Some thoughts on the taxation of income brought into Thailand starting in 2024 (US citizen perspective only)

[Sheryl]

57 minutes ago, mudcat said:

 The purpose would be to have a tax return or transcript showing the sources of your income. 

Basic process is to add half of your Social Security benefit to your gross  income.  If the result is under $25/32 thousand (single/married filing jointly) your benefit is not taxable income and your taxable income is likely to be less than your standard deduction.  See definition of gross income footnote to "do you need to file" in your i1040 instructions.

 

Having a return or transcript will give you the information you may need to answer questions from the RD who may not understand the tax treatment of Social Security benefits

They do not need to understand US tax treatment of SS benefits. (And would be in any case unlikely to figure it out from a tax return). What they need to understand is that SS benefits are assessable only in the US.

 

If they do not understand this DTA provision regarding US Social

Security then showing a tax return will not help. They will think that a tax return showing no tax paid means the full SS amount is taxable in Thailand and that one showing tax paid should declare the benefits as income on a Thai return and  claim  a tax crefit -- wrong in both cases.

 

Since SSA sends out an annual statement of benefits and, at tax time, the equivalent of a form 1099 there is ample documentation of income from this source and no reason I can see to file a US tax return if this is the sole income and no US tax due on it.

 

 

[Time Traveller]

On 10/7/2023 at 11:32 PM, TallGuyJohninBKK said:

I haven't read the whole U.S. treaty -- every time I've tried, my eyes glaze over and I fall asleep... So I'm relying on the OP's summary above....

 

Interesting complexity for Americans -- dividends and interest may be taxable if remitted into Thailand under the OP's reading....

 

But what if the source of those divs and interest is from a Roth IRA retirement account in the U.S., which by U.S. law has tax-free distributions in the U.S.?

 

Would  Thailand here be trying to make tax-free U.S. distributions from a U.S. Roth IRA account suddenly taxable in Thailand if remitted there???

 

Possibly.  I don't think that's their intention, but the US international Tax Treaties appear to apply based on residence.  So tax free retirement vehicles in the US suddenly are not tax free if living in Thailand.   

That's not unusual as it seems to be the same for other countries treaties with the US for their retirement accounts.    

[JackGats]

6 hours ago, MeePeeMai said:

Paying anything with a credit card is not income, it is a loan (debt) which is not taxed other than the 7% VAT added to your purchases.  

If that is the case, instead of remitting sums direct to Thailand, everyone can borrow money abroad and have it sent by the lender to Thailand. Each short-term loan gets repaid abroad within 4 to 5 weeks. It's not income, it's a debt.

[Lorry]

3 hours ago, JackGats said:

If that is the case, instead of remitting sums direct to Thailand, everyone can borrow money abroad and have it sent by the lender to Thailand. Each short-term loan gets repaid abroad within 4 to 5 weeks. It's not income, it's a debt.

That's how the rich in the US live tax free.

The IRS accepts these shenanigans.

I don't know whether the RD accepts this,  too. A Thai tax adviser should know. 

[Presnock]

On 10/8/2023 at 11:11 AM, DineshR said:

Hello,

 

( A long read.)

 

I am a resident of Thailand since I am in Thailand exceeding 180 days per year and hence subject to taxation on income earned abroad that is brought into Thailand. 

 

For my specific situation, I am fully retired and have no income from any type of employment either in Thailand or anywhere else in the world. But I do have income from investments such as interest and dividends. That said, my primary source of funds brought into Thailand is a combination of social security and annuities. I thought I would read up on the actual text of the US-Thai dual taxation treaty and see if I would be subject to tax as per that agreement for the type of funds that I bring into the country.

 

So here's a summary of what that agreement states in so far as it relates to my particular situation. Here's a link to the text of the full treaty - https://www.irs.gov/pub/irs-trty/thailand.pdf

 

Would appreciate your thoughts on this.

 

A. This Convention shall apply to persons who are residents of one or both of the Contracting States, except as otherwise provided in the Convention.

