Understanding Thailand’s New Tax Directive on Foreign Income

[Eloquent pilgrim]

Surely this will not affect foreigners living here that have no income overseas other than their government pension which they have transferred to Thailand  …. or will it ?

[VinnieK]

My take..

It will be a right mess to enforce this.

What they might do..(I hope not)..

 

They might come up with an income or expense level that the average farang needs per year.

Somewhere say, between 20-30k

Then they will tax this.

Much easier to implement.

 

 

[ukrules]

58 minutes ago, proton said:

whats to stop banks deducting tax on foreign transfers?

International commerce would grind to a halt so it will never even be considered as an option let alone implemented.

[TroubleandGrumpy]

12 minutes ago, madmitch said:

Made my mind up that I won't return to Thailand on a full time basis when my daughter finishes her education here in the UK. I'll spend a few months in Thailand on a tourist visa but no more retirement extensions.

As long as you dont stay 180 days in total during any calendar year, then you are not a tax resident and therefore not affected by this new rule - or any other harebrained tax idea they make in the future. 

[Dogmatix]

1 hour ago, ukrules said:

It's not a loophole, it's enshrined in law as part of an act of parliament nearly 40 years ago.

 

Why are so many people here brainwashed into thinking this is some oversight, way of cheating the system / a loophole - it's not.

 

It's not some oversight that someone missed when drafting the law - it was carefully inserted into the law without ambiguity and provided a deliberate way for those who keep funds overseas and perhaps generate earnings from those funds or assets purchased with those funds to bring them back without having to pay any tax.

 

What they want to do is change the law without going through the process of changing the law - which is not really possible - and is the reason why it should fail.

I agree with this interpretation that it was indeed parliament's intention to tax only foreign source income earned and remitted in the prior tax year.  I have reviewed a legal amendment of Section 40 drafted in the 80s and the drafters used elaborate phraseology to make clear that they meant earned any prior tax year, referring to Thai source income.  But in Section 41 they did not and 70 years have passed without any attempt to interpret it differently - until now.

[Dogmatix]

Not mentioned in the Thai Enquirer article is that RD order P 161/2566 is a directive binding only on RD employees.  RD P orders are low down in the pecking order, do not have the force of law and are not binding on the general public.  

 

Srettha, as finance minister, has spoken in support of the RD's disingenuous reinterpretation of existing law, even though it is an overreach of its authority. It is not clear what the RD and Pheua Thai have in mind at this stage.  To make it binding on the public a higher level of announcement is required, e.g. a Royal Decree but that could only take effect no less than 90 days after publication in the Royal Gazette and therefore could not take effect by 1 Jan 2024, as announced by the DG.  Will they just leave as an unlawful order by the RD changing tax law and risk being challenged and humiliated in the Central Tax Court? Who is to say? A party that can come up with such a numbskulled scheme as the digital wallet is capable of anything.

[foreverlomsak]

1 hour ago, khunPer said:

Hmm – withhold a 15% temporary tax at incoming bank source – just like interest – which you can claim back when doing your tax return statement, if you're under the income taxation limit...

 

The taxation point in Thailand is pretty low, and is dependent on spouse or not, children or not, etc..

If the banks withhold a temporary tax (like bank accounts) as you suggest, it would have to appear as a separate entry for Immigration purposes for those on the non-Embassy income letter route (US, UK and Aus), but yes it may be a way to make all submit tax returns or B. Off.

 

[Sydebolle]

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[thesetat2013]

2 hours ago, Srikcir said:

You do raise a possible issue...if the bank withholds income tax on all foreign deposits. It shouldn't regardless of the wire source, foreign bank-to-Thai bank, Government-to-Thai bank. Money is fungible meaning it has no character other than being currency.

I'm going to contact my bank in particular as my foreign sourced funds are tax-exempt by the terns of my visa.

How can a bank withhold tax when money is transferred into their bank? It is not their job to do this. More important is that no longer can be withheld for tax if they do not have a tax number to apply it to. Without your tax number it would be stealing. So with this in mind. If they tried to take out tax from deposits made and they do not have a tax number to apply it to. Then they would have to contact the tax office and provide your banking information and let the tax office determine if they need to find you and make you pay the tax.. This is my thinking anyway. Perhaps I could be mistaken though. 

[mokwit]

I think direct tax by the banks on remitted funds unlikely but there could be direct tax on individual funds with no TIN - it would be up to you to prove your tax status to reclaim wrongly taxed funds. 

 

The only person who can waive/forgive taxes is the Finance Minister - be sure to write to Srettha if you disagree with your assessment. 

[StayinThailand2much]

4 hours ago, khunPer said:

Hmm – withhold a 15% temporary tax at incoming bank source – just like interest – which you can claim back when doing your tax return statement, if you're under the income taxation limit...

