Remit vs. Credit card payment (under new tax rules)

[Mike Lister]

17 minutes ago, Yumthai said:

I think that Thai RD, unlike IRS, has no means nor power to enforce anything out of Thailand borders. Could you bring any case of Thai law being enforced abroad?

 

I doubt that tax treaties have two sets of rules, one for the IRS and one for poorer countries. The IRS may have a long reach but I doubt that in law it is any longer than that of the TRD.

[Etaoin Shrdlu]

11 minutes ago, Yumthai said:

I think that Thai RD, unlike IRS, has no means nor power to enforce anything out of Thailand borders. Could you bring any case of Thai law being enforced abroad?

 

 

My comment is about the RD's ability to obtain relevant financial information under existing international tax agreements. Enforcement, if any, would be undertaken within Thailand under Thai laws.  

 

I think that enforcement of a Thai court judgement would require the re-litigation of the issue in the second country's court. This would be impractical with the exception of very large judgements. But I am not a lawyer and have to defer on this to those with legal training and insight into this issue.

 

 

[Etaoin Shrdlu]

27 minutes ago, Dan O said:

Im not sure that payment of debt is considered income in any country. I may be wrong but that is a gross overstretch to make a claim like that. 

 

In the US, the IRS considers debt forgiveness as being income to the debtor and is taxable. This is an issue when President Biden proposes relief for student loans.

 

I could see how the RD could consider repayment of a loan that was remitted into Thailand but repaid with funds outside Thailand in a similar vein, or at least examine the provenance of the funds used in the repayment.

[Mike Lister]

For my benefit as much as anything else, just so we're all on the same page on this:

 

The TRD doesn't care what the purpose is of the funds that are remitted to Thailand or how they are used. The TRD only cares whether the funds are exempt or assessable, ergo, arguing they will be used to pay off overseas debt is a red herring at best.

 

 

 

 

[thailand49]

I say why open a can of worms that doesnt need to be opened.

Must be some are scared of their own shadows!

Better to pay the taxes wouldnt it than charge it on your credit card, isnt it lije 3% to use it then if balance isnt paid  off got to be close if not over 10?

Based on reading even if you wanted to pay there are so many deductions allowed?

🤔

[eisfeld]

1 hour ago, Mike Lister said:

The TRD doesn't care what the purpose is of the funds that are remitted to Thailand or how they are used. The TRD only cares whether the funds are exempt or assessable, ergo, arguing they will be used to pay off overseas debt is a red herring at best

 

In the given example of a credit card payment there are no funds transferred to Thailand to pay off debt. The paying off of debt happens outside Thailand. What is transferred to Thailand is a loan which is not assessable income under the thai tax laws.

 

If you borrow $1k from an overseas bank and transfer it into Thailand it's also not taxable because it's not assessable income.

 

There is a taxable event if the debt for example is forgiven because then it's a "in kind" benefit of the person in Thailand.

[Dan O]

2 hours ago, Mike Lister said:

I think this is about borders. The Thai RD doesn't care what financial arrangement's you have overseas, all it cares about is that your purchased goods or services here in Thailand and that ultimately you paid for them using overseas funds.

 

The definition of an international tourist, in economics terms, is somebody from outside Thailand's borders who holidays in Thailand using overseas funds that are brought into the country and the holiday experience is then taken home again. It doesn't matter that those funds are borrowed funds or on credit, as many will be. Once the purchase is made, it gets logged against Thai GDP.

 

So the tax resident who uses an overseas credit card in Thailand to finance his/her 181 day stay, may pay  off their credit card bill using savings, or income, one being taxable, the other not, potentially. The fact the cardholder choses to draw out reimbursement of the credit card bill using extended payments, is not a matter for the TRD., 

Debt or a purchase is not income so to make a purchase or payment using a credit card or debit card has no bearing or relation to being income which is what the tax situation is dealing with. It can become very convoluted but I see no way a credit card payment or debit card payment will be classed as income.

[Dan O]

1 hour ago, Etaoin Shrdlu said:

 

In the US, the IRS considers debt forgiveness as being income to the debtor and is taxable. This is an issue when President Biden proposes relief for student loans.

 

I could see how the RD could consider repayment of a loan that was remitted into Thailand but repaid with funds outside Thailand in a similar vein, or at least examine the provenance of the funds used in the repayment.

