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

[Mike Lister]

A poster in a separate debate on tax posted the following link from the UK's HMRC which confirms that credit card spending is assessable to tax, this increases substantially the chances that the same will be true here:

 

https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm33520

[Danderman123]

On 3/21/2024 at 11:22 PM, Etaoin Shrdlu said:

 

Remitting money that is borrowed abroad may not count as income when remitted, but payments to repay the loan could be considered income even if the payments don't cross a border since they accrue to the benefit the debtor located in Thailand. 

Oops, you lost the plot.

 

Let's say I pay for something in Thailand with a US credit card. In reality, I'm not paying anything, the foreign credit card company is paying, and is in effect loaning me the money. When I pay my foreign credit card company back with funds from my foreign bank, I am not remiting money into Thailand.

 

 

[Etaoin Shrdlu]

8 minutes ago, Danderman123 said:

Oops, you lost the plot.

 

Let's say I pay for something in Thailand with a US credit card. In reality, I'm not paying anything, the foreign credit card company is paying, and is in effect loaning me the money. When I pay my foreign credit card company back with funds from my foreign bank, I am not remiting money into Thailand.

 

 

 

In the scenario you mention, you're extinguishing a debt that has been imported into Thailand with money that has not been taxed by Thailand. This could cause the payment of the debt outside Thailand with money that hasn't been taxed by Thailand to be classified as assessable income. Same as in the UK: https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm33520. 

 

I think it is possible that the RD could take the same or a similar position. This is just too easy a loophole for the RD to ignore. Perhaps not with expats' credit cards, but on a larger scale with corporates and wealthy individuals. Problem is that we'd all be swept up by this whether intentionally or not.

 

 

[Phulublub]

On 3/22/2024 at 1:14 PM, 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.

IMV this is exactly the kind of "clever trick" that tax authorities the world over - including Thailand - are keen to stop.

 

Given that many expats will have DTA's in effect to mitigate some or all of their income, most will already have paid tax on assessable income and that there are reasonably generous exemptions here, the vast majority will have no tax liability here in any case and a lot of hot air, angst and suggestions of illegal activity is being generated that is pretty pointless.

 

PH

[Etaoin Shrdlu]

6 minutes ago, Phulublub said:

IMV this is exactly the kind of "clever trick" that tax authorities the world over - including Thailand - are keen to stop.

 

Given that many expats will have DTA's in effect to mitigate some or all of their income, most will already have paid tax on assessable income and that there are reasonably generous exemptions here, the vast majority will have no tax liability here in any case and a lot of hot air, angst and suggestions of illegal activity is being generated that is pretty pointless.

 

PH

 

I agree. I think tax authorities are aware of this issue.

 

Those that have the most potential to be affected are those who manage to escape taxation in their home countries due to residency or domicile status and then also manage to escape Thai taxation by threading the needle timing-wise under the old rules. Of course some pensions may be excluded by treaty and there are generous deductions under the Thai tax regime, but for those with significant remittances of untaxed money, this could be an issue.

[spidermike007]

I do not think that they can keep track of things like credit card payments, I don't think they have the manpower, I don't think they have the technology, and I think for at least the next 50 to 100 years that's not something any of us need to worry about. Use your credit card to your heart's content. 

[Mike Lister]

4 hours ago, Danderman123 said:

Oops, you lost the plot.

 

Let's say I pay for something in Thailand with a US credit card. In reality, I'm not paying anything, the foreign credit card company is paying, and is in effect loaning me the money. When I pay my foreign credit card company back with funds from my foreign bank, I am not remiting money into Thailand.

 

 

You're letting the word, "credit" get in the way of understanding the reality. As soon as you receive the goods or services and the seller is remunerated, you have made a purchase, the fact that you owe a debt to a credit card company is not part of the picture at all, that's just a timing issue.

 

https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm33520

[Danderman123]

6 hours ago, spidermike007 said:

I do not think that they can keep track of things like credit card payments, I don't think they have the manpower, I don't think they have the technology, and I think for at least the next 50 to 100 years that's not something any of us need to worry about. Use your credit card to your heart's content. 

On the other hand, the burden is on the individual paying Thai taxes to honestly and completely declare all remitted income. 

 

I still have not seen a Thai ruling on credit card use being considered a remittance into Thailand.

[Mike Lister]

6 minutes ago, Danderman123 said:

On the other hand, the burden is on the individual paying Thai taxes to honestly and completely declare all remitted income. 

 

I still have not seen a Thai ruling on credit card use being considered a remittance into Thailand.

I wouldn't hold my breath if I were you, it's not likely they will ever make one because it provides too much guidance..

[Sigmund]

Solution is not to stay more then 179,5 days and leave just before...then no need of filing of absurd forms or getting taxed.