 

B. definition - the terms "a Contracting State" and "the other Contracting State" mean the United States or Thailand, as the context requires;

 

C. Residence definition

 

1. For the purposes of this Convention, the term "resident of a Contracting State" means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, citizenship, place of management, place of incorporation, or any other criterion of a similar nature. The term also includes that State and any political subdivision or local authority thereof. The term, however, does not include any person who is liable to tax in that State in respect only of income from sources in that State. For purposes of this paragraph, an individual who is not a resident of Thailand under this paragraph, and who is a United States citizen or an alien admitted to the United States for permanent residence (a "green card" holder) is a resident of the United States only if the individual has a substantial presence, permanent home or habitual abode in the United States. If such individual is a resident of Thailand under this paragraph, he shall be considered a resident of both Contracting States and his residence for purposes of the Convention shall be determined under paragraph 2.

 

2. Where by reason of the provisions of paragraph 1, an individual is a resident of both Contracting States, then his status shall be determined as follows: a) he shall be deemed to be a resident of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (center of vital interests); b) if the State in which he has his center of vital interests cannot be determined, or if he does not have a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode; c) if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is a national; d) if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

 

Per the definition above - someone like me is considered a resident of both contracting parties (last line of para 1) but it is modified by para 2 as my permanent home is in Thailand and hence I am deemed a resident of Thailand per this treaty.

 

D. What's taxable -

 

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

 

2. Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

 

3. Pensions and Social Security Payments

 

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

 

The reference to Government service states that a US Government/State/Locality pension is not taxable in Thailand, unless the US citizen is also a Thai citizen - then, it's only taxable in Thailand - my read. See the full text in my link.

 

b. Notwithstanding the provisions of paragraph (a) above, social security benefits and other similar public pensions paid by a Contracting State to a resident of the other Contracting State or a citizen of the United States shall be taxable only in the first-mentioned State.

 

c. Annuities derived and beneficially owned by a resident of a Contracting State shall be taxable only in that State. The term “annuities” as used in this paragraph means a stated sum paid periodically at stated times during a specified number of years, under an obligation to make the payments in return for adequate and full consideration (other than services rendered).

 

My read - Dividends and interest are taxable in Thailand but pensions (with the exception of government pensions paid to a Thai citizen), social security and annuities are NOT taxable in Thailand. 

 

Would appreciate your thoughts on this. I think the issue of where one is a resident, in so far as the treaty is concerned, is critical in terms of defining tax liability but the text is somewhat ambiguous.

 

TIA.

 

I was told that even though the US has a taxation agreement with a foreign country, that country may still tax pensions but if does, the US will lower the US tax dollar for dollar.  However, I have no real idea what the Thai govt will do but am interested too as I only have my US govt pension monies forwarded here.

 

 

 

 

 

 

 

 

 

[spidermike007]

18 hours ago, Lorry said:

Sure? 

I don't know anybody here who is not a tax resident. 

 

And I know very few who are. 

[khunjake]

Reading these posts is comical. You guys think the RD is as sophisticated as the IRS which is laughable. Look at how this country is run. Look where you live. You are all worried about nothing. This is a tactic to scare foreign money out of the country plain and simple. They want a weaker baht and they are getting it. The last regime had a strong baht policy and it killed exports and FDI which went elsewhere. It all a game and expats are freaking out over nothing.

[mania]

On 10/7/2023 at 10:30 PM, jaideedave said:

What if I was a tourist? How would RD differentiate between a pensioner or someone on a 2 week vacay ?

I guess the easy way is do you have a Thai bank account? "Most" Tourist do not

Edited October 12, 2023 by mania

[jaideedave]

14 minutes ago, mania said:

I guess the easy way is do you have a Thai bank account? "Most" Tourist do not

Yes I do have a Thai bank account.My point is if I use my foreign bank debit/credit card to withdraw cash out of a Thai ATM how can they know my visa status? Maybe I'm missing something here.

[Lorry]

2 hours ago, jaideedave said:

Yes I do have a Thai bank account.My point is if I use my foreign bank debit/credit card to withdraw cash out of a Thai ATM how can they know my visa status? Maybe I'm missing something here.

