Thai government to tax all income from abroad for tax residents starting 2024

[Dogmatix]

10 minutes ago, Klonko said:

As per Mike's comprehensive and deserving tax guide: "Only funds that are exempt from Thai tax or funds on which Thai tax has already been paid, can be Gifted. It is not possible to Gift funds that are assessable income, in order to avoid Thai tax.".

 

I understand there is the argument that funds transferred from a Thai resident benefactor's untaxed foreign income to the Thai account of the beneficiary may be assessable income in Thailand.

 

On the occasion of the Swiss embassy town hall February 27, 2024, after discussing tax qualification of foreign income , the senior Thai RD tax expert answered to the question "How are pre-inheritance and gift funds taxed when transferred from abroad?" with "Under Thai domestic law, exemptions are for example provided for gifts to ascendants or descendants or support payments to spouses and children. In these cases, up to THB 20 million per year are exempted. Exemptions are also provided for payments to persons who are not ascendants,descendants or spouse, if they have moral purpose or and or are in accordance with customs (maximum exempted amounts = THB 10 million).".

 

The quote is from the embassy's transcript and I would assume that the transcript was verified with Thai RD. The quote would not make sense if funds gifted from foreign income accounts were assessable income and not exempt from Thai taxes in principle.

 

Based on this  statement, I deem it legal tax optimisation and not illegal tax evasion to transfer untaxed pension funds from my Swiss bank account to my wife's Thai bank account, provided the amounts transferred are less than 50% of our joint living expenses and not passed on to my Thai bank account, and we do not file a joint tax return.

 

Is there any official statement of Thai RD to the contrary? I would not put too much weight on tax consultants with their fee based bias, but rather plan my taxes based on the recent statement from Thai RD.

 

There is no evidence for the view that gifts are only exempt, if they are made from income on which Thai tax has already been paid. The provision on gifts in the Revenue Code makes no mention of this and there are no ministerial or RD regulations to this effect. The only case study on the RD's website about gifts is an example about a foreigner who sent remittances from abroad at irregular intervals to his Thai girlfriend.  Some of the remittances were of a size that could have been regarded as maintenance and others which significantly larger than this.  The RD didn't question that the remittances were from abroad and therefore obviously not out of income taxed in Thailand or that some were too much for regular maintenance.  The only point at issue for the RD was that the couple wasn't legally married and therefore the gifts were assessable for the woman's PIT. I seem to recall they said in the commentary that the gifts would all have been exempted, if they had been legally married.  As you say, a gift from overseas is unlikely to have been taxed in Thailand, unless you earned the money in Thailand and remitted it overseas before gifting it back to Thailand and the RD official talking at the Swiss Embassy would probably have mentioned that gifts from overseas were effectively not exempted, if this were the case.

[Klonko]

21 minutes ago, Dogmatix said:

 

There is no evidence for the view that gifts are only exempt, if they are made from income on which Thai tax has already been paid. The provision on gifts in the Revenue Code makes no mention of this and there are no ministerial or RD regulations to this effect. The only case study on the RD's website about gifts is an example about a foreigner who sent remittances from abroad at irregular intervals to his Thai girlfriend.  Some of the remittances were of a size that could have been regarded as maintenance and others which significantly larger than this.  The RD didn't question that the remittances were from abroad and therefore obviously not out of income taxed in Thailand or that some were too much for regular maintenance.  The only point at issue for the RD was that the couple wasn't legally married and therefore the gifts were assessable for the woman's PIT. I seem to recall they said in the commentary that the gifts would all have been exempted, if they had been legally married.  As you say, a gift from overseas is unlikely to have been taxed in Thailand, unless you earned the money in Thailand and remitted it overseas before gifting it back to Thailand and the RD official talking at the Swiss Embassy would probably have mentioned that gifts from overseas were effectively not exempted, if this were the case.

Thank you very much for case evidence.

[Yumthai]

58 minutes ago, Dogmatix said:

There is no evidence for the view that gifts are only exempt, if they are made from income on which Thai tax has already been paid. The provision on gifts in the Revenue Code makes no mention of this and there are no ministerial or RD regulations to this effect.

Agreed.

Hence, it should be noted in the tax guide that:

 

53) Note: Only funds that are exempt from Thai tax or funds on which Thai tax has already been paid, can be Gifted. It is not possible to Gift funds that are assessable income, in order to avoid Thai tax.

 

is an opinion/interpretation and not from Thai official source.

 

[Dogmatix]

56 minutes ago, Klonko said:

Thank you very much for case evidence.

 You are welcome. For your interest I have attach the RD case study which is quite recent from Feb 2023.  At the beginning is a google translation but the original is at the bottom.

 

A further complication in considering gifts to spouses is the provision in the Civil and Commercial Code that any income or assets acquired after marriage become part of the the common conjugal assets means that the gift to your spouse immediately becomes your joint property, not her sole property. I think that will make it very difficult for the RD to pursue spousal gifts to try to argue they were not irrecoverable gifts, as also defined in the CC&C.  It would also be a nightmare to try to establish that, for example, you got benefit from a house or a car she bought with the gift because you used it.  If she used it for household expenses, as the person in the house study claimed, you would obviously get some benefit too. 