[Mike Lister]

21 minutes ago, Sigmund said:

Solution is not to stay more then 179,5 days and leave just before...then no need of filing of absurd forms or getting taxed.

You can't stay a half a day, it's one or zero.

[Danderman123]

2 hours ago, Sigmund said:

Solution is not to stay more then 179,5 days and leave just before...then no need of filing of absurd forms or getting taxed.

That is my plan for 2024, but I will re-evaluate in 2025, based on the experience of the 100s of 1000s of ex-pats who won't file a tax return.

 

In the meantime, I am only remitting Social Security payments from the US to my Thai bank. This should allow me to be a tax resident in 2025, but owing zero in taxes.

 

I will re-evaluate that strategy, as well, next year, depending on whether old ex-pats are hauled out of the villages in Isaan, and sent to the monkeyhouse by the Revenue Department.

[tuktuktuk]

5 hours ago, Sigmund said:

Solution is not to stay more then 179,5 days and leave just before...then no need of filing of absurd forms or getting taxed.

That was my initial thought.  I don't think I've ever stayed in the Kingdom for more than 180 days in one year unless perhaps one year we returned early.  I never stopped to consider what it would all add up to.  Now I will.

 

My concern is with my wife.  She's a dual citizen. She enters and exits with her Thai passport but spends with our credit card and makes ATM withdrawals.  In the last several years she's been here for more than 180 days per year.  I'm sure the same applies to her, but they probably won't be looking at how long she's been here.  I wonder if or how they might monitor her "remittance".

[Chongalulu]

On 3/22/2024 at 9:34 AM, Etaoin Shrdlu said:

 

The RD would request this information from the person they were auditing as a first step. As a second step, the RD could request assistance from the auditee's home country tax authorities who could obtain this from the bank or other financial institution and send it to the RD.

 

I don't think data protection laws would prevent tax authorities from obtaining information from financial institutions under existing international tax cooperation agreements. Privacy in financial matters, at least when it comes to tax, has been pretty much dead since the IRS busted open the Swiss banks about fifteen years ago.

 

 

They might ask it from the person they are targeting but Thai RD would would have little joy in a fishing trip across the gammiit of card suppliers in U.K. Perhaps if there was some high profile serious specific crime investigation might they obtain cooperation from the U.K. authorities,but to a foreign tax authority of Thailand’s standing,I doubt.

[Mike Lister]

30 minutes ago, Chongalulu said:

They might ask it from the person they are targeting but Thai RD would would have little joy in a fishing trip across the gammiit of card suppliers in U.K. Perhaps if there was some high profile serious specific crime investigation might they obtain cooperation from the U.K. authorities,but to a foreign tax authority of Thailand’s standing,I doubt.

Don't confuse the legality issue with whether or not they could or would. The issue under debate is whether or not such income is assessable or not.

[norbra]

I think it has been made clear in the RD rules,that the value of any benefit you receive from such transactions ,whilst in Thailand ,will be an assessable item of income.

[Etaoin Shrdlu]

2 hours ago, Chongalulu said:

They might ask it from the person they are targeting but Thai RD would would have little joy in a fishing trip across the gammiit of card suppliers in U.K. Perhaps if there was some high profile serious specific crime investigation might they obtain cooperation from the U.K. authorities,but to a foreign tax authority of Thailand’s standing,I doubt.

 

I think existing information exchange agreements, often contained in dual taxation agreements, would compel the UK tax authorities to provide relevant information if an investigation rose to the level of Thai authorities formally asking for it. I don't think UK authorities would refuse to cooperate based upon how some people may regard Thailand, but they could decline to cooperate if proper procedures were not adhered to.

 

I agree that a formal request for information exchange is unlikely in the case of Thai tax authorities investigating a pensioner over minor tax affairs. My guess is that the RD would simply present a bill for amounts they believe are due, with the presumption that any overseas credit card use constituted the inward remittance of untaxed funds and place the burden on the taxpayer to prove otherwise. Credit card transaction details can likely be obtained from the Bank of Thailand since they involve foreign exchange. 

 

Again, what the RD chooses to do and what they technically can do are often different things. In order for someone to decide on how compliant they wish to be, I think they would need to know both what actual practice is going to be as well as what the worst case scenario is. I don't think we know yet what practice will be under the new interpretation of the rules.

[Danderman123]

On 3/22/2024 at 12:35 PM, thailand49 said:

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?

🤔

I bought lunch today in Phuket with my Bank of America credit card. So, what do I do now? Am I going to jail?

 

How do I report it? I may or may not be a tax resident this year.

 

These new rules seem to be a mess.

[thailand49]

31 minutes ago, Danderman123 said:

I bought lunch today in Phuket with my Bank of America credit card. So, what do I do now? Am I going to jail?

 

How do I report it? I may or may not be a tax resident this year.

