Introduction to Personal Income Tax in Thailand

[chiang mai]

2 hours ago, Jingthing said:

You're touching on another aspect of interest to me.

 

Examples.

 

Withdrawal 10k from Traditional IRA.

 

10k taxable in the US.

 

10k taxable if sent to Thailand.

 

 

Withdrawal 10k from Roth IRA.

 

Zero.taxable in the US.

 

10k taxable if sent to Thailand 

 

Double taxation rules may apply but not exempt like social security.

 

Now the source of the 10ks within the retirement accounts could be a single stock or a complex mix of stocks, bonds, mutual funds, etfs, etc. Each source element within would have a profit or loss basis.

 

However it is my understanding that as these are classed as pensions not regular investments that the taxable number of relevance would be the full 10k and not the profit on the source investments if any. Unlike if you held the same investments outside the retirement accounts in which case capital gains would be the thing to look at upon sale.

 

Your post above suggests differently.

 

Still seeking a definituve answer on this.

 

 

 

 

Indeed this is all very confusing. As you say, 100% of the income is taxable, if it is classed as pension income but if stocks or bonds, only the gain is taxable (allegedly), which if correct, appears to penalise pension income, which certainly can't be right. The bottom line is that we don't have enough information regarding the TRD treatment of these instruments and guessing at the answer or adopting home country solutions, probably isn't helpful.

 

 

 

 

[OJAS]

20 hours ago, jwest10 said:

no it is the 90 form if it ever gets updated.

 

That would appear to imply that it would be pointless for the TRD to continue with the PND91 form since no-one would be able to use it in practice!

 

[potless]

19 hours ago, chiang mai said:

I have to back track on my recent posts on the subject of foreign currency accounts, I think I may have intermingled two different scenarios' in what is a complex and confusing picture. 

 

Resident Foreign Currency Account

 

Funds arriving in the account are assessable when they are deposited into the account. This is because the account is nothing more than a facility to hold a range of currencies, without any special tax treatment.

 

Non-resident Foreign Currency Account

 

This type of account not only holds a range of currencies but also shares some of the characteristics of an offshore account in that a) the funds are no0t assessable to Thai tax B) the funds can be freely transferred out of Thailand, without regard to BOT normal funds transfer rules. The funds in this account are only considered to be "fully onshore" for tax purposes, once they are converted to THB and withdrawn.

 

Issues arise when a non-resident becomes resident and the bank is unaware.

 

My apologies for my error and incomplete explanation.

Interesting. No apology necessary. I was totally unaware of the scenarios you describe. The account I opened many years back would  certainly have been a non resident account. Nonetheless, I will convert into Baht this year. Thanks.

[jwest10]

4 hours ago, OJAS said:

 

That would appear to imply that it would be pointless for the TRD to continue with the PND91 form since no-one would be able to use it in practice!

 

Most retires  do not have a job here in Thailand but those that do would use the 91 form but most of us if ever get these forms then it is the 90 form but most are waiting and see.

[Jingthing]

12 hours ago, gamb00ler said:

On this matter I would consider how TRD treated these withdrawals PRIOR to the recent change in treatment of prior year's earnings.

 

I believe that in 2023 and before, the TRD did not consider those withdrawals as assessable income when remitted to Thailand.  I think TRD's treatment of those withdrawals has not changed.

Honestly I don't know of even one retired expat who filed Thai taxes referring to international transfers up till now. WHY? Because of the famous loophole wide as the Holland Tunnel about money from previous years always being exempt. So transfers of things like pensions was really OFF THE RADAR of both expats and I think TR as well.

But that rule has changed. 

So while I get what you're saying, I don't think it's really relevant to the CURRENT situation. 

[Jingthing]

11 hours ago, chiang mai said:

Indeed this is all very confusing. As you say, 100% of the income is taxable, if it is classed as pension income but if stocks or bonds, only the gain is taxable (allegedly), which if correct, appears to penalise pension income, which certainly can't be right. The bottom line is that we don't have enough information regarding the TRD treatment of these instruments and guessing at the answer or adopting home country solutions, probably isn't helpful.