 

Your point about filing separate tax returns is an interesting one.  I hadn't thought of that, although I just filed a separate tax return for the missus for the first time because she started to get some income that would have been taxed in a higher tax bracket, if I had continued to file jointly.  I am not sure though it would make any difference.  Filing a joint tax return doesn't imply that you have pooled your assets, which are legally pooled under the CC&C anyway.  It only implies that your spouse has not much assessable income, so that you can take advantage of her allowances without being affected by her income.  Anyway the clause in the RD about spousal gift exemption is very broad:

 

42 (27) Income derived from maintenance and support or gifts from ascendants, descendants or spouse, but only for the portion not exceeding twenty million Baht throughout the tax year.

 

The clause does mention maintenance or support but adds "or gift" which presumably means that exempted gifts to spouses are not restricted to sums needed for household subsistence but that any gifts under 20 million. whatever the purpose, are exempted. At any rate there are very few households that need 20 million in after tax income to run smoothly, which if restricted to half the maintenance costs would limit it even further to 40 million households. Looking at the history of gift tax, it was introduced in 2016 on the same day as the revival of inheritance tax and was intended to be used in tandem.  The gift exemptions were intended as sweeteners to get IHT through the coup legislature and Council of State and avoid a backlash.  Inheritances to spouses are tax exempt but the 20 million exemption allows billionaires to pass on their estates to children tax free while they are still alive.  That can be the only reason for a 20 million cap and it is unlikely that the RD has been audition offspring from ultra wealthy families to check that their living expenses are 20 million a year. Will the RD take an different approach when the gift exemption emerges as a loophole in its new remittance tax.  Who knows?  They might wish to but also might not find much support in existing laws and regulations which are bare bones. The big problem for he RD is that they are imposing this remittance tax by themselves with no supporting legislation or ministerial regulations and there is a limit to their powers to change laws. 

Gift Tax Case RD KK0702-530 11 Feb 2023.docx

Edited April 6 by Dogmatix

[Dogmatix]

17 minutes ago, Yumthai said:

Agreed.

Hence, it should be noted in the tax guide that:

 

53) Note: Only funds that are exempt from Thai tax or funds on which Thai tax has already been paid, can be Gifted. It is not possible to Gift funds that are assessable income, in order to avoid Thai tax.

 

is an opinion/interpretation and not from Thai official source.

 

Agreed.  Opinions and assumptions can be useful but should be clearly identified as such, if not supported by any evidence. 

[Mike Lister]

2 hours ago, Klonko said:

As per Mike's comprehensive and deserving tax guide: "Only funds that are exempt from Thai tax or funds on which Thai tax has already been paid, can be Gifted. It is not possible to Gift funds that are assessable income, in order to avoid Thai tax.".

 

I understand there is the argument that funds transferred from a Thai resident benefactor's untaxed foreign income to the Thai account of the beneficiary may be assessable income in Thailand.

 

On the occasion of the Swiss embassy town hall February 27, 2024, after discussing tax qualification of foreign income , the senior Thai RD tax expert answered to the question "How are pre-inheritance and gift funds taxed when transferred from abroad?" with "Under Thai domestic law, exemptions are for example provided for gifts to ascendants or descendants or support payments to spouses and children. In these cases, up to THB 20 million per year are exempted. Exemptions are also provided for payments to persons who are not ascendants,descendants or spouse, if they have moral purpose or and or are in accordance with customs (maximum exempted amounts = THB 10 million).".

 

The quote is from the embassy's transcript and I would assume that the transcript was verified with Thai RD. The quote would not make sense if funds gifted from foreign income accounts were assessable income and not exempt from Thai taxes in principle.

 

Based on this  statement, I deem it legal tax optimisation and not illegal tax evasion to transfer untaxed pension funds from my Swiss bank account to my wife's Thai bank account, provided the amounts transferred are less than 50% of our joint living expenses and not passed on to my Thai bank account, and we do not file a joint tax return.

 

Is there any official statement of Thai RD to the contrary? I would not put too much weight on tax consultants with their fee based bias, but rather plan my taxes based on the recent statement from Thai RD.

 

2 hours ago, Dogmatix said:

 

There is no evidence for the view that gifts are only exempt, if they are made from income on which Thai tax has already been paid. The provision on gifts in the Revenue Code makes no mention of this and there are no ministerial or RD regulations to this effect. The only case study on the RD's website about gifts is an example about a foreigner who sent remittances from abroad at irregular intervals to his Thai girlfriend.  Some of the remittances were of a size that could have been regarded as maintenance and others which significantly larger than this.  The RD didn't question that the remittances were from abroad and therefore obviously not out of income taxed in Thailand or that some were too much for regular maintenance.  The only point at issue for the RD was that the couple wasn't legally married and therefore the gifts were assessable for the woman's PIT. I seem to recall they said in the commentary that the gifts would all have been exempted, if they had been legally married.  As you say, a gift from overseas is unlikely to have been taxed in Thailand, unless you earned the money in Thailand and remitted it overseas before gifting it back to Thailand and the RD official talking at the Swiss Embassy would probably have mentioned that gifts from overseas were effectively not exempted, if this were the case.

 

57 minutes ago, Yumthai said:

Agreed.

Hence, it should be noted in the tax guide that:

 

53) Note: Only funds that are exempt from Thai tax or funds on which Thai tax has already been paid, can be Gifted. It is not possible to Gift funds that are assessable income, in order to avoid Thai tax.

 

is an opinion/interpretation and not from Thai official source.

 

 

Gift Tax statements have been problematic from the outset, mostly because of the lack of clear information and the fact it is primarily a domain of the wealthy that is reserved for hi-so's in Thailand and much depends on established local practise. The current statements derive from known documentation, combined with discussion in various threads and unfortunately, some logic. Part of that logic says that a foreigner cannot sensibly earn untaxed income overseas and import it into Thailand tax free as a Gift. That scenario is Tax evasion in the Western play book so I deployed the same logic here. I agree this is only an opinion and should indeed be indicated as such but since those statements had sat in the previous guide for a couple of months without comment on them, I felt it was safe to let them stand in the current version. 