That's my guess too. Imagine you transferred 65,000 baht monthly for your visa, but received only 55,250 baht in your bank account, and then you would have to prove with a, into Thai translated and by your embassy certified, document from back home, to overworked, barely English speaking Thai revenue bureaucrats that your money has already been taxed. Expect not to have use of your money for the next 2-3 years... You can as well write it off as a 'donation' for Thailand.

[The Theory]

2 hours ago, foreverlomsak said:

, but yes it may be a way to make all submit tax returns

And how those who don't file tax return in the US since their income is under $12000 ?

[The Theory]

IMO for example all Americans (non-Thai) have paid (or paying) tax for their income, but this is about those Thai working or investors with dual citizenship who send money to Thailand without paying tax (from those countries with tax agreement) because they claim that will pay tax in their own country, but they never pay. 
I have already paid tax for my income in the US that's why i'm on SS retirement. 

[Yumthai]

2 hours ago, mokwit said:

The only person who can waive/forgive taxes is the Finance Minister - be sure to write to Srettha if you disagree with your assessment. 

You absentmindedly forgot the other empowered crowned one.

[ikke1959]

It is nothing new as a resident you have to pay tax over your income in Thailand.  So far no problem as I had to pay more taxi my home country.  The tax in my home country is giving me the paid tax  back, if I can show that I pay here. 

 But there will be changes and I can't get my tax back anymore.  I will not tax inThailand, because there is also a tactile here that you don't need to tax if it are Savings. So I keep my money on my account in my home country and transfer it a few months later... Problem solved

[Srikcir]

3 hours ago, thesetat2013 said:

How can a bank withhold tax when money is transferred into their bank? It is not their job to do this. More important is that no longer can be withheld for tax if they do not have a tax number to apply it to. Without your tax number it would be stealing. So with this in mind. If they tried to take out tax from deposits made and they do not have a tax number to apply it to. Then they would have to contact the tax office and provide your banking information and let the tax office determine if they need to find you and make you pay the tax.. This is my thinking anyway. Perhaps I could be mistaken though. 

Rather naive.

Thai banks now withhold tax on interest earned on savings account.  A tax number is only required if you want a refund if you're entitled to a refund.

And I do have a tax number although retired.

[keefryan]

I'll just use my UK Wise account/card  , First £200 is free , then 1.75%.  IE:  £2000 GBP would cost  £31.50 per month in ATM fees withdraw in Thai Baht at Wise Mid rate at the time .  Side step the thai banks completely.   KR  

 

[hondoelsinore]

Just a move for yet another developing country to move into the digitalization and control of currency and gaining more tax revenue in the interim. It has always been inevitable for this to happen especially in the race towards a one world currency and at the end of the day, if you are moving millions of baht every year into a country where you reside, then how arrogant of you to think this was going to be without any repercussion and lasting forever? You can stupidly list all your small fish assets on a public forum to appease a fragile unhealthy ego and continue to threaten to strangers on the Internet that you will pack it all in and leave for greener pastures, but those pastures you seek will be no different than here in the very near future. Welcome to the machine....

[Smokin Joe]

14 hours ago, Dogmatix said:

I agree with this interpretation that it was indeed parliament's intention to tax only foreign source income earned and remitted in the prior tax year.  I have reviewed a legal amendment of Section 40 drafted in the 80s and the drafters used elaborate phraseology to make clear that they meant earned any prior tax year, referring to Thai source income.  But in Section 41 they did not and 70 years have passed without any attempt to interpret it differently - until now.

Are you reading the official documents in Thai? I'm hoping you are as you seem much more knowledgeable than a lot of the other posters.

 

Anyone reading Thai laws in English should be well aware that only the Thai version is official. Something that may be very clear in English could be ambiguous in Thai and vice versa.

 

 

[JBChiangRai]

18 hours ago, khunPer said:

If you live in Thailand from your already income taxed savings abroad, it's certainly aimed at you...

No it's not.

 

17 hours ago, ukrules said:

Wrong - that was 100% the intention of the original law which is exactly why it's not a loophole.

You are wrong.  It was never intended for a rich profitable Thai company to send money abroad, reducing their profit and tax in Thailand (possibly to zero) and then return it to the business owner's personal account the following year (supported by a personal invoice from the previous year for consultancy) with no tax payable at any time by anyone corporate or individual in any company.  This is the loophole they want to close and it's costing Thailand enormously.

 

My accountant has been warning me for over a decade that this loophole will be closed.

[freeworld]

11 hours ago, Srikcir said:

Rather naive.

Thai banks now withhold tax on interest earned on savings account.  A tax number is only required if you want a refund if you're entitled to a refund.

And I do have a tax number although retired.