Now your really twisting  the topic to being in the realm of absurd 

[eisfeld]

17 minutes ago, Dan O said:

Debt or a purchase is not income so to make a purchase or payment using a credit card or debit card has no bearing or relation to being income which is what the tax situation is dealing with. It can become very convoluted but I see no way a credit card payment or debit card payment will be classed as income.

 

A debit card payment is not a loan. That's why it's called debit vs credit.

[Mike Lister]

1 hour ago, Dan O said:

Debt or a purchase is not income so to make a purchase or payment using a credit card or debit card has no bearing or relation to being income which is what the tax situation is dealing with. It can become very convoluted but I see no way a credit card payment or debit card payment will be classed as income.

A debit card is the same as cash, using an overseas debit card is exactly the same as importing funds into Thailand and should be reported accordingly. 

 

We may not be able to agree regarding the use of overseas credit cards in Thailand. In my world, the transaction or sale of goods or service are complete when the seller receives payment and the goods/services are passed to the buyer, here in Thailand. There was an offer to sell, acceptance of the terms and there was remuneration, the sale is complete and transacted on Thai soil.

 

If a foreigner, for example, spent their entire year in Thailand, charging their rent, food and living expenses, to their UK credit card which was later settled in the UK, using UK resident funds, the foreigner could easily be guilty of evading Thai taxes. If they used the credit card sparingly, from time to time, probably not. Where that mid point might be is unclear.

[Mike Lister]

1 hour ago, eisfeld said:

 

In the given example of a credit card payment there are no funds transferred to Thailand to pay off debt. The paying off of debt happens outside Thailand. What is transferred to Thailand is a loan which is not assessable income under the thai tax laws.

 

If you borrow $1k from an overseas bank and transfer it into Thailand it's also not taxable because it's not assessable income.

 

There is a taxable event if the debt for example is forgiven because then it's a "in kind" benefit of the person in Thailand.

OK. If the CC payments are made in the home country bank, the line between convenience and evasion is cloudy. If I make ALL my purchases via the overseas card and ALL the payments overseas, surely that is evasion. 

 

Borrowing overseas and transferring the debt into Thailand is, once again, a red herring! The TRD doesn't care about the debt liability in the home country. All it cares about is the purchase was made using overseas funds that were imported to buy goods or services.

 

We can agree to disagree on this and that would be OK, since I presume neither of us is a lawyer or forensic accountant.

[eisfeld]

1 hour ago, Mike Lister said:

Borrowing overseas and transferring the debt into Thailand is, once again, a red herring! The TRD doesn't care about the debt liability in the home country. All it cares about is the purchase was made using overseas funds that were imported to buy goods or services.

 

What the revenue department cares about is if tax is due or not and for that it only cares about if something is assessable income. A loan is not income. Be it from outside the country or from inside. I've given loans to a company in Thailand and there was no tax due (as expected).

 

Where the story changes is the person suddenly having an item in Thailand which has a value which was purchased with oversees funds. It's equivalent to you buying something outside Thailand but then having it sent to you in Thailand. I believe that falls under the "in kind benefit" and is therefore taxable but I am not sure if there is a clear precedent.

 

1 hour ago, Mike Lister said:

We can agree to disagree on this and that would be OK, since I presume neither of us is a lawyer or forensic accountant.

 

Yup. Still interesting topic to discuss. Would be awesome if someone with real world experience in such a matter could chine in or better a tax lawyer or accountant. Doesn't have to be forensic, just CPA 🙂

Edited March 22 by eisfeld

[Troy Tempest]

5 hours ago, Mike Lister said:

I think this is about borders. The Thai RD doesn't care what financial arrangement's you have overseas, all it cares about is that your purchased goods or services here in Thailand and that ultimately you paid for them using overseas funds.

 

The definition of an international tourist, in economics terms, is somebody from outside Thailand's borders who holidays in Thailand using overseas funds that are brought into the country and the holiday experience is then taken home again. It doesn't matter that those funds are borrowed funds or on credit, as many will be. Once the purchase is made, it gets logged against Thai GDP.

 

So the tax resident who uses an overseas credit card in Thailand to finance his/her 181 day stay, may pay  off their credit card bill using savings, or income, one being taxable, the other not, potentially. The fact the cardholder choses to draw out reimbursement of the credit card bill using extended payments, is not a matter for the TRD., 

 

Impossible to enforce income Tax on Credit Card Payments here.......How in Hell can they police that or Even try to Administer!??????

