What is the tax treaty between Canada and Thailand?

[shady4lyfe]

I recently applied for the Thai Elite visa and have some questions and concerns regarding the new rule coming to place to tax foreign income in Thailand. Does anyone know how the Canada-Thailand tax treaty will come into play? In Canada, you can still be considered a tax resident even if you don't live there for more than 183 days. So if you pay tax there and are considered a tax resident, do you still have to pay tax in Thailand? Would appreciate any insights from fellow Canadians in Thailand. 

[Celsius]

8 minutes ago, shady4lyfe said:

Canada, you can still be considered a tax resident even if you don't live there for more than 183 days.

You could or you don't have to. It depends on how CRA sees your situation. I did not have any ties to canada except my rental condo and a bank account so they deemed me a non resident for tax purposes after spending 2 years in Thailand.

 

Which was qite a bit of inconvenience as i lost all my rights inclyding free healthcare.

[foreverlomsak]

Check in here

Double Tax Agreement (DTA) | The Revenue Department (English Site) (rd.go.th)

[Maestro]

https://www.canada.ca/en/department-finance/programs/tax-policy/tax-treaties/country/thailand-convention-1984.html

 

[DrJack54]

6 hours ago, shady4lyfe said:

.....concerns regarding the new rule coming to place to tax foreign income in Thailand.

What new rule.

Don't believe all the rubbish you read.

Unfounded Scaremongering 

[kingstonkid]

OP Wat until a formal annuncement.  There is absolutely no way legally they can tax you for 4 months with the other countries agreeing not to tax you for the same period.

 

Imagine a snowbird comes here for 4 months and then goes back to their home country.

 

[Presnock]

On 9/26/2023 at 2:23 PM, foreverlomsak said:

Check in here

Double Tax Agreement (DTA) | The Revenue Department (English Site) (rd.go.th)

Great response!  Last updated almost 2 years ago but most likely still accurate.  It would seem to me that they would

be creating more problems instead of making more money but that doesn't stop them from trying to squeeze every cent out of the farangs who spend money here the entire time they live here!

2 hours ago, kingstonkid said:

OP Wat until a formal annuncement.  There is absolutely no way legally they can tax you for 4 months with the other countries agreeing not to tax you for the same period.

 

Imagine a snowbird comes here for 4 months and then goes back to their home country.

 

 

2 hours ago, kingstonkid said:

OP Wat until a formal annuncement.  There is absolutely no way legally they can tax you for 4 months with the other countries agreeing not to tax you for the same period.

 

Imagine a snowbird comes here for 4 months and then goes back to their home country.

 

 

[Presnock]

Just now, Presnock said:

Great response!  Last updated almost 2 years ago but most likely still accurate.  It would seem to me that they would

be creating more problems instead of making more money but that doesn't stop them from trying to squeeze every cent out of the farangs who spend money here the entire time they live here!

 

 

 

Just now, Presnock said:

Great response!  Last updated almost 2 years ago but most likely still accurate.  It would seem to me that they would

be creating more problems instead of making more money but that doesn't stop them from trying to squeeze every cent out of the farangs who spend money here the entire time they live here!

 

 

 

2 hours ago, kingstonkid said:

OP Wat until a formal annuncement.  There is absolutely no way legally they can tax you for 4 months with the other countries agreeing not to tax you for the same period.

 

Imagine a snowbird comes here for 4 months and then goes back to their home country.

 

Their announcement indicates that one must be here over 180 days a year to be taxed.  Some news indicated that the original decree indicates that countries with a tax agreement wouldn't double tax folks either nor would they tax retirement funds (unless they were coming from interest drawn on savings, IRA's or what ever) that are earned each year of retirement, so like the US, Social Security or government/military retirement funds would not be taxed.  But, =TIT and we have not yet seen the formal official annoncement so many folks are maybe wasting time even worrying about what might be.  We have nursery stories about killing the goose that laid the golden eggs.

[foreverlomsak]

20 hours ago, DrJack54 said:

What new rule.

Don't believe all the rubbish you read.