They don't need to know your visa status, they need to know you are here more than 179 days in a calendar year. 

 

2 ways:

- check with immigration.  Implies a lot of work for RD and for immigration,  the data banks are not (yet) linked.

- check all your transaction,  time and amount. If you had withdrawals all over the year, totalling 20000 USD, please show your passport stamps to check how many days you were actually here.

 

Problem:

They can check your withdrawals of 2024  in 2030, you leave a nice electronic trail. If they then find you didn't pay due taxes of 2024, late fees and penalties apply.

 

[SailingHome]

On 10/8/2023 at 1:42 PM, Sheryl said:

@DineshR

 

My reading of the US tax treaty with Thailand is substantially the same as yours except that to my read it is only government pensions that cannot be taxed in Thailand.  Private pensions can be.

 

Of course, any tax you have to pay in Thailand on private pension and the various other taxable incomes can be claimed as a tax credit on your US return. In fact, it could be argued from the terms of  the Tax treaty that any income taxable in Thailand under the DTA should be fully exempt from US taxes. (You'll need an accountant versed in expat issues)

 

To simplify life, you might like to limit your remittances to Thailand to direct deposit of your Social Security (and government pension if that is what you have). If currently using income method and these sources not enough, switch to the 800K method and bring that money in before end of the year. Like that you should be home free since it is only assessable income remitted to Thailand after 1 January that is at issue.

 

If you can't live on just SS, make up the difference through use of a US credit card paid from a US bank account and perhaps occasional ATM withdrawal from US bank account.

 

 

Sheryl - there are 2 ways SS income can get deposited to a Thai bank account. One is the normal "go to the bank every month and sign to have it released" which known to them to be a social security payment. The other way I do not remember the name of, but it just shows up as a direct deposit. It sounds like you might be saying go back to them knowing it is SS and I will not be taxed?

[likerdup1]

Rather than try to guess what this taxation business is all gonna look like I think it's time I wire a bunch more cash to my Thai bank account .. geez.. what a mess. I hate to do it but I think i'm gonna wire a full years expenses into Thailand next week. Using my international visa card whenever possible is probably gonna save my butt from this mess. Wow, what next? It's looking like Philippines or South America maybe a choice if this ramping up of hoops to jump through continues.

 

Any news on what the tax rate will be??

Edited November 26, 2023 by likerdup1

[kiwikeith]

On 10/8/2023 at 8:14 PM, MJCM said:

I tend to  agree, but for computers nowadays it's not that difficult to link name, visa status and amount withdrawn over a year from an ATM (with an overseas ATM card) together that is just linking database together.

 

Also bringing in Cash is not that safe as you need to exchange it and when exchanging it, what do they need? Your Id (passport)

 

 

The private money changers, so far never asked, but the ones in malls, rich something, I forgot the name do ask 

[kiwikeith]

On 10/10/2023 at 4:43 PM, khunjake said:

Reading these posts is comical. You guys think the RD is as sophisticated as the IRS which is laughable. Look at how this country is run. Look where you live. You are all worried about nothing. This is a tactic to scare foreign money out of the country plain and simple. They want a weaker baht and they are getting it. The last regime had a strong baht policy and it killed exports and FDI which went elsewhere. It all a game and expats are freaking out over nothing.

That is what I think, and I hope we're right 

[SailingHome]

7 minutes ago, kiwikeith said:

That is what I think, and I hope we're right 

Couldn't be more wrong when it comes to banking oversight. Yea, maybe in the first year they will miss some things, yes for a few years they will miss some pensioners on retirement visas, then you won't be able to get a retirement visa (think visas are not PERFECTLY and STRICTLY controlled?) without showing your proof of tax...

 

I am not risking 25% of my income on that theory, thanks.

Edited November 26, 2023 by SailingHome
Addition

[Captain Monday]

On 10/8/2023 at 8:13 PM, Sheryl said:

That is my reading, yes -provided one is resident in Thailand under the (complicated) definition of the DTA. Unlike most nationalities, US citizens in Thailand more than 180 days a year are legally tax residents in both the US and Thailand so DTA provisions on dual residency apply.