 

[Mike Lister]

1 minute ago, Troy Tempest said:

 

Impossible to enforce income Tax on Credit Card Payments here.......How in Hell can they police that or Even try to Administer!??????

 

We're not discussing enforcement, have you read the OP?

 

But since you raised the question, hypothetically: foreigner lives here year round hence is tax resident, but has no assessable income. At visa extension time, Immigration says, show us your bank book/statements for living expenses (they do this from time to time in various locations and have done this to me several times) and the foreigner says, ah, I don't have any! Immi., asks, really, why don't you have any, are you working here illegally? Foreigner says no, I use my overseas credit card for all my Thai based expenses. Really says Mr Immi. man, that probably means you don't have to pay Thai tax, right? Yup says the foreigner, smart eh? Indeed, says Mr Immi man, reaching for the phone to dial his TRD counterpart.

[Cardano]

22 hours ago, Mike Lister said:

Which is tax evasion and since its illegal, can't be discussed here.

 

Regardless, using a foreign credit card in Thailand to make payments kere, is still considered to be remitted funds.

so using a CC is now considered (by you) tax evasion 555

[Mike Lister]

2 minutes ago, Cardano said:

so using a CC is now considered (by you) tax evasion 555

If you're going to quote things, quote fully along with context:

 

The poster wrote:

 

"Not in the sense that it would be in any way visible to the RD".

[Mike Lister]

See para 30 of the link below:

 

30) The way in which overseas Funds Transfers are received in Thailand does not change their definition. Bank transfers, cheques, cash or overseas ATM withdrawals can also be income, the latter because overseas funds were imported to pay for goods or services in Thailand.  

 

 

If you pay for something in Thailand (or anywhere else), you receive goods or services in exchange for remuneration. If you argue that by paying for something using an overseas credit card, you didn't actually import funds into Thailand, how did you manage to buy the thing that you bought?

 

In fact what I think you probably did was to export whatever you bought, even if it was only the experience. You used overseas funds to buy something in Thailand that was later exported to your home country. 

 

[xeniv23]

11 hours ago, Mike Lister said:

Certainly visible to the Central Bank since it involves currency exchange, whether or not the RD has saight also, is unclear.

Not much is clear concerning this issue.  I would be surprised if the RD was not looking at foreign exchange transactions.   It's a list of where to start digging.  

[Dan O]

5 hours ago, eisfeld said:

 

A debit card payment is not a loan. That's why it's called debit vs credit.

I know exactly what they are and how they are used. However others commenting here do not seem to understand the difference in a debt payment against a loan or purchase and what income is. They have also implied any type of money transfer as income which is incorrect as well and thats why I included it. Youve blurred the lines several times on this issue 

Edited March 22 by Dan O
Spelling

[Mike Lister]

52 minutes ago, Dan O said:

I know exactly what they are and how they are used. However others commenting here do not seem to understand the difference in a debt payment against a loan or purchase and what income is. They have also implied any type of money transfer as income which is incorrect as well and thats why I included it. Youve blurred the lines several times on this issue 

I don't see that anyone has suggested that all transfers are regarded as income, only that they are potentially assessable.

 

The CC holder cares about the differences you outlined but the TRD doesn't. The TRD doesn't distinguish between funds that are immediately available in liquid form and funds that represent debt. Liquid funds are easier and simpler to classify to determine if they are assessable to Thai tax or not. Funds that represent debt are more difficult because the means used to repay the debt overseas must first be established to determine if they are assessable or not.

 

Goods and services purchased here must have a visible method of being acquired. If that method is cash, it's easy enough to determine the source, either it was from inside Thailand or outside. If it was outside there was a transfer of some sort, a funds transfer, cash was carried or a debit card was used. Those things are easy enough to establish accessibility to Thai tax.

 

A debt mechanism such as a loan or prepaid credit are more complex because there is an additional step in the end to end process. But just because there is an additional step, doesn't automatically mean there is no assessability to Thai tax. Goods or services were still acquired using funds from overseas, the exact same principle applies.

 

Having said all those things, I doubt very much that today, the TRD is interested in the average expats CC spend using overseas cards, whether or not they might be in the future is unclear. Much will depend on the extent to which they are used to circumvent tax and the scale involved. This discussion is more about the theoretical rather than the practical, in that respect, the evidence points firmly, I think, to CC spending being assessable. If the CC used their overseas CC for all their Thai based expenses and they were extensive, it certainly would be assessable in the TRD eyes, I'm certain of that.