Unfounded Scaremongering 

Exactly, what new rule, read the underlined extract from Thai Revenue Personal Income Tax, this doesn't mean they will tax Expat's just that the option is there and has been for a while.

Personal Income Tax | The Revenue Department (English Site) (rd.go.th)

1.Taxable Person

Taxpayers are classified into “resident” and “non-resident”. “Resident” means any person residing in Thailand for a period or periods aggregating more than 180 days in any tax (calendar) year. A resident of Thailand is liable to pay tax on income from sources in Thailand as well as on the portion of income from foreign sources that is brought into Thailand. A non-resident is, however, subject to tax only on income from sources in Thailand.

Date of last amendment 23.11.2020

[flexomike]

3 hours ago, kingstonkid said:

OP Wat until a formal annuncement.  There is absolutely no way legally they can tax you for 4 months with the other countries agreeing not to tax you for the same period.

 

Imagine a snowbird comes here for 4 months and then goes back to their home country.

 

To be a tax resident in Thailand you would have to stay in the country for more than 180 days in a calendar year

[Srikcir]

21 hours ago, Maestro said:

https://www.canada.ca/en/department-finance/programs/tax-policy/tax-treaties/country/thailand-convention-1984.html

 

Notably:

Article 18

Pensions

1. Pensions and other similar remuneration, whether they consist of periodic or non-periodic payments, for past employment, arising in a Contracting State and paid to a resident or the other Contracting State shall be taxable only in the first-mentioned State.

[Srikcir]

16 minutes ago, flexomike said:

To be a tax resident in Thailand you would have to stay in the country for more than 180 days in a calendar year

And it would be more than an aggregate of 180 days during the year.  

[flexomike]

Just now, Srikcir said:

And it would be more than an aggregate of 180 days during the year.  

yes, does not have to be consecutive days

[Jaggg88]

7 hours ago, Presnock said:

 

 

Their announcement indicates that one must be here over 180 days a year to be taxed.  Some news indicated that the original decree indicates that countries with a tax agreement wouldn't double tax folks either nor would they tax retirement funds (unless they were coming from interest drawn on savings, IRA's or what ever) that are earned each year of retirement, so like the US, Social Security or government/military retirement funds would not be taxed.  But, =TIT and we have not yet seen the formal official annoncement so many folks are maybe wasting time even worrying about what might be.  We have nursery stories about killing the goose that laid the golden eggs.

There has been an official announcement. Currently if you have untaxed income from abroad and you don't bring it on shore to Thailand in the year you earn it then in future years it was exempt from tax. The new Departmental Instruction No. Por 161/2566 (“DI No. 161/2566”) changes that and if you are resident in Thailand, that is stay more than 180 days in a year, then your untaxed earnings from abroad will now be subject to tax no matter when you bring them into Thailand. This does NOT affect income you have already been taxed on in your home country if Thailand has a double taxation agreement. Going forward we may need to prove the money we are bringing in has already been taxed which will be a real pain. International accountants KMPG have supplied their take on it.   https://kpmg.com/th/en/home/insights/2023/09/th-tax-news-flash-issue-145.html?fbclid=IwAR1kEo_QrnHc2SH10G16TJICnIdzRh4f5L5wUFol_n4tDO7b5h6ZGqp4oE8

[ChaiyaTH]

1 hour ago, Jaggg88 said:

There has been an official announcement. Currently if you have untaxed income from abroad and you don't bring it on shore to Thailand in the year you earn it then in future years it was exempt from tax. The new Departmental Instruction No. Por 161/2566 (“DI No. 161/2566”) changes that and if you are resident in Thailand, that is stay more than 180 days in a year, then your untaxed earnings from abroad will now be subject to tax no matter when you bring them into Thailand. This does NOT affect income you have already been taxed on in your home country if Thailand has a double taxation agreement. Going forward we may need to prove the money we are bringing in has already been taxed which will be a real pain. International accountants KMPG have supplied their take on it.   https://kpmg.com/th/en/home/insights/2023/09/th-tax-news-flash-issue-145.html?fbclid=IwAR1kEo_QrnHc2SH10G16TJICnIdzRh4f5L5wUFol_n4tDO7b5h6ZGqp4oE8

What you are stating is not what I am reading from the article.

