 20 Pars. 2 & 3 are applied, I won't have any tax bill in Thailand at all." And, yes, para 2 will keep your Social Security from being taxed. But para 3 clearly states that any income from an annuity owned by you is taxed by the contracting state in which you are a resident. Thus, Thailand, if you're a tax resident, gets first taxation dibs on your annuity income (if remitted). If you're just saying you won't have any Thai tax bill, it's not from any protection you believe para 3 is giving you.

[jerrymahoney]

17 minutes ago, JimGant said:

 

We must be on different frequencies..... I was responding to your, "If the the USA-Thai DTA article 20 Pars. 2 & 3 are applied, I won't have any tax bill in Thailand at all." And, yes, para 2 will keep your Social Security from being taxed. But para 3 clearly states that any income from an annuity owned by you is taxed by the contracting state in which you are a resident. Thus, Thailand, if you're a tax resident, gets first taxation dibs on your annuity income (if remitted). If you're just saying you won't have any Thai tax bill, it's not from any protection you believe p ara 3 is giving you.

Right now I will just say I don't care. The annuity would only be a top-up to the Social Security to get to the 65K and if I have to pay tax on it, with all the available deductions, it won't be much.

 

As to further interpretation of Paragraph 3, I have no further comment.

[JimGant]

55 minutes ago, Ben Zioner said:

Just looked at one of the 3 DTAs that may affect me  and found that 

 

"ARTICLE 18
PRIVATE PENSIONS

            Income in the nature of pensions or other remuneration for past employment arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in the first-mentioned State."

 

Doesn't say anything IMHO.

 

This may help define terms. It's from the Technical Explanation of the US-Thai DTA, and it pertains to Article 6, rents; but the highlighted terminology applies to all articles.

Quote

.....states the general rule that income of a resident of a Contracting State derived from real property situated in the other Contracting State may be taxed
in the Contracting State in which the property is situated. ......This Article does not grant an exclusive taxing right to the situs State; the situs State is
merely given the primary right to tax.

 

The language of the OECD and UN model tax treaties uses this language to define: Exclusive taxation rights, e.g., "taxable only in the first mentioned contracting state." The next level is illustrated above, where "may be taxed" defines the "primary right to tax," leaving the second contracting state with a "secondary right to tax." In the above example, the US would have first taxation rights (primary rights) on rents from property located in the US;  but Thailand, if that's where you're a tax resident, can also tax this income. In this example, the US gets to keep all the collected taxes, while Thailand's tax revenue, if any, is what's left after having to absorb the US taxes as a tax credit. Sounds like a waste of time, unless you're in a high Thai tax bracket, and a low US tax bracket..... But, how Thai RD sorts out all these DTA subtleties, if they even decide to, should be interesting.

[JimGant]

59 minutes ago, jerrymahoney said:

As to further interpretation of Paragraph 3, I have no further comment

 

Thank you.

[jerrymahoney]

9 minutes ago, JimGant said:

 

Thank you.

That is because the PNG I posted of Paragraph 3 and the verbiage you used to describe Paragraph 3 are not the same.

[The Cyclist]

1 hour ago, Ben Zioner said:

Just looked at one of the 3 DTAs that may affect me  and found that 

 

"ARTICLE 18
PRIVATE PENSIONS

            Income in the nature of pensions or other remuneration for past employment arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in the first-mentioned State."

 

Doesn't say anything IMHO.

 

What that says in a nutshell is that the Country where the pension arises, that Country has first dibs on taxing it.

 

If that Country it is not taxing it, Thailand has second dibs on taxing it.

 

As it is pension specific, the bottom line is ( As I have said many times ) if those pensions are not taxed in other Countries, you will probably be taxed if you remit them to Thailand.

 

Or to put it even simpler, if income remitted to Thailand has been taxed at source, it is highly likely that it will not  be taxed again in Thailand.

 

Whether one will be required to obtain a TIN and file tax returns for pensions remains to be seen.

[JimGant]

5 minutes ago, The Cyclist said:

What that says in a nutshell is that the Country where the pension arises, that Country has first dibs on taxing it.

 

That's what the DTA says that Ben provided. But that's not the norm, at least for private pensions. Here's what the US-Thai tax treaty technical explanation says:

 

Quote

Article 20 deals with the taxation of private (i.e., non-government) pensions, annuities, .........
Paragraph 1 provides that private pensions and other similar remuneration paid in
consideration of past employment are generally taxable only in the residence State of the recipient.

