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

[Mike Lister]

16 minutes ago, Jingthing said:

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?

Yes

[JimGant]

1 hour ago, Jingthing said:

I thought anything earned before January 1 2024 is exempt?

 

Yes, indeed. I'm looking at where things are headed post Jan 1 2024. And, actually, where things might go, should Thailand wise up, and forget the remittance fiasco. In which case, a simple, ah, you cashed out $10000 from your IRA, subject to ordinary taxation, and subject, first, to Thai taxation. All easily identifiable.

 

But, if the remittance rule remains, if you put your IRA distribution into your checking or savings account, mixed with other deposits, say, from military retirement and social security -- and you do a wire transfer to Thailand -- how do you decipher which money was sent, from among the various deposits mixed into a fungible pile of money? You can't. Hence, we're back to the unsolvable problem Thailand will have on sorting out remittance streams for taxability. Stay tuned.

[JimGant]

1 hour ago, Jingthing said:

So you withdrawal 12k.

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

 

Well, yes. But you better have shut down the account by Dec 31st 2023 -- or newer deposits will queer the pot, since there are no accounting rules, to my knowledge, that dictate FIFO or LIFO for remittances; under GAAP, this is for inventory accounting.

[Peterpannetje]

ATM could be linked to a private name, what if the ATM is in the name of a foreign company in Hong Kong or Singapore...and the funds are indeed actually used for travel expenses etc. ? Still taxable income ?

[Mike Lister]

7 minutes ago, Peterpannetje said:

ATM could be linked to a private name, what if the ATM is in the name of a foreign company in Hong Kong or Singapore...and the funds are indeed actually used for travel expenses etc. ? Still taxable income ?

Only Thailand tax residents have income assessed for tax, that means remaining here at least 180 days per tax year. Any income received from any source, be it payment for work, remitted funds or ATM cash withdrawals constitutes assessible income.

[Thailand J]

On 12/2/2023 at 8:27 AM, mudcat said:

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

Looking at Thai Tax Code Section 42 (10) and (12), inherited income should be tax free here. She will need to show that the money originated from inherited ROTH. I don't know about joint ROTH accounts but if it is your individual ROTH, the account name will change to " Inherited ROTH" once she inherited it from you, and the statements will show " inherited ROTH", so it's not difficult for her to show it's inherited.

If she would like to keep the inherited ROTH in US but worries about the bank may close her account for not having a US address, consider Schwab or Interactive Brokers brokerage accounts which accept Thai addresses.

[mudcat]

Every situation is different - the most important considerations in evaluating how to leave a Roth IRA to one's spouse are age and citizenship status.   A spouse has a number of options beyond inheriting the Roth including a lump sum, distribution, a tax-free lifetime RMD, and a 10-year withdrawal plan.  See https://www.investopedia.com/terms/r/rothira.asp for more information.

 

Roth IRAs post-date the U.S. Thailand tax convention so it is unclear where in the treaty they are counted - I assume they will be covered under Article 21.  See Roth IRAs (https://www.law.cornell.edu/uscode/text/26/408A). 

 

It is important to do your research based on those facts, as simply assuming that what applies to her in respect distributions from an inherited Roth IRA.   See the helpful calculator the IRS provides https://www.irs.gov/help/ita/is-the-distribution-from-my-roth-account-taxable , note that this calculator defaults to assuming U.S. Citizen/Resident Aliens - there is a 'jump' link in the calculator for non-citizens non-resident aliens.

 

Principal issues we faced even though my wife is a U.S. citizen within 6-years of having penalty free access to her inherited IRA include because 85% of the account balance is the result of Taxable IRA to Roth conversions (2021, 2022, and 2023) which take a penalty if distributed within 5-years and under 59 1/2. 

 

Even if your spouse is a U.S. citizen >59 1/2 years old her ability to designate non-resident aliens such as children is not a simple matter:

 https://www.irs.gov/retirement-plans/plan-distributions-to-foreign-persons-require-withholding

 

How the Thai Revenue Department will treat distributions of contributions (capital) as opposed to the earnings from an inherited IRA is a question that has not been addressed anywhere I have found. 