 

These new rules seem to be a mess.

Why ask me!  What I say would give you the impression I know?🤔

[Danderman123]

1 hour ago, thailand49 said:

Why ask me!  What I say would give you the impression I know?🤔

I am just expressing my confusion about the new regulations.

 

Perhaps I need to keep a record of that one credit card payment for lunch in Phuket in case I am audited.

[thailand49]

17 minutes ago, Danderman123 said:

I am just expressing my confusion about the new regulations.

 

Perhaps I need to keep a record of that one credit card payment for lunch in Phuket in case I am audited.

Personally I just go on with my life and not worry.

[ukrules]

On 3/22/2024 at 11:13 AM, Mike Lister said:

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.

 

I'm going to purchase a new computer at some point in the next year, it's going to be a very heavy duty powerful beast of a machine.

 

Now I could wire the money to my bank account here and spend the 250k-300k Baht on the overpriced components from a Thai computer store to build it here or order the lot from Amazon.com in the US which will work out considerably cheaper even with VAT/Duty on the import and put it all on my UK credit card.

 

Lets assume it's 300k Baht in total.

Do I declare this foreign spending on a foreign card as income in the form of computer parts?

 

I am going to pay the UK credit card off with UK income and I clear the entire card balance every month.

 

What if next month I decide to buy a Patek Philippe watch over the internet and mail it in? They cost a bit more.

[Ben Zioner]

On 3/25/2024 at 8:41 AM, Danderman123 said:

That is my plan for 2024, but I will re-evaluate in 2025, based on the experience of the 100s of 1000s of ex-pats who won't file a tax return.

You could forever, because they'll dig up [probably few] expat cases every year, with arrears and fines to be paid back to Jan 1, 2024 (or t-10 years).

[Ben Zioner]

2 minutes ago, ukrules said:

 

I'm going to purchase a new computer at some point in the next year, it's going to be a very heavy duty powerful beast of a machine.

 

Now I could wire the money to my bank account here and spend the 250k-300k Baht on the overpriced components from a Thai computer store to build it here or order the lot from Amazon.com in the US which will work out considerably cheaper even with VAT/Duty on the import and put it all on my UK credit card.

 

Lets assume it's 300k Baht in total.

Do I declare this foreign spending on a foreign card as income in the form of computer parts?

 

I think you gave the answer, for import you'll deal with Thai Customs, not Thai RD.

[ukrules]

2 minutes ago, Ben Zioner said:

You could forever, because they'll dig up [probably few] expat cases every year, with arrears and fines to be paid back to Jan 1, 2024 (or t-10 years).

 

Best to do 1 year without residence I think and liquidate and remit enough assets during this non resident year to last the following 5 to 10 years.

 

I'm going to check this with an acountant prior to leaving for 6.5 months next year.

[ukrules]

1 minute ago, Ben Zioner said:

I think you gave the answer, for import you'll deal with Thai Customs, not Thai RD.

But vat/duty is much less than income tax

[Ben Zioner]

1 minute ago, ukrules said:

But vat/duty is much less than income tax

Sure, but they could make correction through import duties. I could imagine duties for private overseas imports being higher that those of licensed importers. 

[Mike Lister]

11 minutes ago, ukrules said:

 

I'm going to purchase a new computer at some point in the next year, it's going to be a very heavy duty powerful beast of a machine.

 

Now I could wire the money to my bank account here and spend the 250k-300k Baht on the overpriced components from a Thai computer store to build it here or order the lot from Amazon.com in the US which will work out considerably cheaper even with VAT/Duty on the import and put it all on my UK credit card.

 

Lets assume it's 300k Baht in total.

Do I declare this foreign spending on a foreign card as income in the form of computer parts?

 

I am going to pay the UK credit card off with UK income and I clear the entire card balance every month.

 

What if next month I decide to buy a Patek Philippe watch over the internet and mail it in? They cost a bit more.

Ah, a nice easy one I see! 🙂

 

Technically speaking I would guess it's a Custom and Import taxes which may be equal to 50% of the product cost. It's hard to ever imagine RD being interested in such a thing.

[ukrules]

15 minutes ago, Mike Lister said:

Ah, a nice easy one I see! 🙂

 

Technically speaking I would guess it's a Custom and Import taxes which may be equal to 50% of the product cost. It's hard to ever imagine RD being interested in such a thing.

 

It's closer to 0% on computer parts.

[Celsius]

On 3/21/2024 at 8:23 AM, Mike Lister said:

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

 

 

I strongly think you are 100% wrong on this one.

 

Credit Cards are governed by different rules. Otherwise over $30,000 in credit card points I accumulated during my lifetime would be taxable income.

 

What else would you suggest? Is someone books Hilton using honor points would be a taxable income in Thailand?