 

I do not mean to quibble over terminology. But so that readers are not misled there is nothing such as "US tax residency".

 

If an individual is a US citizen or US person (resident, corporation, green card holder etc). one must file a federal tax return, or not, every year. Most people with an income are required to file a return (eg. single under 65 age gross income not under $12,950)

 

• There is a foreign earned income exclusion now $120,000 if you are outside the USA for 330 days
• There is a concept of "domicile", example used for business purposes or many people to avoid State income taxes why they have their primary residence in states such as Nevada or Florida that have no state income tax.

One of these persons claiming Florida domicile is very famous and has orange hair. At the same time he claims his residence is a "private club". The value of which stated in accounting records changes depending on whether he is paying property taxes or is using it as collateral to borrow money from banks!

 

The only way to cut the cord to USA is renunciation of citizenship. Not free and subject to negotiations with the US authorities if one has significant assets.

Edited November 26, 2023 by Captain Monday

[Sheryl]

9 hours ago, SailingHome said:

Sheryl - there are 2 ways SS income can get deposited to a Thai bank account. One is the normal "go to the bank every month and sign to have it released" which known to them to be a social security payment. The other way I do not remember the name of, but it just shows up as a direct deposit. It sounds like you might be saying go back to them knowing it is SS and I will not be taxed?

 SS started direct international deposits to Thailand a few years back so the old system some used of ACH transfer into a Bangkok Bank account that then had to be physically collected is unnecessary. You can have your SS directly deposited into your regular Thai bank account. You could of course also have it directly deposited in the US and then arrange your own transfers as needed but that incurs bank transfer charges (SS direct deposit is free) and also would make it harder to establish source of the funds should you ever need to do so. While I am not one of those who think it at all likely that huge amounts of work and effort, including inter-departmental linkages of a type otherwise non-exist in Thai government,  will be undertaken in future to track down relatively small amount of tax revenue from foreign retirees,  it is still prudent to be able to readily show the source of remittances from 1 January forward just in case.

 

You can find the direct deposit request form online, complete it and sent it to the FBU office in Manila. Takes a few months to come into effect but works a treat thereafter.

 

As it currently stands (and as has been the law for along time) you are not required to file a Thai tax return if you do not owe any Thai tax, and you owe Thai tax only if you have >160K taxable income remitted into Thailand. Under the DTA US SS is completely exempt from taxation in Thailand, full stop (regardless of whether you have to pay any tax on it in the US, which will depend on your total income). So if your only remittances are your SS you are on solid ground in not filing (unless of course some totally new requirement is enacted in future) and even if the subject of an in-depth investigation (exceedingly unlikely) wold not end up owing back taxes and penalties.

 

 

[SailingHome]

18 hours ago, Sheryl said:

 SS started direct international deposits to Thailand a few years back so the old system some used of ACH transfer into a Bangkok Bank account that then had to be physically collected is unnecessary. You can have your SS directly deposited into your regular Thai bank account. You could of course also have it directly deposited in the US and then arrange your own transfers as needed but that incurs bank transfer charges (SS direct deposit is free) and also would make it harder to establish source of the funds should you ever need to do so. While I am not one of those who think it at all likely that huge amounts of work and effort, including inter-departmental linkages of a type otherwise non-exist in Thai government,  will be undertaken in future to track down relatively small amount of tax revenue from foreign retirees,  it is still prudent to be able to readily show the source of remittances from 1 January forward just in case.

 

You can find the direct deposit request form online, complete it and sent it to the FBU office in Manila. Takes a few months to come into effect but works a treat thereafter.

 

As it currently stands (and as has been the law for along time) you are not required to file a Thai tax return if you do not owe any Thai tax, and you owe Thai tax only if you have >160K taxable income remitted into Thailand. Under the DTA US SS is completely exempt from taxation in Thailand, full stop (regardless of whether you have to pay any tax on it in the US, which will depend on your total income). So if your only remittances are your SS you are on solid ground in not filing (unless of course some totally new requirement is enacted in future) and even if the subject of an in-depth investigation (exceedingly unlikely) wold not end up owing back taxes and penalties.