 

We decided to take a cautious approach and recommend to my executor and her Power of Attorney agent to take a lump-sum distribution which we can easily document as an inheritance through our beneficiary page and U.S. will.  This  documents that the distribution is an inheritance and, as the recipient is a spouse exempt from taxes on balances up to 20-million baht.  Furthermore we can document that the investment (non-IRA) account she is the beneficiary of is an inheritance through similar documentation of beneficiary statement and U.S. will.  

 

As an aside, we recently needed to close out our investment accounts because the institution was dropping their offering - we took the opportunity at the end-of-2023 to establish a cash balance for each of us so that amount supposedly is not subject to Thai income taxes is and when she transfers it to Thailand. 

 

 

[Thailand J]

My post was to point out Thai tax code section 42 (10) or (12) , inherited fund is easy to prove, and how to maintain a Roth account in US . I was hoping it may be helpful.

 

Edited January 18 by Thailand J

[Hepbub]

I am UK citizen, but tax resident in Thailand. I get a UK state pension which I pay tax on in UK, I also get a small Norwegian state pension, which I pay tax on in Norway. I have savings in my UK bank account, where my pension is also paid. Can I claim that any money brought into Thailand, is from my savings, and any top up to my savings is from previous years pension payments, not in this year? Similar with my Norwegian account.

[Mike Lister]

7 hours ago, Hepbub said:

I am UK citizen, but tax resident in Thailand. I get a UK state pension which I pay tax on in UK, I also get a small Norwegian state pension, which I pay tax on in Norway. I have savings in my UK bank account, where my pension is also paid. Can I claim that any money brought into Thailand, is from my savings, and any top up to my savings is from previous years pension payments, not in this year? Similar with my Norwegian account.

"Can I claim that any money brought into Thailand, is from my savings, and any top up to my savings is from previous years pension payments, not in this year? Similar with my Norwegian account".

 

If it was then yes you can, just be prepared to prove it if asked.

 

If it wasn't no you can't.

 

Be aware that income from any year after 1 January 2024 is assessable to tax, delaying it's importation to Thailand by a year doesn't change anything.

 

Suggest you read this:

 

https://aseannow.com/topic/1319807-personal-income-tax-guide-for-foreigners-thailand/

 

 

[CordeyLahey]

First off, thank you all for the effort of keeping up with all of this and posting updates and responses. 

 

Does anyone have an accurate tax calculator for these tax changes? Several of the sites I have found are more for calculating a paycheck in Thailand and each of them gives me a different value. I tried making my own in a spreadsheet but have little confidence the values are correct. I hope they are wrong...

 

I am in the planning stages and hope to take an early retirement by 49 in a year or two. I plan to float around visiting other countries until 50 and then get a retirement Visa in Thailand.  All of my income from 50 to whenever I decide to start collecting SS will be from capital gains. I received a bit of the money in 2023, but the bulk of the money I will be pulling gains from will come from a second payout from the sale of a business at a future date, money earned after 1/1/24, or at best a mix of before and after 1/1/24. The plan at the moment would be to bring in about 130,000 - 120,000 THB a month. Assume the amount would be under the capital gains tax limit ($44,625) in the USA and would be taxed at zero dollars. This would then be fully taxed by Thailand due to paying zero taxes in the US, correct? 

 

I understand this is early days, and things will most likely change 14 times between now and then, but if I need to pivot and make alternative plans I would like to at least have an idea of how this will shake out given the current state of taxation of foreign income. I will of course be talking to professionals as the time draws closer, but for now, it's just planning. 

[Mike Lister]

2 hours ago, CordeyLahey said:

First off, thank you all for the effort of keeping up with all of this and posting updates and responses. 

 

Does anyone have an accurate tax calculator for these tax changes? Several of the sites I have found are more for calculating a paycheck in Thailand and each of them gives me a different value. I tried making my own in a spreadsheet but have little confidence the values are correct. I hope they are wrong...