''On 15 September 2023, the Thai Revenue Department issued Departmental Instruction No. Por 161/2566 (“DI No. 161/2566”) as a guideline to assist tax officers in determining the personal income tax implications for foreign-sourced income brought into Thailand by Thai tax residents.

 

DI No. 161/2566 provides a new interpretation of Section 41 Paragraph 2 of the Thai Revenue Code: the assessable income under Section 40 of the Revenue Code derived by a resident of Thailand in the previous tax year — from employment, a business carried on overseas, or property situated overseas — that is brought into Thailand should be subject to personal income tax in the tax year that the said assessable income is brought into Thailand. ''

 

So yes, you would pay taxes even it is earnings from a year ago in the new scenario, but you will still not pay any tax on the money you earn abroad, that you do not bring into Thailand, which is a significant difference.

 

I suspect the part of ''that is brought into Thailand'' was also designed for the Elite, not to be friendly to us.

 

This also makes the entire story logical. However the question would still be how this works for specific things like retirement, or money you saved up while being taxed in the past etc etc. There is not really a way to proof this.

Edited September 27, 2023 by ChaiyaTH

[Skeptic7]

Nobody knows anything because as typical, Thailand imbeciles spouting off another ill-considered BS money grab scheme without a clue and zero forethought of implications, existing treaties, exemptions, enforcement. Clear as mud, as usual.

 

Constantly scamming for ways to pay for their problems with others money. Never manning up, never taking responsibility and never solving their inept country's designed poverty/inequality from within and leading by example. Because it has nothing to do with that. That's the con, the smokescreen, the lie. Those in need will see a pittance at best and all the fat cats at the top will prosper immensely and widen that gap even further. 

Edited September 28, 2023 by Skeptic7

[Jaggg88]

11 hours ago, ChaiyaTH said:

What you are stating is not what I am reading from the article.

''On 15 September 2023, the Thai Revenue Department issued Departmental Instruction No. Por 161/2566 (“DI No. 161/2566”) as a guideline to assist tax officers in determining the personal income tax implications for foreign-sourced income brought into Thailand by Thai tax residents.

 

DI No. 161/2566 provides a new interpretation of Section 41 Paragraph 2 of the Thai Revenue Code: the assessable income under Section 40 of the Revenue Code derived by a resident of Thailand in the previous tax year — from employment, a business carried on overseas, or property situated overseas — that is brought into Thailand should be subject to personal income tax in the tax year that the said assessable income is brought into Thailand. ''

 

So yes, you would pay taxes even it is earnings from a year ago in the new scenario, but you will still not pay any tax on the money you earn abroad, that you do not bring into Thailand, which is a significant difference.

 

I suspect the part of ''that is brought into Thailand'' was also designed for the Elite, not to be friendly to us.

 

This also makes the entire story logical. However the question would still be how this works for specific things like retirement, or money you saved up while being taxed in the past etc etc. There is not really a way to proof this.

What I stated is exactly what the article says. My quote "then your untaxed earnings from abroad will now be subject to tax no matter when you bring them into Thailand." I never said all your untaxed earning will be subject to tax but only the ones you bring into Thailand, whether it's the year you earn them or later years. They are trying to close a loop hole.

[oldcpu]

Unfortunately , this old thread really got off track in terms of the tax treaty between Canada and Thailand, as it focused on a new Thai RD interpretation for taxation, and has multiple posts about major worries by some of a possible, yet to come, change to taxing foreign income.

 

Yes - we all know that is very possible.

 

But, can we please take a step back - and put some of those worries aside for a moment? 

 

And consider the current situation (BEFORE any such hypothetical changes implemented).

 

I want to review the tax scenario so to better understand how any changes could impact myself as a Canadian expatriate, dependent on the visa I may hold.