 

"Generally taxable" sounds a little wishy washy. Here's what the actual treaty language says:

Quote

Subject to the provisions of paragraph 2 of Article 21 (Government Service), [private] pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment shall be taxable only in that State.

 

"Taxable only in that State" implies exclusivity (but, again, there is no exclusivity in US DTAs, due to the saving clause).

 

Anyway, this is why advice on this forum over the years has said to not have your Boeing or IBM pension direct deposited into Thailand, since Thailand would have obvious taxation rights, to include remitted in year earned.

[Danderman123]

8 hours ago, jerrymahoney said:

You said earlier this topic to me: What's new in 2024 is that your 65K (per month) is now reportable.

 

Fine. But it looks like you want to be 180+ days per year tax resident in Thailand with no reportable income.

 

Legally.

First off, I am leaving Thailand until this is sorted out.

 

Secondly, I will load up my Thai bank account before January 1, so that I have no reportable income in 2024.

 

[jerrymahoney]

3 minutes ago, Danderman123 said:

First off, I am leaving Thailand until this is sorted out.

 

Secondly, I will load up my Thai bank account before January 1, so that I have no reportable income in 2024.

 

Ok. Have fun wherever. (Really).

 

I just computed with/if Social Security off limits and with the available deductions especially for an old codger my Thai tax bill might be $US 100 per year.

 

No reason to go packing for me.

[Danderman123]

6 minutes ago, jerrymahoney said:

Ok. Have fun wherever. (Really).

 

I just computed with/if Social Security off limits and with the available deductions especially for an old codger my Thai tax bill might be $US 100 per year.

 

No reason to go packing for me.

The problem is more than money, it's getting trapped in the world of Thai tax law.

 

For anyone who is already paying Thai income tax, there's no problem.  For the rest of us, it's a big problem.

 

 

[jerrymahoney]

4 minutes ago, Danderman123 said:

The problem is more than money, it's getting trapped in the world of Thai tax law.

Still I am more concerned about being trapped in the Estados Unidos than trapped in Thailand.

 

Hasta luego.

[Sheryl]

23 minutes ago, jerrymahoney said:

Ok. Have fun wherever. (Really).

 

I just computed with/if Social Security off limits and with the available deductions especially for an old codger my Thai tax bill might be $US 100 per year.

 

No reason to go packing for me.

 

The only drawback is you will have to file a tax return (currently not required if you owe nothing at all). And may need, at least the first time, the services of an accountant well versed in the DTA etc to know how to show the fact that the SS is exempt.

 

If you have a US credit card that you can pay out of a US bank account, making more use of that for larger ticket items might help you stay within just your SS. Alternatively, transfer some extra funds as a cushion now before the new rules go into effect.

 

in order to be extra sure I can live solely on my SS I have switched to use of US card when buying air tickets to abroad and for my (internationally based) health insurance.  In both instances, though I do the transaction from Thailand the funds never enter Thailand at all, except/unless I use a Thai air carrier.

 

[Ben Zioner]

1 hour ago, JimGant said:

 

This may help define terms. It's from the Technical Explanation of the US-Thai DTA, and it pertains to Article 6, rents; but the highlighted terminology applies to all articles.

 

The language of the OECD and UN model tax treaties uses this language to define: Exclusive taxation rights, e.g., "taxable only in the first mentioned contracting state." The next level is illustrated above, where "may be taxed" defines the "primary right to tax," leaving the second contracting state with a "secondary right to tax." In the above example, the US would have first taxation rights (primary rights) on rents from property located in the US;  but Thailand, if that's where you're a tax resident, can also tax this income. In this example, the US gets to keep all the collected taxes, while Thailand's tax revenue, if any, is what's left after having to absorb the US taxes as a tax credit. Sounds like a waste of time, unless you're in a high Thai tax bracket, and a low US tax bracket..... But, how Thai RD sorts out all these DTA subtleties, if they even decide to, should be interesting.

I truly appreciate. Thanks

[jerrymahoney]

3 minutes ago, Sheryl said:

The only drawback is you will have to file a tax return (currently not required if you owe nothing at all). And may need, at least the first time, the services of an accountant well versed in the DTA etc to know how to show the fact that the SS is exempt.

Maybe. But as I already give Thai immigration my Thai bank account details for my 65K+ monthly annual extension, a tax filing showing only Social Security and my annuity income -- which is already in the 'source of funds' letter for immigration -- that shouldn't be too difficult.