 

I will attempt to  go through the document again and mark up which statements are opinion and which are quotes but this will take time, that purpose was previously served by supplying quotes to source web sites where the full statements could be seen in full, but the quirky nature of quoting links on AN interfered and they had to be removed. Please bear with me on this point and it will be addressed. 

 

Perhaps more importantly, thank you for reading it and for your comments which I deeply appreciate. Having read the and re-read the same material so many times I am so close to it that I probably couldn't spot even obvious errors any longer, which is why objective assessment is extremely useful.

Edited April 6 by Mike Lister

[Klonko]

46 minutes ago, Dogmatix said:

 You are welcome. For your interest I have attach the RD case study which is quite recent from Feb 2023.  At the beginning is a google translation but the original is at the bottom.

 

A further complication in considering gifts to spouses is the provision in the Civil and Commercial Code that any income or assets acquired after marriage become part of the the common conjugal assets means that the gift to your spouse immediately becomes your joint property, not her sole property. I think that will make it very difficult for the RD to pursue spousal gifts to try to argue they were not irrecoverable gifts, as also defined in the CC&C.  It would also be a nightmare to try to establish that, for example, you got benefit from a house or a car she bought with the gift because you used it.  If she used it for household expenses, as the person in the house study claimed, you would obviously get some benefit too. 

 

Your point about filing separate tax returns is an interesting one.  I hadn't thought of that, although I just filed a separate tax return for the missus for the first time because she started to get some income that would have been taxed in a higher tax bracket, if I had continued to file jointly.  I am not sure though it would make any difference.  Filing a joint tax return doesn't imply that you have pooled your assets, which are legally pooled under the CC&C anyway.  It only implies that your spouse has not much assessable income, so that you can take advantage of her allowances without being affected by her income.  Anyway the clause in the RD about spousal gift exemption is very broad:

 

42 (27) Income derived from maintenance and support or gifts from ascendants, descendants or spouse, but only for the portion not exceeding twenty million Baht throughout the tax year.

 

The clause does mention maintenance or support but adds "or gift" which presumably means that exempted gifts to spouses are not restricted to sums needed for household subsistence but that any gifts under 20 million. whatever the purpose, are exempted. At any rate there are very few households that need 20 million in after tax income to run smoothly, which if restricted to half the maintenance costs would limit it even further to 40 million households. Looking at the history of gift tax, it was introduced in 2016 on the same day as the revival of inheritance tax and was intended to be used in tandem.  The gift exemptions were intended as sweeteners to get IHT through the coup legislature and Council of State and avoid a backlash.  Inheritances to spouses are tax exempt but the 20 million exemption allows billionaires to pass on their estates to children tax free while they are still alive.  That can be the only reason for a 20 million cap and it is unlikely that the RD has been audition offspring from ultra wealthy families to check that their living expenses are 20 million a year. Will the RD take an different approach when the gift exemption emerges as a loophole in its new remittance tax.  Who knows?  They might wish to but also might not find much support in existing laws and regulations which are bare bones. The big problem for he RD is that they are imposing this remittance tax by themselves with no supporting legislation or ministerial regulations and there is a limit to their powers to change laws. 

Gift Tax Case RD KK0702-530 11 Feb 2023.docx 24.19 kB · 2 downloads

Thanks for the case doc.

 

Based on marital agreement concluded in Switzerland, which is honoured in Thailand, I will not have conjugal but separated property. Else it could be argued that my pension income in Switzerland is conjugal property and transfers are partially a gift from my wife to herself.

 

With respect to joint tax filing, I consider it a little contradictory to claim THB 60k spouse allowance on the one side and  keep the gift tax exempt on the other side.

 

I could organise myself with zero taxable income and provide respective documentation, but I consider to come up with a tax payable equal to the withholding tax on the interest on my Thai bank accounts, not reclaiming the withholding tax and hopefully keeping the tax man happy and less motivated for cumbersome inquiries.

[UKresonant]

I'm surprised if the genuine gift from overseas  from legitimate source would be problematic. Reading the posts on the UK tax Comunity forum, it does not seem to be other than straight forward there. Unless then re-transfered to a 'relavant person' (like the sender).

Perhaps the gift in a Thai context, could not be then used to purchase property.

Edited April 6 by UKresonant

[Mike Lister]

1 minute ago, UKresonant said:

I'm surprised if the genuine gift from overseas  from legitimate source would be problematic. Reading the posts on the UK tax Comunity forum, it does not seem to be other than straight forward there. Unless then re-transfered to a 'relavant person' (like the sender).

Perhaps the gift in a Thai context, could not be then used to purchase property?

All of this is slap bang in the middle of "dunno" territory! The UK and S and other countries also, have additional laws that surround use of Gift Tax to reduce the risk of Tax Evasion but Thailand appears to have none. The US limits Gifts by monetary value, the UK by time and imposes penalties where that is not met. Working offshore and earning fee income that is not taxed and the transferring the funds to Thailand using Gift Tax, to buy a house, doesn't pass my sniff test, as much as we might want otherwise.

 

It's Work in Progress that I'm happy for others to debate but which I will avoid.. 