 

 

I apologize getting back to you so late, Sheryl. You do so much for us you deserve better,

Yes. I visited the Paragon branch today and learned what you just said. A few  years ago I switched to the type you are talking about ( no ,monthly visit) )and thought I had to switch back to the old method of going to the bank monthly to get the money so they would know it is SS.

It turns out we can ask ask for a credit report (IE deposit report) and that will show that every deposit monthly was indeed from USA Social Security Administration. They also provide a certified letter to go with it.

 

One caveat, for some reason they can't just generate from the computer, they need the bank book updated so it shows every deposit. Apparently I waited too long to update and since I have a high number of transactions updating could not work correctly for the 8 months that I have not updated.

This combination of documents can be used at immigration for poof of income, and if necessary to shoe the tax revenue department that it is indeed not private based income, but social security.

 

Spread the news :)

[Elkski]

Seems like the nest place to post my question. 

Wife 46, me 63. We live in USA. 

Trying to decide between putting money for wife in  Roth or traditional IRA?

I'm assuming at some point she will return to Thailand maybe me too.  But low chance for me. 

I'm worried that the politicians will raise taxes on traditional IRAs in the US. But maybe that would be lower than the Thai taxes might be on the gains in the Roth IRA. 

So I'm trying to imagine my wife in old age living in a Thai village with hers and my SS benifits and maybe a Roth or trad IRA and wondering the tax ramifications. 

 

Its so stupid we have to spend time thinking of these things rather than enjoying life.  

 

One more note: one post said he was contributing 1k each month to an IRA for wife and him, but limits are 6500 or 7500 over 50?  Didnt see how that info was accurate.  

[Jingthing]

10 minutes ago, Elkski said:

Seems like the nest place to post my question. 

Wife 46, me 63. We live in USA. 

Trying to decide between putting money for wife in  Roth or traditional IRA?

I'm assuming at some point she will return to Thailand maybe me too.  But low chance for me. 

I'm worried that the politicians will raise taxes on traditional IRAs in the US. But maybe that would be lower than the Thai taxes might be on the gains in the Roth IRA. 

So I'm trying to imagine my wife in old age living in a Thai village with hers and my SS benifits and maybe a Roth or trad IRA and wondering the tax ramifications. 

 

Its so stupid we have to spend time thinking of these things rather than enjoying life.  

 

One more note: one post said he was contributing 1k each month to an IRA for wife and him, but limits are 6500 or 7500 over 50?  Didnt see how that info was accurate.  

There aren't specific taxes for traditional IRA withdrawals. Such withdrawals are treated as regular income. So the hit if any if based on your tax bracket. There won't be a specific raise for IRA withdrawals.

 

If using a trad IRA any US tax paid could presumably be used as a credit on Thai tax due if any (as we don't know yet what the Thai rules will actually be) based on double taxation treaty.

 

My take is if she'll be low income when retired go traditional, if not, Roth might be better.

Edited November 30, 2023 by Jingthing

[frantick]

20 hours ago, Elkski said:

Seems like the nest place to post my question. 

Wife 46, me 63. We live in USA. 

Trying to decide between putting money for wife in  Roth or traditional IRA?

I'm assuming at some point she will return to Thailand maybe me too.  But low chance for me. 

I'm worried that the politicians will raise taxes on traditional IRAs in the US. But maybe that would be lower than the Thai taxes might be on the gains in the Roth IRA. 

So I'm trying to imagine my wife in old age living in a Thai village with hers and my SS benifits and maybe a Roth or trad IRA and wondering the tax ramifications. 

 

Its so stupid we have to spend time thinking of these things rather than enjoying life.  

 

One more note: one post said he was contributing 1k each month to an IRA for wife and him, but limits are 6500 or 7500 over 50?  Didnt see how that info was accurate.  

If I had to do it over, I'd opt for the Roth. Dealing with distributions and taxes when retired is a PITA. And worry about eventual Required Minimum Distributions will also be. Of course I do my own taxes. 