 

Canadian Pensions:

 

For Canadian expat tax-residents in Thailand , I have read that Canadian pensions are taxed in Canada (and not in Thailand) - this is also my experience as I pay Canadian tax on my Canadian Old Age Security (OAS) and on my Canada Pension Plan (CPP). I also read RRIF payments are considered in that 'pension' category (ie they will also be taxed in Canada).  The Thai/Canada Double Tax Agreement (DTA) also suggests that to me that Canadian pensions are to be only taxed in Canada.

 

Canadian Interest/Dividends:

 

I have read that nominally, for non-residents to Canada, who hold stock market shares in Canadian brokerage, that the dividends (and also interest in savings (?) ) are nominally taxed at 25% - but they instead 'may' be taxed by Canada (per the Thai-Canada DTA) at 15% tax rate. I suspect < unsure > that some Canadian Revenue Agency (CRA) form (possibly NR301) needs to be completed to reduce the withholding tax to 15% for dividends and interest. ... I assume later, when one submits their income tax return to Canada - one could end up still being taxed at a higher rate than the 15% (and possibly higher than the 25%).

 

I also read that withholding tax by Canada for mutual funds held in an account in Canada may be less ... and its withholding tax is at 15% (possibly as specified in the Canada/Thai DTA (and an NR301 form is not necessary in the mutual fund case)).  Again, I assume after income tax returns filed, the actual tax rate could be higher.

 

As to the above taxes - in my case, this is more a curiousity for me, in regards to the taxation of 'dividends' and 'interest' earned in Canada (with myself being a non-resident to Canada, but a resident of Thailand) as I don't receive much in dividends nor interest from investments in Canada.  

 

Canadian Capital Gains:

 

It gets more interesting when it comes to Capital Gains (Section 116 of the Canadian Income Tax Act (ITA) and the Thai/Canadian DTA).  

 

If I understand the DTA between Thailand and Canada, then capital gains from Canadian investments earned in a Canadian brokerage  'may' be taxed in Canada (but not in Thailand). < unsure >  However, further, I read (and also inferred to be more specific) from the Canadian ITA that that if a non-resident to Canada owns less than 25% of a public company listed on a stock exchange in Canada, then capital gains (on stocks, and also mutual funds, ETFS, ... ) on that equity are not taxed in Canada.  .... Of course a non-resident to Canada is not entitled to the ~$1-million capital gains deduction in Canada, so perhaps not being required to pay any capital gains tax here is not so far off a speculation.  I am NOT certain about this.

 

Again, so to manage ones tax payments (or lack there of), a Canadian Revenue Agency (CRA) form may be required for the capital gains. I don't know.

 

I ALSO am not certain on this capital gains interpretation of mine is accurate and I could be 100% wrong here.  This (capital gains) is of more interest to me, as I do have equities outside of my RRSP/RRIF in a Canadian brokerage margin account where, when I sell the equities from my margin account, I will have capital gains (which may or may not be payable in Canada).  

 

LTR Visa holder perspective

 

I am an LTR visa holder at present. As an LTR visa holder, I may have some benefits here, above and beyond the clear benefits of the Thai/Canada DTA, which is why I am now becoming curious about this.  If the money was small (ie dividends/interest) I would not bother much to review this, but for capital gains, this could be of substantial amounts and hence of interest for me sometime in the future.

 

And yes - I fully understand there could be tax changes coming up in Thailand - but to better understand any upcoming changes which may or may not occur - it would be very useful to understand the current situation.

 

EDIT : And for the moderators - please move this to the appropriate financial thread if and as appropriate.

Edited October 18 by oldcpu

[oldcpu]

Further to the above, I've been trying to decipher the Capital Gains section of the Thailand/Canada DTA.  Its very easy to get confused when they refer to 'contracting state' and 'other contracting state' if they do not specify in the same sub-paragraph in which state one is a resident.

 

With regards to disposition of capital gains (where I am specifically thinking of the sale of stocks, and mutual funds (including ETFs) , I read in an RBC document that there is likely no withholding tax.   However when I read the Thai/Canada DTA, I note [where I inserted "Thailand" and "Canada" in the text to help me understand this better as a resident of Thailand😞

 

Quote

" 1. Gains derived by a resident of a Contracting State (Thailand) from the alienation of immovable property situated in the other Contracting state (Canada) may be taxed in that other State (Canada)"

 

... which suggests to me that even if no withholding tax on the capital gains, one may still need to pay tax to Canada on the capital gains.  I can't find wording in the Thai/Canada DTA that states Thailand can tax the Canadian capital gain - but I could be reading the DTA wrong.