[Mike Lister]

Para 53 of the master copy of the Simple Guide now reads:

 

53) Note: It is my opinion that only funds that are exempt from tax, or funds on which tax has already been paid, can be Gifted. Because Gift Tax is a domain of the wealthy and depends on local practise to some extent, there is a shortage of confirmed information on this subject. I do not believe it is possible to Gift funds that are untaxed assessable income, in order to avoid  tax. Members wishing to exercise this option should seek qualified advice before using this option to Gift untaxed funds.

 

I will update the above into the forum copy, as soon as practicable.

 

Edited April 6 by Mike Lister

[Mike Lister]

The numbering in the Overview is wonky but the content remains valid, it should read as follows:

 

OVERVIEW OF THE TAX LAW

 

1) Thai tax laws require a person to pay income tax to the Thai Revenue Department under the following conditions:

 

Individuals, who are categorized as:

a) Thai citizens;

b) A Thai resident who filed taxes in the previous tax year;

c) Foreigners who reside in Thailand for one or more periods with at least 180 days in one tax calendar year.

 

And who receive income inside or outside Thailand via:

 

a) Income from employment (wages, salaries, remuneration, etc.) assessable under Section 40 of the Revenue Code;

b) Income from business operations is assessable under Section 40.

c) Passive or property income (interest, dividends, rental income, goodwill, etc.) based on Article 41 paragraph 2 of the Revenue Code.

 

I have updated the master copy and will update the forum version before long.

[Dogmatix]

33 minutes ago, Klonko said:

Thanks for the case doc.

 

Based on marital agreement concluded in Switzerland, which is honoured in Thailand, I will not have conjugal but separated property. Else it could be argued that my pension income in Switzerland is conjugal property and transfers are partially a gift from my wife to herself.

 

With respect to joint tax filing, I consider it a little contradictory to claim THB 60k spouse allowance on the one side and  keep the gift tax exempt on the other side.

 

I could organise myself with zero taxable income and provide respective documentation, but I consider to come up with a tax payable equal to the withholding tax on the interest on my Thai bank accounts, not reclaiming the withholding tax and hopefully keeping the tax man happy and less motivated for cumbersome inquiries.

 

Thai RD bureaucrats don't make these type of judgments.  If the Revenue Code allows you to claim a 60k allowance for having a spouse, they will let you claim it without question. Unless they investigate your wife's remittances, they won't know, she has received a tax exempt gift from you anyway because the tax return form only requires declaration of gifts in excess of 20 mil from a spouse. You don't have to declare a gift under 20 mil and then claim exemption.  They will also not care whether you claim a refund of withholding tax which is likely to be fairly miniscule, since the maximum tax free interest is 20k which at 15% withholding tax and 0.5% interest on savings accounts gives a maximum refund of 3,000. The kind things they might look at would be someone with huge interest income reported by Thai banks but very little income declared on tax returns to explain where the savings came from. 

[Mike Lister]

5 minutes ago, Dogmatix said:

 

Thai RD bureaucrats don't make these type of judgments.  If the Revenue Code allows you to claim a 60k allowance for having a spouse, they will let you claim it without question. Unless they investigate your wife's remittances, they won't know, she has received a tax exempt gift from you anyway because the tax return form only requires declaration of gifts in excess of 20 mil from a spouse. You don't have to declare a gift under 20 mil and then claim exemption.  They will also not care whether you claim a refund of withholding tax which is likely to be fairly miniscule, since the maximum tax free interest is 20k which at 15% withholding tax and 0.5% interest on savings accounts gives a maximum refund of 3,000. The kind things they might look at would be someone with huge interest income reported by Thai banks but very little income declared on tax returns to explain where the savings came from. 

That also has to be assumption and opinion. I personally think that if somebody was gifted 20 mill, the RD would look at both the giver and the receiver. 

[Dogmatix]

49 minutes ago, UKresonant said:

I'm surprised if the genuine gift from overseas  from legitimate source would be problematic. Reading the posts on the UK tax Comunity forum, it does not seem to be other than straight forward there. Unless then re-transfered to a 'relavant person' (like the sender).

Perhaps the gift in a Thai context, could not be then used to purchase property.

 

I think it would be hard for the RD to argue in the Tax Court that a spousal gift could not be used to buy property or a car or something that the giftor might get some benefit from, when the gift already became common conjugal property the moment it arrived in the receiving spouse's bank account. So I somehow doubt the RD would want to dig into this sort of thing and risk lengthy court cases they might lose, given the lack of law and regulations to support their view.  Bear in mind that this is not going to be just an expat thing. Wealthy Thais who have made millions from investing overseas in stocks on the NASDAQ etc are also going to be gifting untaxed capital gains back to their spouses.  

[Dogmatix]

7 minutes ago, Mike Lister said:

That also has to be assumption and opinion. I personally think that if somebody was gifted 20 mill, the RD would look at both the giver and the receiver. 

 

They might but in that case would they worry, if the giftor claimed a 60k spouse allowance or a refund of 3k in withholding tax?   In the only case study we have so far the only things that the RD investigated was that the gift was not over 20 mil and that the couple was lawfully married.  Of course more cases may follow but anything more to do with irrecoverability and separation of assets is going to hard for them to argue, given that the CC&C makes impossible to keep ownership of conjugal assets separate. More likely they would push the finance ministry for a Royal Decree to reduce the exempt amount which is on the cards anyway along with a reduction in the 100 mil exemption on IHT.  I believe gift tax will continue to be looked in tandem with the IHT, rather than in tandem with this remittance reinterpretation.