 

And I have a good translation service that can even get a stamp from Thai MoFA going in from my Thai marriage 2 years ago.

[The Cyclist]

44 minutes ago, JimGant said:

"Taxable only in that State" implies exclusivity

 

The UK DTA states the same for Government Pensions, with the following exception.

 

For example.

 

A Thai National who garners a UK Gov Pension would remain taxable in the UK unless they return to Thailand, where it would not be taxed in the UK but taxed in Thailand instead.

 

Other UK Pensions are not subjected to any ' exclusitivity clause ' but I am still of the belief that if they are taxed in the UK they will not then be taxed again in Thailand.

 

Cannot copy and paste for some reason but 

 

Page 27, Article 19, Para 2 ( a ) and ( b ) of the UK-Thai DTA refers

[jerrymahoney]

[jayboy]

27 minutes ago, Sheryl said:

 

The only drawback is you will have to file a tax return (currently not required if you owe nothing at all). And may need, at least the first time, the services of an accountant well versed in the DTA etc to know how to show the fact that the SS is exempt.

 

If you have a US credit card that you can pay out of a US bank account, making more use of that for larger ticket items might help you stay within just your SS. Alternatively, transfer some extra funds as a cushion now before the new rules go into effect.

 

in order to be extra sure I can live solely on my SS I have switched to use of US card when buying air tickets to abroad and for my (internationally based) health insurance.  In both instances, though I do the transaction from Thailand the funds never enter Thailand at all, except/unless I use a Thai air carrier.

 

 

This sums up my own position exactly.Funds already transferred to my Thai bank account.Next year will maximize use locally of UK credit card.Resigned to having to file tax return for 2024 tax year and in due course will seek accountant that meets my requirements.Will take no immediate action as for time being this is a developing situation.There is time - filing limit for 2024 tax year is 31.3.2024.

[The Cyclist]

27 minutes ago, jerrymahoney said:

 

Thanks

[jerrymahoney]

1 minute ago, The Cyclist said:

 

Thanks

OK.

 

And just to note to some of the comments above, I have a structured monthly income -- I do not have access to large lump sums. So any large deposit prior to Jan 1, 2024, is not an option for me.

[TravelerEastWest]

16 hours ago, Danderman123 said:

I am guessing that you are a tax resident with a tax ID in Thailand. 

 

For many of us, we have never filed a return, have no tax ID, and don't want to file.

 

The impact of these new regulations is probably trivial for you, but to us, it's a major problem.

 You are correct I am a tax resident with a business and personal tax return. I pay taxes here and in America No one wants to file and pay taxes but death and taxes as the old saying goes are sure things. If you only have a small pension your Thai taxes will normally be small or zero so not a big problem. If you have lots of money you hire some highly trained experts again no big problem. If you are in the middle it might be some work but again Thai CPAs are not expensive.

 

For myself I do all the above: larger than usual money in this year, Hire a CPA, study the situation and I have an LTR visa so for now no issues but who knows in the future?

[Presnock]

3 hours ago, JimGant said:

 

We must be on different frequencies..... I was responding to your, "If the the USA-Thai DTA article 20 Pars. 2 & 3 are applied, I won't have any tax bill in Thailand at all." And, yes, para 2 will keep your Social Security from being taxed. But para 3 clearly states that any income from an annuity owned by you is taxed by the contracting state in which you are a resident. Thus, Thailand, if you're a tax resident, gets first taxation dibs on your annuity income (if remitted). If you're just saying you won't have any Thai tax bill, it's not from any protection you believe para 3 is giving you.

according to the DTA art 20 1 & 2 and Article 21 para 2, us govt pensions can only be taxed by the US unless the person is not only a citizen but a resident of Thailand.  I receive a us govt pension based on 40 years working for the US govt and upon birth was a us citizen.

[jerrymahoney]

34 minutes ago, Presnock said:

(Jim Gant said) But para 3 clearly states that any income from an annuity owned by you is taxed by the contracting state in which you are a resident.

No it doesn't.

 

You left out the words "derived' and '"only" as in:

 

Annuities derived and beneficially owned by a resident of a Contracting State shall be taxable only in that State.

 

[noobexpat]

2 hours ago, The Cyclist said:

 

Other UK Pensions are not subjected to any ' exclusitivity clause ' but I am still of the belief that if they are taxed in the UK they will not then be taxed again in Thailand.

