New LTR Visa and Tax Exemption for Overseas Income

[trandall]

I have been following news regarding the foreign earned income tax rules effective Jan 1, 2024. Most of my income is derived from rental properties in the US, and the income from which appears to be taxable in Thailand if brought into the country after Jan 1, 2024. I received a new LTR visa in January of 2023 which is valid for five years and renewable for an additional five years. The BOI website states that LTR visa holders are granted "tax exemption from overseas income" (https://ltr.boi.go.th/). Does anyone know if this exemption will remain valid or will the new rules negate it?

[JackGats]

The exemption is enshrined in a Royal Decree which trumps the new rule/guideline until further notice.

[JimGant]

8 hours ago, trandall said:

Most of my income is derived from rental properties in the US, and the income from which appears to be taxable in Thailand if brought into the country after Jan 1, 2024.

 

Under the DTA between the US and Thailand, the US has primary taxing authority (but not exclusive) on rental income from properties in the US. Thailand could also tax it, but would have to give a credit for all the tax paid to the US, which probably means little or no tax paid to Thailand. So, assuming you don't get an LTR visa, or the LTR tax exemption falls through -- worst case would probably be the paperwork drill of maybe having to file a Thai tax return.

 

Quote

This Article does not grant an exclusive taxing right to the situs State; the situs State is merely given the primary right to tax.

 

From the technical explanation of Article 6 (Rents) of the Thai-US DTA.

[trandall]

7 hours ago, JimGant said:

 

Under the DTA between the US and Thailand, the US has primary taxing authority (but not exclusive) on rental income from properties in the US. Thailand could also tax it, but would have to give a credit for all the tax paid to the US, which probably means little or no tax paid to Thailand. So, assuming you don't get an LTR visa, or the LTR tax exemption falls through -- worst case would probably be the paperwork drill of maybe having to file a Thai tax return.

 

 

From the technical explanation of Article 6 (Rents) of the Thai-US DTA.

Thank you for your response! I have already received an LTR. I am hoping to get verification that the exemption for overseas earnings with remain in place with the new rules. My other concern is the differences in tax rates. My US tax bracket is 22%, and my income would place me in the 35% tax bracket in Thailand. Will I be required to pay the 12% difference?

[trandall]

11 hours ago, JackGats said:

The exemption is enshrined in a Royal Decree which trumps the new rule/guideline until further notice.

Ahh, thank you for the heart-warming response! (so far)

[CartagenaWarlock]

16 hours ago, trandall said:

LTR visa holders are granted "tax exemption from overseas income" (https://ltr.boi.go.th/). Does anyone know if this exemption will remain valid or will the new rules negate it?

As a US citizen, you pay taxes no matter where you live. You don't pay taxes on all your incomes from the US in Thailand. You will pay taxes for the portion you bring to Thailand. My suggestion is to pay taxes in Thailand and deduct them from US obligations.

[NorthernRyland]

4 hours ago, trandall said:

My US tax bracket is 22%, and my income would place me in the 35% tax bracket in Thailand. Will I be required to pay the 12% difference?

It's too early to know. Seriously all we can do is just wait and see what happens. These people don't have a plan (as usual) and they're gong to figure it out as they go along.

 

If I had to guess they're not going to have any feasible way to collect the money so they'll have us file a form at immigration and have us state our income and how much we should pay based on some totally inadequate information. Since they can't know much money we're actually bringing in to the country we'll probably have to volunteer receipts and rental agreements etc... It could be a total nightmare and I don't see how they accomplish this with their current system.

[JimGant]

On 11/30/2023 at 4:23 PM, trandall said:

My US tax bracket is 22%, and my income would place me in the 35% tax bracket in Thailand. Will I be required to pay the 12% difference?

You need to figure your effective tax rate on your rental income. Easy. What's your tax bill before you add the rental income to your taxable income pile; then what's the tax bill afterwards. That additional tax, divided by your rental income, is your effective taxation on the rental income. But, the rate's not that important -- what's important is the dollar amount that's used as the tax credit on your Thai tax bill. And if that's greater than your Thai tax, nothing paid to Thailand. 

 

But, if rental income is the only income subject to Thai taxation (as other income may be gov't pensions, social security, Roth payouts -- all NOT subject to inclusion on your Thai tax return), your Thai tax return, with only rental income, may have an effective taxation less than that of your US return. Thus, all the Thai tax is covered by the credit. But, if the other way, then, yes, you'll pay whatever remains of the Thai tax, after taking the credit for the US tax.

 

But, they're not going to screw us on this LTR exemption. BoI's boss is the Prime Minister, and they're not about to let the Ministry of Finance tarnish their LTR effort and reputation.