[Mike Lister]

1 minute ago, Dogmatix said:

 

They might but in that case would they worry, if the giftor claimed a 60k spouse allowance or a refund of 3k in withholding tax?   In the only case study we have so far the only things that the RD investigated was that the gift was not over 20 mil and that the couple was lawfully married.  Of course more cases may follow but anything more to do with irrecoverability and separation of assets is going to hard for them to argue, given that the CC&C makes impossible to keep ownership of conjugal assets separate. More likely they would push the finance ministry for a Royal Decree to reduce the exempt amount which is on the cards anyway along with a reduction in the 100 mil exemption on IHT.  I believe gift tax will continue to be looked in tandem with the IHT, rather than in tandem with this remittance reinterpretation.

I have no difficulty with members interpretations of the rules in this thread, the difficulty arise where others view the statements as fact or established precedent and decide to follow. The other aspect is me understanding what is reliable to include in future versions of the tax guide, it's for those reasons that I would like to understand what is what. Perhaps I will need to feed back assumed facts and reliable information from time to time, to get sign off and agreement, before issuing subsequent versions of the guide.

[Yumthai]

36 minutes ago, Mike Lister said:

I personally think that if somebody was gifted 20 mill, the RD would look at both the giver and the receiver. 

Possible, but the gifter should have already been known from the RD as TH taxpayer and Thai (tax) resident the year the gift occurs.

[Yumthai]

1 hour ago, Mike Lister said:

1) Thai tax laws require a person to pay income tax to the Thai Revenue Department under the following conditions:

 

Individuals, who are categorized as:

a) Thai citizens;

b) A Thai resident who filed taxes in the previous tax year;

c) Foreigners who reside in Thailand for one or more periods with at least 180 days in one tax calendar year.

 

And who receive income inside or outside Thailand via:

 

a) Income from employment (wages, salaries, remuneration, etc.) assessable under Section 40 of the Revenue Code;

b) Income from business operations is assessable under Section 40.

c) Passive or property income (interest, dividends, rental income, goodwill, etc.) based on Article 41 paragraph 2 of the Revenue Code.

 

The way it is written is misleading as it is understood with "receive income inside or outside Thailand" that worldwide income is then taxable.

 

"receive income inside or outside Thailand" is only valid for Thai-sourced income (Work performed in Thailand, Business in Thailand, Business of an employer in Thailand, Property located in Thailand).

 

Foreign-sourced income must be remitted in Thailand in order to be taxed, and not taxable in Thailand if kept offshore (or remitted but tax exempted).

[Mike Lister]

2 minutes ago, Yumthai said:

 

The way it is written is misleading as it is understood with "receive income inside or outside Thailand" that worldwide income is then taxable.

 

"receive income inside or outside Thailand" is only valid for Thai-sourced income (Work performed in Thailand, Business in Thailand, Business of an employer in Thailand, Property located in Thailand).

 

Foreign-sourced income must be remitted in Thailand in order to be taxed, and not taxable in Thailand if kept offshore (or remitted but tax exempted).

I agree, I think the word "from" is missing, it should read, receive income FROM inside or outside Thailand".

 

Do you agree?

[Yumthai]

5 minutes ago, Mike Lister said:

I agree, I think the word "from" is missing, it should read, receive income FROM inside or outside Thailand".

 

Do you agree?

I would write "receive income FROM inside or FROM outside Thailand" or simply "receive income within Thailand".

[Mike Lister]

1 minute ago, Yumthai said:

I would write "receive income FROM inside or FROM outside Thailand" or simply "receive income within Thailand".

That section is a direct quote from a law firm of some repute, nevertheless, I agree it is still somewhat ambiguous. I think I'd prefer to go with a single "from", as follows.

 

 

OVERVIEW OF THE TAX LAW

 

1) Thai tax laws require a person to pay income tax to the Thai Revenue Department under the following conditions:

 

Individuals, who are categorized as:

a) Thai citizens;

b) A Thai resident who filed taxes in the previous tax year;

c) Foreigners who reside in Thailand for one or more periods with at least 180 days in one tax calendar year.

 

And who receive income from inside or outside Thailand via:

 

a) Income from employment (wages, salaries, remuneration, etc.) assessable under Section 40 of the Revenue Code;

b) Income from business operations is assessable under Section 40.

c) Passive or property income (interest, dividends, rental income, goodwill, etc.) based on Article 41 paragraph 2 of the Revenue Code.

[Mike Lister]

I may need to change my opinion on Gift Tax, I've been reading how other countries such as the UK treat Gifts and it's much more liberal than I had previously understood.

 

Gifts from overseas, to UK residents are free of tax, that being the case, overseas gifts to Thai tax residents might also be free of tax (subject to limits). One question is whether the Thai RD would look at those funds first as a Gift, or as Imported Funds that need assessment, in other words, does the Gift aspect negate the need to assess them?

 

https://community.hmrc.gov.uk/customerforums/pt/8d15fffc-4393-eb11-8ced-00155d9c86c6#:~:text=There is no income tax,be subject to income tax.

 

The US also has liberal terms on Gifts, they impose a lifetime limit of Gifts which is in the millions of Dollars.

 

On the Thai side: there appears to be a means by which previously given Gifts can be clawed back and reclaimed, under odd circumstances. The giftor can reclaim the gift from the giftee, if the giftee defames the giftor or refuses to provide funding for medical care in critical situations, when they are able to do so. 

 

"You can reclaim a gift if the recipient commits a serious crime against the donor, if the recipient seriously insults the donor or seriously undermined his reputation (defamation), and if the recipient refuses to provide the donor with the necessary assistance in the event of danger to his life .