Edited March 22 by Mike Lister

[eisfeld]

58 minutes ago, Dan O said:

I know exactly what they are and how they are used. However others commenting here do not seem to understand the difference in a debt payment against a loan or purchase and what income is. They have also implied any type of money transfer as income which is incorrect as well and thats why I included it. Youve blurred the lines several times on this issue 

 

The situation when a credit card is used can be indeed blurry. Not so with a debit card which clearly transfers previously earned income into Thailand at which point it might be assessable in terms of tax. There wouldn't be a thread with people argueing back and forth if the line was not blurry.

 

Overall I agree with Mike Lister though we differ on the details  I guess.

[Dan O]

11 hours ago, eisfeld said:

 

The situation when a credit card is used can be indeed blurry. Not so with a debit card which clearly transfers previously earned income into Thailand at which point it might be assessable in terms of tax. There wouldn't be a thread with people argueing back and forth if the line was not blurry.

 

Overall I agree with Mike Lister though we differ on the details  I guess.

We absolutely do disagree on a number of points and having theoretical guessing is pointless until final regs to manage this situation is issued which I've stated as well.

 

  I dont agree completely with Mike's view on some of this either but he does have a fairly firm grasp on the topic but its far from defined by Thailand at this point.

 

Theres too much speculation at this point on what is income, and certainly with

The number of DTA's existing and the challenges to legality that could arise and  that's not helping others, only causing more confusion.

[Mike Lister]

3 minutes ago, Dan O said:

We absolutely do disagree on a number of points and having theoretical guessing is pointless until final regs to manage this situation is issued which I've stated as well.

 

  I dont agree completely with Mike's view on some of this either but he does have a fairly firm grasp on the topic but its far from defined by Thailand at this point.

 

Theres too much speculation at this point on what is income, and certainly with

The number of DTA's existing and the challenges to legality that could arise and  that's not helping others, only causing more confusion.

Income is very well defined:

 

https://library.siam-legal.com/thai-law/revenue-code-assessable-income-and-income-tax-sections-40-64/

 

But the issue is not, what is income, the issue is whether credit card spending is a assessible or not or whether it is exempt because it is credit.

 

 

Edited March 23 by Mike Lister

[Dan O]

54 minutes ago, Mike Lister said:

Income is very well defined:

 

https://library.siam-legal.com/thai-law/revenue-code-assessable-income-and-income-tax-sections-40-64/

 

But the issue is not, what is income, the issue is whether credit card spending is a assessible or not or whether it is exempt because it is credit.

 

 

I agree that Thai's list of what is income has been outline in detail but certainly will change as they close loop holes and clarify certain areas and manager their way thru tge DRA maze but If there is an  issue of  whether credit card use could be defined as income because its accessible then its not clear and speculation starts which just muddied the water which is what I have said a number if times.

[Mike Lister]

7 minutes ago, Dan O said:

I agree that Thai's list of what is income has been outline in detail but certainly will change as they close loop holes and clarify certain areas and manager their way thru tge DRA maze but If there is an  issue of  whether credit card use could be defined as income because its accessible then its not clear and speculation starts which just muddied the water which is what I have said a number if times.

We're still not on the same page with this yet. The issue is the money that is used to pay the credit card bill, not just the use of the creditcard alone.

 

The TRD will never be interested in casual credit card usage abroad. But if someone uses a foreign credit card to live off in Thailand, and they don't file a tax return because they were tax resident, they could easily become interested. If the person has extensive savings that were earned prior to 1 January 2024, living off a credit card will not be an issue as long as those savings were used to pay the bill and a tax return was filed. But, if for the sake of an extreme example, a digital nomad earns income that is banked tax free, uses that income to pay of their credit card bills every month and fails to file a tax return, that's an issue for the TRD.

 

All of this is to say that using a foreign credit card in Thailand is not tax evasion in itself but the extent to which it is used, combined with the nature of the funds used to pay the bill, along with a failure to file a tax return, is tax evasion.

[sirineou]

First let's wait and see how this thing plays out. For most expats living on pension it might not be an issue. 

This year will not be an issue because any money  transferred can be from savings from last year (Those who have savings back home) and are not taxable. For many ,such as Americans,  most pensions are only taxed in the US by bilateral agreement. Then there will be deductions, 

So let's see.