 

What I interpreted out of the DTA contradicts some of what I read (and posted) in the post prior to this post about Capital Gains (from stocks and Mutual funds) in Canada. ... ie I believe they are still taxed in Canada - only there may be no initial withholding tax in some cases.

Edited October 20 by oldcpu

[Dan O]

On 9/27/2023 at 4:12 PM, foreverlomsak said:

Exactly, what new rule, read the underlined extract from Thai Revenue Personal Income Tax, this doesn't mean they will tax Expat's just that the option is there and has been for a while.

Personal Income Tax | The Revenue Department (English Site) (rd.go.th)

1.Taxable Person

Taxpayers are classified into “resident” and “non-resident”. “Resident” means any person residing in Thailand for a period or periods aggregating more than 180 days in any tax (calendar) year. A resident of Thailand is liable to pay tax on income from sources in Thailand as well as on the portion of income from foreign sources that is brought into Thailand. A non-resident is, however, subject to tax only on income from sources in Thailand.

Date of last amendment 23.11.2020

Thats an old version which has been reinterpreted last year to change the language about " income brought into Thailand" and remove that loophole. The final regs and applicable guidelines haven't been publish so all bets are off of how they plan to implement it.  Make yourself knowledgeable about any existing DTA from your home country. 

[alphason]

On 10/20/2024 at 9:19 PM, oldcpu said:

Further to the above, I've been trying to decipher the Capital Gains section of the Thailand/Canada DTA.  Its very easy to get confused when they refer to 'contracting state' and 'other contracting state' if they do not specify in the same sub-paragraph in which state one is a resident.

 

" 1. Gains derived by a resident of a Contracting State (Thailand) from the alienation of immovable property situated in the other Contracting state (Canada) may be taxed in that other State (Canada)"

 

From my research and advice about the UK Thai DTA,

I am informed that the term "may be taxed" actually provides exclusive taxing rights only to that country. This is the intended legal meaning of the phrase. If the property is located in Canada then only Canada has taxing rights.

[oldcpu]

3 hours ago, alphason said:

 

From my research and advice about the UK Thai DTA,

I am informed that the term "may be taxed" actually provides exclusive taxing rights only to that country.

 

The use of the wording "may be taxed" appears in many places in the Canada-Thailand DTA, so its interpretation is important.

 

I note in regards to interest from the Canada/Thailand DTA (where I substituted "in brackets and in italics"  both the words "Canada" and "Thailand". Where there are no brackets/italics (and "Canada" and "Thailand" appear) then that is exact wording (with those countries mentioned) in that DTA:

 

Quote

 

Article 11

Interest

1. Interest arising in a Contracting State (Canada) and paid to a resident of the other Contracting State (Thailand) may be taxed in that other State (Thailand).

2. However, such interest may also be taxed in the Contracting State (Canada) in which it arises, and according to the laws of that State, but if the recipient is the beneficial owner of the interest the tax so charged shall not exceed:

    a) if that State is Canada, 15 per cent of the gross amount of the interest;

    b) if that State is Thailand,

        (i) 10 per cent of the gross amount of the interest if it is received by any financial institution (including an insurance company); and
        (ii) 25 per cent of the gross amount of the interest in all other cases.

 

 

Honestly, I would be surprised if I can "get away" with only paying 15% tax of the gross amount of the interest from investments in Canada. My global income (from outside of Canada and outside of Thailand), that I am required to report to Canada as part of my Canadian tax returns (and also report my global income on my wife's Canadian tax return), is sufficiently high such that my experience is that I pay more than 15% to Canada on Canadian interest from investments (but I will need to check that to be certain).

 

I also note that for the interest on Thai government savings bond (that I purchased to help qualify me for a Thai LTR visa) that my Thailand withholding tax is 15% ... which is greater than 10% but less than 25% noted in the DTA.