You must submit a claim in this regard within six months of becoming aware of the incident. There is also a statute of limitations.

Theft, fraud and an attack on the donor himself can be a reason to revoke a donation. If it concerns defamation and insult, it must be serious matters. A wrong word in the family atmosphere can be too little; you have to think of public statements that seriously discredit the donor".

 

https://www.thailandblog.nl/en/expats-en-pensionado/over-schenken-en-schenkbelasting-in-thailand/

 

Another aspect is that the Gift must be intended for the Giftee and used by them.

 

My confidence level that we understand Gift Tax here is low.

 

 

[Klonko]

27 minutes ago, Mike Lister said:

I may need to change my opinion on Gift Tax, …

👍

[Dogmatix]

2 hours ago, Mike Lister said:

I may need to change my opinion on Gift Tax, I've been reading how other countries such as the UK treat Gifts and it's much more liberal than I had previously understood.

 

Gifts from overseas, to UK residents are free of tax, that being the case, overseas gifts to Thai tax residents might also be free of tax (subject to limits). One question is whether the Thai RD would look at those funds first as a Gift, or as Imported Funds that need assessment, in other words, does the Gift aspect negate the need to assess them?

 

https://community.hmrc.gov.uk/customerforums/pt/8d15fffc-4393-eb11-8ced-00155d9c86c6#:~:text=There is no income tax,be subject to income tax.

 

The US also has liberal terms on Gifts, they impose a lifetime limit of Gifts which is in the millions of Dollars.

 

On the Thai side: there appears to be a means by which previously given Gifts can be clawed back and reclaimed, under odd circumstances. The giftor can reclaim the gift from the giftee, if the giftee defames the giftor or refuses to provide funding for medical care in critical situations, when they are able to do so. 

 

"You can reclaim a gift if the recipient commits a serious crime against the donor, if the recipient seriously insults the donor or seriously undermined his reputation (defamation), and if the recipient refuses to provide the donor with the necessary assistance in the event of danger to his life .

You must submit a claim in this regard within six months of becoming aware of the incident. There is also a statute of limitations.

Theft, fraud and an attack on the donor himself can be a reason to revoke a donation. If it concerns defamation and insult, it must be serious matters. A wrong word in the family atmosphere can be too little; you have to think of public statements that seriously discredit the donor".

 

https://www.thailandblog.nl/en/expats-en-pensionado/over-schenken-en-schenkbelasting-in-thailand/

 

Another aspect is that the Gift must be intended for the Giftee and used by them.

 

My confidence level that we understand Gift Tax here is low.

 

Indeed the Civil & Commercial Code definition of a gift contradicts itself.  In the first part it says that a gift is irrevocable.  In the second part it outlines conditions for a gift to be revoked. Furthermore the CC&C definition of common conjugal property means that spousal gifts immediately become common conjugal property. 

 

I don't think we can get much help from unattributed views in expat blogs and the RD probably doesn't pay much attention to taxability of gifts in other countries. The Revenue Code is very open in exempting gifts up to 20 mil between married couples.  It doesn't define gifts or make any limitations. It doesn't even say that a spouse, who has received a gift may never make a gift back their spouse.  If there are other cash flows into the receiving spouse's bank account, the RD is not in a position to argue that the re-gifted amount came from the initial gift or other funds. Plus the fact that all funds received after marriage are conjugal property anyway. 

 

The only way to get greater clarity is to find individual cases of gifts. I found one and posted it. Then there is the case of a Potjaman's gift to her brother-in-law that was initially ruled taxable on the grounds that there was insufficient evidence that this was a gift made on a special occasion because it occurred 2 years after his marriage. Then the appeal court ruled it was in fact a wedding gift.  The fact that there may not be any others since the gift tax amendment may suggest it is not a controversial subject for the RD.  Both of these cases relied solely on what was in the statutory law and didn't bring in any other regulations or reinterpretations of the law. 

[Dogmatix]

16 hours ago, Mike Lister said:

That section is a direct quote from a law firm of some repute, nevertheless, I agree it is still somewhat ambiguous. I think I'd prefer to go with a single "from", as follows.

 

 

OVERVIEW OF THE TAX LAW

 

1) Thai tax laws require a person to pay income tax to the Thai Revenue Department under the following conditions:

 

Individuals, who are categorized as:

a) Thai citizens;

b) A Thai resident who filed taxes in the previous tax year;

c) Foreigners who reside in Thailand for one or more periods with at least 180 days in one tax calendar year.

 

And who receive income from inside or outside Thailand via:

 

a) Income from employment (wages, salaries, remuneration, etc.) assessable under Section 40 of the Revenue Code;

b) Income from business operations is assessable under Section 40.

c) Passive or property income (interest, dividends, rental income, goodwill, etc.) based on Article 41 paragraph 2 of the Revenue Code.

 

I don't know whose website this is from but it is pretty hopeless. 

 

Thai citizens are not liable to pay tax unless they are tax residents or have Thai source income. 

 

It makes no difference whether you filed taxes the previous year or not. If you stop having assessable income, no need to keep on filing PND90/91s.

 

The second part creates confusion about assessability of offshore income.  The actual situation is that income paid offshore but arising from Thailand is taxable regardless of whether the recipient is tax resident in Thailand because it is Thai source income.  Foreign source income is only taxable on remittance to Thailand.