 

 

Why would they be taxed in UK when you are non resident and the pension provider is using an NT tax code provided by hmrc?

 

I think a lot of expats never completed their P85. I couldn’t wait to fill mine in 555

 

[stat]

11 hours ago, Presnock said:

suggest all read their country's DTA with Thailand and what can or cannot be taxed...US - article 20 is interesting

The DTA is only! relevant if

 

a. you already paid taxes in one country (for example dividends, rent from UK house etc, already taxed! pension)

b. you are tax resident in both countries.

c. you are an us national (very special case)

 

The DTA is irrelevant if you have for example capital gains outside TH and you have NOT paid any taxes on it as is the norm if you are only tax resident in TH (more then 180 days in TH). Another example is a German pension that is not taxed in Germany as you live in Thailand.

[jerrymahoney]

1 hour ago, jerrymahoney said:

No it doesn't.

 

You left out the words "derived' and '"only" as in:

 

Annuities derived and beneficially owned by a resident of a Contracting State shall be taxable only in that State.

 

https://www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/tax-residency/United-States-Tax-Residency.pdf (Click om PNG)

[jayboy]

52 minutes ago, noobexpat said:

 

Why would they be taxed in UK when you are non resident and the pension provider is using an NT tax code provided by hmrc?

 

I think a lot of expats never completed their P85. I couldn’t wait to fill mine in 555

 

 

I believe the onus is on the individual to submit the P85 and argue the case for NT status with HMRC who would then advise the pension provider.

 

I gather it's not nearly as simple as it might appear and I know a few who have been unsuccessful in getting the NT status despite having a good case.

 

Be that as it may, those residents of Thailand with NT status will obviously not be able to benefit from the provisions of the UK/Thailand DTA (because they have been exempted from paying tax in the UK resulting in a conclusion they should pay in\come tax in Thailand).That presents a problem for them, unless they have the financial resources to fund themselves from pre-2024 investments/savings.

[JimGant]

2 hours ago, jerrymahoney said:

No it doesn't.

 

You left out the words "derived' and '"only" as in:

 

Annuities derived and beneficially owned by a resident of a Contracting State shall be taxable only in that State.

 

Ok, replace derived with obtained or received. And as previously discussed, taxable "only" means -- in this para on annuities -- exclusivity in the Contracting State of residency, i.e., Thailand. How you arrive at the US having taxing priority over these kinds of annuities is beyond me. But why care? You're liable for taxation on an annuity by both Thailand and the US (due to the saving clause). This should be a neutral taxation situation, due to tax credits -- unless you owe no US taxes (i.e., standard deduction greater than AGI), but owe Thai taxes because your annuity exceeds the allowances and deductions. But, as you've already said -- if you do owe Thai taxes, it won't be much. Relax.

[noobexpat]

32 minutes ago, jayboy said:

 

I believe the onus is on the individual to submit the P85 and argue the case for NT status with HMRC who would then advise the pension provider.

 

I gather it's not nearly as simple as it might appear and I know a few who have been unsuccessful in getting the NT status despite having a good case.

 

Be that as it may, those residents of Thailand with NT status will obviously not be able to benefit from the provisions of the UK/Thailand DTA (because they have been exempted from paying tax in the UK resulting in a conclusion they should pay in\come tax in Thailand).That presents a problem for them, unless they have the financial resources to fund themselves from pre-2024 investments/savings.

 

Stick to your day job, which clearly isn't tax. I will do the same - which is!

[jayboy]

2 minutes ago, noobexpat said:

 

Stick to your day job, which clearly isn't tax. I will do the same - which is!

You're right it's not my day job.Can you refer me to the bit or bits where I have gone wrong.

[noobexpat]

50 minutes ago, jayboy said:

 

I believe the onus is on the individual to submit the P85 and argue the case for NT status with HMRC who would then advise the pension provider.

 

I gather it's not nearly as simple as it might appear and I know a few who have been unsuccessful in getting the NT status despite having a good case.

 

Be that as it may, those residents of Thailand with NT status will obviously not be able to benefit from the provisions of the UK/Thailand DTA (because they have been exempted from paying tax in the UK resulting in a conclusion they should pay in\come tax in Thailand).That presents a problem for them, unless they have the financial resources to fund themselves from pre-2024 investments/savings.

 

I've bolded the incorrect bits.

 

You also misunderstand the purpose of a DTA.