 

For me ?  This is all as clear as mud at present.

 

Edited October 22 by oldcpu

[oldcpu]

Further I find the section on 'dividends' in the Canada/Thailand DTA a bit murky.

 

I extracted some of the Canadian/Thai DTA article 10 on dividends below. 

 

Again, where there are brackets and italics, that is where I entered "Thailand" and "Canada".  If "Thailand" and "Canada" are seen below without brackets and italics, then that is part of the DTA 'as is'.

Quote

 

Article 10
Dividends

1. Dividends paid by a company which is a resident of a Contracting State (Canada) to a resident of the other Contracting State (Thailand) may be taxed in that other State (Thailand).

 

2. Dividends paid by a company which is a resident of Canada to a resident of Thailand who is the beneficial owner of the dividends, may be taxed in Canada in accordance with the laws of Canada but the tax so charged shall not exceed 15 per cent of the gross amount of the dividends. The provisions of this paragraph shall not affect the taxation of the company on the profits out of which the dividends are paid.
...
...
4. The term "dividends" as used in this Article means income from shares, mining shares, founders' shares or other rights, not being debt-claims, participating in profits, as well as income which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident.

 

 

With myself a tax resident of Thailand, my interpretation is Thailand may tax dividends I obtain from a Canadian company.  But Canada may also tax me up to 15% of the Canadian dividends amount.

 

Again, my experience is a pay more than 15% tax to Canada on the dividends I earn in Canada, ... but I need to double check that.

 

Once again, this (from my view) is very murky (to say the least).

Edited October 22 by oldcpu

[alphason]

17 hours ago, oldcpu said:

With myself a tax resident of Thailand, my interpretation is Thailand may tax dividends I obtain from a Canadian company.  But Canada may also tax me up to 15% of the Canadian dividends amount.

 

Again, my experience is a pay more than 15% tax to Canada on the dividends I earn in Canada, ... but I need to double check that.

 

Once again, this (from my view) is very murky (to say the least).

 

Looks like that to me to,

 

But I would guess you need to determine who has first taxing rights?

As it first says may be taxed by Thailand, then goes on to say may be taxed in Canada up to 15%, I would maybe guess Thailand has the first shot, then Canada can charge the difference up to 15%. But wouldn't the DTA still prevent double taxation? Canada giving a credit for whatever was paid in Thailand leaving the difference if any due to Canada up to the limit 15%. ???

[JimGant]

On 10/22/2024 at 12:13 PM, alphason said:

I am informed that the term "may be taxed" actually provides exclusive taxing rights only to that country. 

This DTA language is derived from the OECD and UN Model tax treaties. "May be taxed" vs "may only be taxed" is simply: "May ONLY be taxed" gives exclusive taxation rights to the contracting country indicated -- and the other contracting country can't tax it. But "may be taxed" gives the contracting country "A" primary taxation rights -- but also gives contracting state "B" secondary taxation rights (context determines which is which).

 

What this means for you, the taxpayer, is that country A gets to keep all the tax receipts, same as if it had had exclusive taxation rights. But country B, per treaty, also has taxation rights -- but as secondary, has to absorb a tax credit for the taxes paid to country A. So, after the credit is absorbed, there may be no or negative taxes owed to country B (in which case, I wouldn't even bother to file a tax return, at least for this income, with country B).

 

What's the practical outcome of this? Well, after filing with country A, and paying the taxes due, you then look at filing with country B. If, after absorbing the tax credit from country A, you then owe no taxes to country B -- that's all. BUT, if after absorbing the tax credit you still owe a tax to country B -- then you owe the difference between your tax bill and the tax credit; and that delta, added to your full tax bill paid to country A, means that when the DTA gives secondary taxation rights -- your total tax bill may now be higher, 'cause you're now paying taxes on same income to two countries.

 

[Note for Yanks: Because of the so-called "saving clause" the US, if not an exclusive or primary taxation authority -- will always be a least a secondary taxation authority. Thus, gotch by the short and curlies. ]