Edited April 7 by Dogmatix

[Mike Lister]

54 minutes ago, Dogmatix said:

 

Indeed the Civil & Commercial Code definition of a gift contradicts itself.  In the first part it says that a gift is irrevocable.  In the second part it outlines conditions for a gift to be revoked. Furthermore the CC&C definition of common conjugal property means that spousal gifts immediately become common conjugal property. 

 

I don't think we can get much help from unattributed views in expat blogs and the RD probably doesn't pay much attention to taxability of gifts in other countries. The Revenue Code is very open in exempting gifts up to 20 mil between married couples.  It doesn't define gifts or make any limitations. It doesn't even say that a spouse, who has received a gift may never make a gift back their spouse.  If there are other cash flows into the receiving spouse's bank account, the RD is not in a position to argue that the re-gifted amount came from the initial gift or other funds. Plus the fact that all funds received after marriage are conjugal property anyway. 

 

The only way to get greater clarity is to find individual cases of gifts. I found one and posted it. Then there is the case of a Potjaman's gift to her brother-in-law that was initially ruled taxable on the grounds that there was insufficient evidence that this was a gift made on a special occasion because it occurred 2 years after his marriage. Then the appeal court ruled it was in fact a wedding gift.  The fact that there may not be any others since the gift tax amendment may suggest it is not a controversial subject for the RD.  Both of these cases relied solely on what was in the statutory law and didn't bring in any other regulations or reinterpretations of the law. 

Please bear in mind that not all readers of this thread have the same academic stamina and qualifications that you do and the average members ability to understand the Revenue Code or a DTA is not what yours might be. My biggest criticism of the thread previously is that the conversations were too complex and hi brow for many to understand, which is why a more simpler dialogue became so popular. Expat blogs and any other reasonable form of narrative that puts things simply and provides anecdotal evidence, is usefully deployed here for many, this is not a court of law or a debate in the Supreme Court!

 

I also think we can get a good indication from looking at what other countries Revenue departments do, if we want to understand how the TRD might behave in the future. Looking at gold standards or best practise or even most common practise, in the absence of first hand confirmation of local practise, is extremely helpful.

Edited April 7 by Mike Lister

[Mike Lister]

55 minutes ago, Dogmatix said:

 

I don't know whose website this is from but it is pretty hopeless. 

 

Thai citizens are not liable to pay tax unless they are tax residents or have Thai source income. 

 

It makes no difference whether you filed taxes the previous year or not. If you stop having assessable income, no need to keep on filing PND90/91s.

 

The second part creates confusion about assessability of offshore income.  The actual situation is that income paid offshore but arising from Thailand is taxable regardless of whether the recipient is tax resident in Thailand because it is Thai source income.  Foreign source income is only taxable on remittance to Thailand.

The web site belongs to Dezan Shera and Associates, a very large global firm with a substantial presence in Asia. 

 

https://www.dezshira.com/about-us/our-firm.html#

 

The usefulness of the article is to describe to foreign residents in Thailand, in simple terms, the circumstances under which their funds transfers might be assessable, under which parts of the Revenue Code, AS SHOWN IN BOLD IN THE TAX GUIUDE.  

 

Individuals, who are categorized as:

a) Thai citizens;

b) A Thai resident who filed taxes in the previous tax year;

c) Foreigners who reside in Thailand for one or more periods with at least 180 days in one tax calendar year.

 

And who receive income from inside or outside Thailand via:

 

a) Income from employment (wages, salaries, remuneration, etc.) assessable under Section 40 of the Revenue Code;

b) Income from business operations is assessable under Section 40.

c) Passive or property income (interest, dividends, rental income, goodwill, etc.) based on Article 41 paragraph 2 of the Revenue Code.

 

 

Edited April 7 by Mike Lister

[Dogmatix]

2 hours ago, Mike Lister said:

The web site belongs to Dezan Shera and Associates, a very large global firm with a substantial presence in Asia. 

 

https://www.dezshira.com/about-us/our-firm.html#

 

The usefulness of the article is to describe to foreign residents in Thailand, in simple terms, the circumstances under which their funds transfers might be assessable, under which parts of the Revenue Code, AS SHOWN IN BOLD IN THE TAX GUIUDE.  

 

Individuals, who are categorized as:

a) Thai citizens;

b) A Thai resident who filed taxes in the previous tax year;

c) Foreigners who reside in Thailand for one or more periods with at least 180 days in one tax calendar year.

 

And who receive income from inside or outside Thailand via:

 

a) Income from employment (wages, salaries, remuneration, etc.) assessable under Section 40 of the Revenue Code;

b) Income from business operations is assessable under Section 40.

c) Passive or property income (interest, dividends, rental income, goodwill, etc.) based on Article 41 paragraph 2 of the Revenue Code.

 

 

 

I have never heard of Dezan, Shira & Associates but it doesn't matter much what their reputation is or what resources they have in Asia because because 2 out of 7 points are nonsense:

 

a) Thai citizens;

b) A Thai resident who filed taxes in the previous tax year;

 

And the connecting phrase is misleading because it fails to draw a distinction between income received from outside Thailand that is remitted to Thailand and that which is not.

And who receive income from inside or outside Thailand via:

 

I don't know you would want to draw stuff from other peoples' unverified ebsites which are probably plagiarised from somewhere else, in the trust that they have read the Revenue Code in detail and thoroughly understand it, rather than based on direct reading of the Revenue Code yourself. Anyway, if you want to put that in the tax guide, I don't care because I have no interest in the guide. I also think it would be better to keep this thread for discussion of the tax change at hand and not to clutter this thread with discussion of the phraseology of the tax guide, as I am sure many others are not interested in discussing the guide  That should be done in the tax guide thread itself, or if you don't want any discussion in that for some reason, open a dedicated thread for comments on the tax guide. 