 

I am in the planning stages and hope to take an early retirement by 49 in a year or two. I plan to float around visiting other countries until 50 and then get a retirement Visa in Thailand.  All of my income from 50 to whenever I decide to start collecting SS will be from capital gains. I received a bit of the money in 2023, but the bulk of the money I will be pulling gains from will come from a second payout from the sale of a business at a future date, money earned after 1/1/24, or at best a mix of before and after 1/1/24. The plan at the moment would be to bring in about 130,000 - 120,000 THB a month. Assume the amount would be under the capital gains tax limit ($44,625) in the USA and would be taxed at zero dollars. This would then be fully taxed by Thailand due to paying zero taxes in the US, correct? 

 

I understand this is early days, and things will most likely change 14 times between now and then, but if I need to pivot and make alternative plans I would like to at least have an idea of how this will shake out given the current state of taxation of foreign income. I will of course be talking to professionals as the time draws closer, but for now, it's just planning. 

https://www.uobam.co.th/en/tax-calculation

[mudcat]

Use of Power of Attorney (PoA) by a U.S. Expat to file U.S. taxes.  As an older expat with a Thai-U.S. wife I had been relying upon my existing (and older) general power of attorney to have a trusted friend to file our U.S. taxes if I am unable.  I do not believe that my wife would be able to file U.S. taxes for us so I have executed new Powers of Attorney for us that meet the IRS's standards.

 

The right of an expat to have an agent file individual or married filing jointly taxes is contained in 26 CFR § 1.6012-1(a)(5).

 

To be effective I have prepared mirroring Bangkok Embassy PoA forms each of us giving two trusted individuals who can get our taxes prepared and then sign and file them.  

26 CFR § 1.6012-1(a)(5).docx Template POA for taxes.pdf

MCLR_Signing_a_Tax_Return_for_Someone_Else.pdf

Edited March 17 by mudcat
Added procedural steps for filing using a PoA

[TallGuyJohninBKK]

7 hours ago, mudcat said:

Use of Power of Attorney (PoA) by a U.S. Expat to file U.S. taxes. 

 

Under U.S. law,  don't power of attorney designation cease/end with the death of the granting party?

 

[Mike Lister]

3 minutes ago, TallGuyJohninBKK said:

 

Under U.S. law,  don't power of attorney designation cease/end with the death of the granting party?

 

Not just US law, any country's law.

[TallGuyJohninBKK]

32 minutes ago, Mike Lister said:

Not just US law, any country's law.

 

Ya, so the reason I mentioned it was, a helpful tool while the granting party is alive. But apparently not a useful tool when it comes to estate planning provisions.

 

[mudcat]

The IRS allows a widow/widower to file jointly in the year of their spouse's death.  The power of attorney allows the surviving spouse to obtain assistence from the agent.

[Mike Lister]

43 minutes ago, mudcat said:

The IRS allows a widow/widower to file jointly in the year of their spouse's death.  The power of attorney allows the surviving spouse to obtain assistence from the agent.

I don't believe that what you wrote is correct:

 

https://www.irs.gov/newsroom/how-to-file-a-final-tax-return-for-someone-who-has-passed-away

[biervoormij]

@Jingthing said

"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?"

 

On 12/27/2023 at 4:01 PM, Mike Lister said:

Yes

 

Sorry Mike I am a bit confused by your answer but  I am confused by all this tax stuff. 

 

I thought the only US Pensions that were exempt are Social Security and Government Service Pensions.  The US treats IRA and 401K distributions as normal earned income at the time of distribution so I thought this would be taxable in Thailand. Is it in the Thai tax law or the Thailand-US treaty where I am missing the IRA/401K exemption?

 

Thanks for any clarification you can provide.

[Mike Lister]

1 hour ago, biervoormij said:

@Jingthing said

"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?"

 

 

Sorry Mike I am a bit confused by your answer but  I am confused by all this tax stuff. 

 

I thought the only US Pensions that were exempt are Social Security and Government Service Pensions.  The US treats IRA and 401K distributions as normal earned income at the time of distribution so I thought this would be taxable in Thailand. Is it in the Thai tax law or the Thailand-US treaty where I am missing the IRA/401K exemption?

 

Thanks for any clarification you can provide.

Anything earned before 1 January 2024 is exempt although @JimGant can probably guide you better in the case of IRA's and 401K's

[JimGant]

53 minutes ago, biervoormij said:

The US treats IRA and 401K distributions as normal earned income at the time of distribution so I thought this would be taxable in Thailand. Is it in the Thai tax law or the Thailand-US treaty where I am missing the IRA/401K exemption?