 

But, currently, taxes are fewer now than when I was earning. So I am  saving a few bucks, but that wouldn't have bothered me then. 

 

[Elkski]

Wouldn't gains in a Roth be taxable if she was residing in Thailand? What is the income where taxes start and the rates?   A Roth would let that income show, which may be better for her to improve her own credit rating. 

How much gold ( bar or coin) can she travel with? Of course it seems real 99.999 gold isnt so valuable in Thailand. 

[mudcat]

I also faced the taxable IRA (TIRA) vs. Roth IRA (ROTH) dilemma, but I am fully retired and my wife never worked in the U.S.  My wife, a U.S. citizen, was the primary beneficiary for both accounts (our ages are 53 and 75 respectively.  For her to inherit the TIRA balance upon my passing could result in a largish tax bill should she choose to move the balance to Thailand immediately or move the balance over a number of years to stay within the 10 or 12% tax rate after her standard deduction.  In a worse case she could be evicted from our banking relationship because of no longer having a U.S. residency (see many threads on banks terminating accounts of non-resident citizens).  

 

To use IRAs as estate planning tools rather than retirement savings vehicles has no simple answer.  Factors include whether your wife is a U.S. citizen, her stated desire to return, and who you have stateside that can and be willing to help her with all the paperwork necessary to be compliant with the rules and regulations. 

 

After attempting to devise a simple method to use both IRAs as an estate planning tool I decided to convert my TIRA to my ROTH over three years.  This cost ~$50,000, but most of the taxes paid would have been paid either by myself or my wife - my RMD was running around $6,000 per year.  After completing our move to Thailand we had the income to pay the estimated taxes without needing to use the TIRA withdrawal to pay the bill, thus moving the entire balance to the ROTH (minus the decreasing RMDs).  

 

A few notes about ROTH inheritance; the account can be 'assumed' by your wife but she also is subject to the same conditions as any ROTH holder including penalties (especially withdrawals before 59 1/2-years old).  My recommendation to my wife who is already here in Thailand is to cash out the ROTH and transfer the balance to her U.S. checking account and wire most or all of it to her accounts in Thailand.  Our separate Robot investment accounts should be converted to cash and moved to Thailand after canceling her U.S. VISA card ending her U.S. financial ties.  Once this is done she would have ongoing responsibility to file FinCEN 114 to comply with FATCA and file with FBU Manila for her survivor benefit from Social Security.   

[gamb00ler]

On 10/8/2023 at 1:35 PM, Sheryl said:

Nobody is going to monitor ATM withdrawals, that is absurd, with millions of tourists each year making them.

Computing power is continuously getting cheaper.  The program to track those ATM withdrawals is not very complicated.  As a retired software engineer, I find it difficult to assume that ATM withdrawals above a certain limit would/could not be monitored.

Edited December 2, 2023 by gamb00ler

[Sheryl]

On 11/28/2023 at 5:32 AM, SailingHome said:

It turns out we can ask ask for a credit report (IE deposit report) and that will show that every deposit monthly was indeed from USA Social Security Administration. They also provide a certified letter to go with it.

 

One caveat, for some reason they can't just generate from the computer, they need the bank book updated so it shows every deposit. Apparently I waited too long to update and since I have a high number of transactions updating could not work correctly for the 8 months that I have not updated.

This combination of documents can be used at immigration for poof of income, and if necessary to shoe the tax revenue department that it is indeed not private based income, but social security.

 

Spread the news :)

These are also called "Credit Advice".

 

You may be able to get them automatically each month, ask your bank.  I get them  by email monthly from Kasikorn (had to talk to their call center to set ut up). Very convenient.

[dpcjsr]

I am yearning for the good old days when Prayut was in charge!

[mudcat]

For anyone attempting to decipher the Thai/U.S. tax convention, I interleaved the relevant articles (Articles 1, 20, and 21) with each technical explanation into a MS Word document so it is easy to highlight or copy sections without needing to keep multiple windows open..   