 

 

[Dogmatix]

6 hours ago, Mike Lister said:

I may need to change my opinion on Gift Tax, I've been reading how other countries such as the UK treat Gifts and it's much more liberal than I had previously understood.

 

Gifts from overseas, to UK residents are free of tax, that being the case, overseas gifts to Thai tax residents might also be free of tax (subject to limits). One question is whether the Thai RD would look at those funds first as a Gift, or as Imported Funds that need assessment, in other words, does the Gift aspect negate the need to assess them?

 

https://community.hmrc.gov.uk/customerforums/pt/8d15fffc-4393-eb11-8ced-00155d9c86c6#:~:text=There is no income tax,be subject to income tax.

 

The US also has liberal terms on Gifts, they impose a lifetime limit of Gifts which is in the millions of Dollars.

 

On the Thai side: there appears to be a means by which previously given Gifts can be clawed back and reclaimed, under odd circumstances. The giftor can reclaim the gift from the giftee, if the giftee defames the giftor or refuses to provide funding for medical care in critical situations, when they are able to do so. 

 

"You can reclaim a gift if the recipient commits a serious crime against the donor, if the recipient seriously insults the donor or seriously undermined his reputation (defamation), and if the recipient refuses to provide the donor with the necessary assistance in the event of danger to his life .

You must submit a claim in this regard within six months of becoming aware of the incident. There is also a statute of limitations.

Theft, fraud and an attack on the donor himself can be a reason to revoke a donation. If it concerns defamation and insult, it must be serious matters. A wrong word in the family atmosphere can be too little; you have to think of public statements that seriously discredit the donor".

 

https://www.thailandblog.nl/en/expats-en-pensionado/over-schenken-en-schenkbelasting-in-thailand/

 

Another aspect is that the Gift must be intended for the Giftee and used by them.

 

My confidence level that we understand Gift Tax here is low.

 

 

It's all a matter of opinion but I personally have more confidence in my understanding of gift tax because it is set out in black and white in the Revenue Code and there has not any controversy over the RD's application of the gift tax exemption or any cases that suggest that since it was introduced in 2016.

 

Where I have really low confidence is in the application of the RD of DTAs which are not even mentioned in the Revenue Code as being applicable to PIT. That is odd as Thai statutory law would normally be amended to reflect the existence of international treaties and specify how they should be applied, as you can see in the Land Code.  The RD has had decades to amend the Revenue Code in this way but has failed to do so. There is a ruling from a few decades ago on one case that said tax credits were applicable to salary tax withheld in the Philippines under the DTA but there are few details in that ruling to say how tax credits should be applied and nothing whatsoever vis a vis investment income which we are told is the RD's main target.  That means there is no statutory low, ministerial regulations or Revenue Department regulations on how DTAs should be applied. That leaves room for a great deal of inconsistent discretion by individual RD officers and the possibility that many applications for tax credits will be rejected due to lack of acceptable documentation or due to out of synch tax years, leaving tax payers to pay the total Thai tax due and try to get a refund of the total tax paid overseas on foreign source income.

[Mike Lister]

38 minutes ago, Dogmatix said:

 

I have never heard of Dezan, Shira & Associates but it doesn't matter much what their reputation is or what resources they have in Asia because because 2 out of 7 points are nonsense:

 

a) Thai citizens;

b) A Thai resident who filed taxes in the previous tax year;

 

And the connecting phrase is misleading because it fails to draw a distinction between income received from outside Thailand that is remitted to Thailand and that which is not.

And who receive income from inside or outside Thailand via:

 

I don't know you would want to draw stuff from other peoples' unverified ebsites which are probably plagiarised from somewhere else, in the trust that they have read the Revenue Code in detail and thoroughly understand it, rather than based on direct reading of the Revenue Code yourself. Anyway, if you want to put that in the tax guide, I don't care because I have no interest in the guide. I also think it would be better to keep this thread for discussion of the tax change at hand and not to clutter this thread with discussion of the phraseology of the tax guide, as I am sure many others are not interested in discussing the guide  That should be done in the tax guide thread itself, or if you don't want any discussion in that for some reason, open a dedicated thread for comments on the tax guide. 

 

 

No  thanks, it's already been demonstrated that dedicated tax guide threads don't remain dedicated for very long. I think that leaving all the tax discussions in the same pot probably best serves the members who want information, even if it does mean a slot of sifting through legal hypothesis by amateur American lawyers and accountants with spreadsheets. Sooner or later, some useful information is bound to surface somewhere.

 

If anyone wishes to propose alternate wording for the challenge that has been raised, I'm happy to hear it. That said, for third time, the typre face in bold sets aside the previous arguments by many that foreigners in Thailand don't need to pay tax and confirms that the Revenue Code states that they do (even if the remaining verbiage is questionable in its presentation):

 

Individuals, who are categorized as:

a) Thai citizens;

b) A Thai resident who filed taxes in the previous tax year;

c) Foreigners who reside in Thailand for one or more periods with at least 180 days in one tax calendar year.

 

And who receive income from inside or outside Thailand via:

 

a) Income from employment (wages, salaries, remuneration, etc.) assessable under Section 40 of the Revenue Code;

b) Income from business operations is assessable under Section 40.

c) Passive or property income (interest, dividends, rental income, goodwill, etc.) based on Article 41 paragraph 2 of the Revenue Code.

Edited April 7 by Mike Lister