 

No, the distributions are treated by the US as TAXABLE income at time of distribution; but it was earned years ago, and banked in an IRA account as tax deferred income. So, per Thai guidance: "Offshore-sourced income received before 1 January 2024 can be brought into Thailand in 2024 or later without being subject to Thai personal income tax." The tricky word here might be "received." But I would certainly argue that "received" is equivalent to "earned" -- and not that it wasn't really earned until taxes are paid.

 

This could prove an interesting semantics discussion with a Thai RD person. But that it would ever get to that point, is highly doubtful. Your self assessment on this point, about when the IRA proceeds were earned, should have no head scratching. Yes, if they hadn't interjected the "pre 2024 income" guidance, then your IRA distro to Thailand *would* then be assessable income, per DTA, as it would have been income distributed post Jan 2024 -- and the exclusive taxation right of Thailand, per DTA (with the US saving clause trumping the Thai "exclusivity" clause, so you'll be paying at least someone).

 

Anyway, take your IRA RMD, pay Uncle Sam taxes as if it were ordinary income, and don't worry about Thailand.

[biervoormij]

54 minutes ago, JimGant said:

 

No, the distributions are treated by the US as TAXABLE income at time of distribution; but it was earned years ago, and banked in an IRA account as tax deferred income. So, per Thai guidance: "Offshore-sourced income received before 1 January 2024 can be brought into Thailand in 2024 or later without being subject to Thai personal income tax." The tricky word here might be "received." But I would certainly argue that "received" is equivalent to "earned" -- and not that it wasn't really earned until taxes are paid.

 

This could prove an interesting semantics discussion with a Thai RD person. But that it would ever get to that point, is highly doubtful. Your self assessment on this point, about when the IRA proceeds were earned, should have no head scratching. Yes, if they hadn't interjected the "pre 2024 income" guidance, then your IRA distro to Thailand *would* then be assessable income, per DTA, as it would have been income distributed post Jan 2024 -- and the exclusive taxation right of Thailand, per DTA (with the US saving clause trumping the Thai "exclusivity" clause, so you'll be paying at least someone).

 

Anyway, take your IRA RMD, pay Uncle Sam taxes as if it were ordinary income, and don't worry about Thailand.

 

Thanks for the reply.

 

Do you have any idea on what will be required when dealing with the Thai RD. Will I need to provide my US tax returns and balances of my US accounts as of the end of 2023? I have only transferred money from my saving into Thailand but have no idea what they will accept as proof of that. 

 

I hope that the Thai RD also sees ""received" is equivalent to "earned"" and not that received is equivalent to distributed.  I assume if I do have to pay Thai taxes I can claim them back on my US returns?

 

 

[JimGant]

2 hours ago, biervoormij said:

Do you have any idea on what will be required when dealing with the Thai RD. Will I need to provide my US tax returns and balances of my US accounts as of the end of 2023? I have only transferred money from my saving into Thailand but have no idea what they will accept as proof of that. 

 

Relax. Thailand won't know, or have the resources to uncover, the exact nature of your cash flow into Thailand -- not that you're pulling a fast one. Presumably your IRA is all pre 2024 contributions and reinvested income, thus no assessable income subject to Thai taxation. In the less than 1% chance that you'll get audited, your IRA paperwork will sufffice. And, even if your IRA were taxable by Thailand, you'd get a one for one tax credit against your US tax return's taxes on your IRA. Thus, no added tax hit for Yanks. But, as regards IRA remittances to Thailand, which you can show as pre 2024, no Thai tax return need be filed. Relax.

 

Quote

I have only transferred money from my saving into Thailand but have no idea what they will accept as proof of that. 

 

Again, they don't have the resources nor any real need to dig that deep. And if they did, certainly you've got a Wise or other data trail showing this transfer activity. And if that savings account was fully funded pre 2024, you can, on your own accord, opt for FIFO as to how those fungible assets are transferred out, meaning post Dec 2023 deposits and reinvested interest would be last to go, thus probably not even on the radar screen as remitted transfers.