I have already limited ny transfers to Thailand, which in a way it's a good enforced discipline to save. 

IMO this system will cost more to Thailand than it will make, because people will limit the amount they transfer to that which absolutely nessacery. 

  I was in the States over the holidays, and brought some money back with me. Both the wife and me are going to the US in june, we  can bring back a certain amount  each without declaring it, Not sure what the total amount each is 

 In the meantime If needed, I can draw from the extension money in the bank and replace it before I have to do my extension next march. 

    If things get to crazy here . (pollution, tax, visa issues etc) there is always plan C, and many more letters in the Alphabet,  

 

[Dan O]

19 minutes ago, Mike Lister said:

We're still not on the same page with this yet. The issue is the money that is used to pay the credit card bill, not just the use of the creditcard alone.

 

The TRD will never be interested in casual credit card usage abroad. But if someone uses a foreign credit card to live off in Thailand, and they don't file a tax return because they were tax resident, they could easily become interested. If the person has extensive savings that were earned prior to 1 January 2024, living off a credit card will not be an issue as long as those savings were used to pay the bill and a tax return was filed. But, if for the sake of an extreme example, a digital nomad earns income that is banked tax free, uses that income to pay of their credit card bills every month and fails to file a tax return, that's an issue for the TRD.

 

All of this is to say that using a foreign credit card in Thailand is not tax evasion in itself but the extent to which it is used, combined with the nature of the funds used to pay the bill, along with a failure to file a tax return, is tax evasion.

We are on the same page just taking it from 2 different directions. Yes in your extreme example that's an issue but its a loop hole that needs to be closed or addressed in some way but Its speculation at this point and that is muddying the water by using extreme cases. There will always be loopholes somewhere.  I agree this is gonna be a tangled web and not easily deciphered. Why stop at credit card use for living expense speculation and add Heloc loans which is a line of credit against an existing valued asset that must be repaid,  they are all extreme case and can be argued as taxable. Its not the use of the cards or credits its the underlying source of funds and where they came from so as I said I think we are saying  the same thing here just maybe in a different way. 

[Mike Lister]

6 minutes ago, Dan O said:

We are on the same page just taking it from 2 different directions. Yes in your extreme example that's an issue but its a loop hole that needs to be closed or addressed in some way but Its speculation at this point and that is muddying the water by using extreme cases. There will always be loopholes somewhere.  I agree this is gonna be a tangled web and not easily deciphered. Why stop at credit card use for living expense speculation and add Heloc loans which is a line of credit against an existing valued asset that must be repaid,  they are all extreme case and can be argued as taxable. Its not the use of the cards or credits its the underlying source of funds and where they came from so as I said I think we are saying  the same thing here just maybe in a different way. 

OK so we are on the same page, great.

 

There are probably several reasons why I might be wrong but the fact that it's a credit card wont be one of them. And of course, in the absence of confirmation by the TRD, all of this is hypothetical debate based on probabilities but underpinned by pretty solid reasoning and fact. The important point for most people is to remove the automatic assumption that foreign CC usage here leaves them free and clear because it may very well not.

[Mike Lister]

I thought it might be helpful to construct a form of words around this subject, for inclusion in the Simple Tax Guide so I have drafted the following. Please let me know is there are other key points, about which readers should be aware.

 

CREDIT CARD SPENDING USING FOREIGN CARDS

 

A series of interesting and useful debates have tried to determine if overseas credit card spending in Thailand by Thai tax residents, constitutes assessable income but they have been unable to decisively conclude. It is far from certain that such spending is not assessable and several factors lead us to believe it may be. The salient points in the debate include:

 

A) It is irrelevant that the spending is done on credit, the taxable event occurs in Thailand when the buyer receives the goods or services they purchased and the seller is remunerated.

B) The TRD is very unlikely to be interested in minor or small scale purchases made using foreign credit cards but is likely to be attracted by large expenses that are repeated every month.

C) The core issue is likely to be the source of the funds used in the home country to settle the credit card bill and whether those funds are exempt or assessable.

D) The TRD doesn’t care about credit agreements or debt in the card holders home country, only about the events that took place in Thailand and the funds used to facilitate them.

E) Debt forgiveness may well  be construed as receiving assessable income.

 

As more becomes clear on this point, we will update the guide accordingly.

[metisdead]

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