ARTICLE 1 Personal Scope, 20-21 Pensions and Social Security Payments.docx

[JimGant]

On 10/9/2023 at 5:23 PM, Time Traveller said:

On 10/8/2023 at 1:32 PM, TallGuyJohninBKK said:

Would  Thailand here be trying to make tax-free U.S. distributions from a U.S. Roth IRA account suddenly taxable in Thailand if remitted there???

 

Possibly.  I don't think that's their intention, but the US international Tax Treaties appear to apply based on residence.  So tax free retirement vehicles in the US suddenly are not tax free if living in Thailand.   

That's not unusual as it seems to be the same for other countries treaties with the US for their retirement accounts.

 

The OECD and UN Model intent is shown in the US-UK DTA, note this quote from the Technical Explanation:

 

Quote

However, the State of residence, under subparagraph (b), must exempt from tax any
amount of such pensions or other similar remuneration that would be exempt from tax in the State in which the pension scheme is established if the recipient were a resident of that State. Thus, for example, a distribution from a U.S. "Roth IRA" to a U.K. resident would be exempt from tax in the United Kingdom to the same extent the distribution would be exempt from tax in the United States if it were distributed to a U.S. resident.

 

The US-Thai DTA was written before this OECD/UN Model sentiment, so such language isn't found in that DTA; but the later written US-UK DTA *did* incorporate such language.

Now, Tax Treaties can be modified with with "exchange of notes" and "protocols." No doubt a lengthy ordeal, so, I guess, the Thais could tax your Roth during the years needed to change the treaty. Not too sure I'd worry about this wrinkle -- I'd just not declare my Roth distribution --knowing the current OECD sentiment -- along with non declaration of my Air Force pension and other non assessable income, per DTA.

[JimGant]

On 11/30/2023 at 10:20 PM, Jingthing said:

If using a trad IRA any US tax paid could presumably be used as a credit on Thai tax due if any (as we don't know yet what the Thai rules will actually be) based on double taxation treaty.

 

Actually, under the DTA, Thailand has exclusive taxation rights on IRAs, which the language "shall be taxable only in that State" means:

Quote

 pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment shall be taxable only in that State.

The phrase “pensions and other similar remuneration” is intended to encompass
payments made by private retirement plans and arrangements in consideration of past employment. In the United States, the plans encompassed by Paragraph 1 include: qualified plans under section 401(a), individual retirement plans (including individual retirement plans that are part of a simplified employee pension plan that satisfies section 408(k), individual retirement accounts [IRAs].....

 Now, there is no "exclusivity" in US DTAs, due to the saving clause, that allows the US to tax all global income as if the DTA did not exist. But, with such wording that makes Thailand exclusive taxing authority, the US becomes secondary taxing authority with its saving clause. And, as such, it has to absorb the tax credit from Thailand, and Thailand gets to keep the entire tax proceeds. Thus, there is no US tax credit against Thai taxes -- only a Thai tax credit against US taxes. So, unless the Thai taxes are greater than the US taxes on the IRA distribution, your overall tax bill will be the same as if your IRA wasn't taxed by Thailand.

[Jingthing]

1 hour ago, JimGant said:

 

Actually, under the DTA, Thailand has exclusive taxation rights on IRAs, which the language "shall be taxable only in that State" means:

 Now, there is no "exclusivity" in US DTAs, due to the saving clause, that allows the US to tax all global income as if the DTA did not exist. But, with such wording that makes Thailand exclusive taxing authority, the US becomes secondary taxing authority with its saving clause. And, as such, it has to absorb the tax credit from Thailand, and Thailand gets to keep the entire tax proceeds. Thus, there is no US tax credit against Thai taxes -- only a Thai tax credit against US taxes. So, unless the Thai taxes are greater than the US taxes on the IRA distribution, your overall tax bill will be the same as if your IRA wasn't taxed by Thailand.

OMG. 

Wait a second.

I thought anything earned before January 1 2024 is exempt?

So for example a typical IRA say 300k usd.

So you withdrawal 12k.

Isn't that all very old money so exempt in Thailand?