Banks withold tax on interest because it is in law and part of the revenue code and guidelines.

[foreverlomsak]

13 hours ago, StayinThailand2much said:

That's my guess too. Imagine you transferred 65,000 baht monthly for your visa, but received only 55,250 baht in your bank account, and then you would have to prove with a, into Thai translated and by your embassy certified, document from back home, to overworked, barely English speaking Thai revenue bureaucrats that your money has already been taxed. Expect not to have use of your money for the next 2-3 years... You can as well write it off as a 'donation' for Thailand.

Meanwhile those that cannot get embassy letters and rely on the deposited amount of foreign funds for their annual extensions of stay are coming up short as far as Immigration are concerned.

[foreverlomsak]

9 hours ago, keefryan said:

I'll just use my UK Wise account/card  , First £200 is free , then 1.75%.  IE:  £2000 GBP would cost  £31.50 per month in ATM fees withdraw in Thai Baht at Wise Mid rate at the time .  Side step the thai banks completely.   KR  

 

Only works if you have an address in your home country, Wise will not issue a card to anybody with a Thai address (and I'm one of them)

[retiree]

2 hours ago, JBChiangRai said:

You are wrong.  It was never intended for a rich profitable Thai company to send money abroad, reducing their profit and tax in Thailand (possibly to zero) and then return it to the business owner's personal account the following year (supported by a personal invoice from the previous year for consultancy) with no tax payable at any time by anyone corporate or individual in any company.  This is the loophole they want to close and it's costing Thailand enormously.

 

My accountant has been warning me for over a decade that this loophole will be closed.

At last! a comment that looks at this in the Thai context.   I assume in this case your hypothetical business owner was able to claim that this consulting was a "business carried on abroad", per section 41 (2).

 

If you happen to speak with your accountant again, would you mind asking him or her if it seems likely that taxpayers with overseas income will simply turn to other methods of legal tax avoidance, such as the use of gifts and loans, to continue to uhh... shield income?   

 

It would seem to me that as long as the phrase:

     ... shall, upon bringing such assessable income into Thailand, pay tax   (Sec 41(2))

is in the code, both Thai and foreign tax residents will always be able to avoid ever bringing income into Thailand directly.

[khunPer]

18 hours ago, StayinThailand2much said:

That's my guess too. Imagine you transferred 65,000 baht monthly for your visa, but received only 55,250 baht in your bank account, and then you would have to prove with a, into Thai translated and by your embassy certified, document from back home, to overworked, barely English speaking Thai revenue bureaucrats that your money has already been taxed. Expect not to have use of your money for the next 2-3 years... You can as well write it off as a 'donation' for Thailand.

My thought of withholding tax is pure speculation, but it they do it and like done with interest, your bank account would show 65,000 baht foreign transfer (for example as FTT-code) and thereafter debited the withheld tax.

[Liverpool Lou]

22 hours ago, proton said:

whats to stop banks deducting tax on foreign transfers?

How would the banks know whether tax was due when it only applies to income from employment or from assets and some people would be below the tax threshold?

[Liverpool Lou]

22 hours ago, Srikcir said:

I'm going to contact my bank in particular as my foreign sourced funds are tax-exempt by the terns of my visa.

Why?  Where has it been stated that banks are going to be deducting tax at source?  Which part of your visa terms gives tax advice?

[Liverpool Lou]

22 hours ago, TroubleandGrumpy said:

If the Thai RD implements this new rule and targets all bank tranfers into Thailand, it will hit us all. 

The OP does not state that will be the case, it specifically states that only income from employment or assets may be liable.

[Sheryl]

23 hours ago, Eloquent pilgrim said:

Surely this will not affect foreigners living here that have no income overseas other than their government pension which they have transferred to Thailand  …. or will it ?

To my reading, it potentially would IF (1) the foreigner is considered a nonresident for tax purposes in his home country so did not make a tax declaration on it in that country and (2) the relevant tax treaty does not specifically state that this type of pension cannot be taxed in Thailand. Some tax treaties do say that but usually only regarding government sourced pensions.

 

In fact, the above is already the law, if bringing the pension in immediateyly, but not usually enforced. Whether enforcement will change remains to be seen. 

[Sheryl]

2 hours ago, Liverpool Lou said:

The OP does not state that will be the case, it specifically states that only income from employment or assets may be liable.

Actually the OP completely fails to discuss the tricky issue of savings - how defined and whether taxable.

 

Many foreign retirees bring in savings accumulated over years of work in their home country, taxed at that time, and impossible to prove when exactly amounts saved were earned and whether/when taxed. Most people don't save tax records more than 10 years or so.

 

Actually the new regulation does not specify income from employment or assets, it states "assessable income" which is a much broader category.