 

 

 

 

Indeed indeed. but for now , I'm pretty sure that IRAs and 401Ks will be classed as accessible pension income and the FULL AMOUNT of withdrawals will be the relevant number as far as the portion of that FULL AMOUNT remitted to Thailand.

 

This video gets into this fairly well.

 

If anyone has any evidence that IRAs and 401Ks can be accounted for in a cost basis profit/loss manner as non retirement account investments are, please post it. 

 

I'm not pretending to be any kind of expert.

 

I'm just trying to figure all this stuff out so I can tax plan better.

 

On the IRA/401K thing, I'm sure these answers will be of interest to the majority of retired American expats in Thailand.

 

Some good news in the video.

It implies because of the DTA that IF you must pay tax in Thailand on any of these vehicles you can get a credit back from the U.S. Apparently under the DTA ONLY THAILAND has a claim to tax these vehicles. It implies for example that if you must pay Thai tax on your Roth IRA withdrawal which is tax free in the U.S. that you can file for that money to be refunded to you by the IRS.

 

 

[gamb00ler]

10 minutes ago, Jingthing said:

So while I get what you're saying, I don't think it's really relevant to the CURRENT situation. 

TRD basically said that any income earned outside Thailand from 2023 and before will never be assessable whether remitted or not.  I cannot see them now treating income from 2020 that spent some portion of the intervening time in an IRA/SEP/401K differently.

[Jingthing]

6 minutes ago, gamb00ler said:

TRD basically said that any income earned outside Thailand from 2023 and before will never be assessable whether remitted or not.  I cannot see them now treating income from 2020 that spent some portion of the intervening time in an IRA/SEP/401K differently.

That is about money in the bank.

IRAs and 401ks are very specialized, very rules based retirement accounts.

They are in no way bank accounts.

Until someone has some evidence from Thai tax experts that says differently, I don't see any evidence that the balance of retirement accounts classed as accessible PENSIONS in Thailand on December 31, 2023 is exempt at all. 

The taxable event happens when you make a withdrawal. 

 

It should be noted here that non-retirement account investments (stocks, bonds, real estate) etc. are definitely not looked at as far their book value of December 31, 2023.

 

If you had a stock for 50 years and sold it now for a profit, the cost basis would be from 50 years ago. Not the price on December 31 2023

 

I encourage people who are engaging with Thai tax experts to ask this specific question and share.

 

We are all still learning. 

[JimGant]

18 minutes ago, Jingthing said:

That is about money in the bank

Says who? Expattax alludes to this. So does Chiang Mai, on this forum. I can't find any TRD backup for this. If I could, I'd withdraw all my arguments. But to say, all that pre 2024 income must be held in a savings account, in order to be non assessable from Thai taxes, is ludicrous. Look at Por 162 again:

Quote

POR 162 says that the assessability of foreign income earned before 31/12/2023 shall not be enforced.

How does that translate into: To comply, that income must be held in a bank account. Maybe logic would say it must be held in a financial account, allowing for liquidity or near liquidity (for whatever that's worth). But certainly, if liquidity was a requirement, I'd be allowed -- to realize greater interest -- to move that income from a savings account, to a brokerage, or to buy CDs -- or to an IRA account, to have US taxes deferred. Certainly TRD isn't putting out restrictions on what I can earn from where I park that pre 2024 income..... Somebody's certainly misinterpreting what they thought TRD said about: Must be kept in a bank or savings account. Or TRD is bonkers..... (rhetorical).

 

Anyway, I have an LTR visa, so this discussion is moot. But for Jingthing -- it won't likely make a hill of beans whether or not your IRA remittance is covered by Por 162, or not. If it is, then Thailand can't tax it -- but the US taxes it in full, without any Thai tax credit deductions. But, if Por 162 isn't a player, then the DTA takes full affect -- and Thailand has primary taxation authority on your IRA remittance -- but because of the saving clause in the DTA -- the US has secondary taxation rights, but has to absorb a tax credit for the Thai taxes. Bottom line: Only in the latter example, if Thai taxes exceed US taxes, will your total tax bill exceed US taxation only.

[chiang mai]

1 hour ago, JimGant said:

Says who? Expattax alludes to this. So does Chiang Mai, on this forum. I can't find any TRD backup for this. If I could, I'd withdraw all my arguments. But to say, all that pre 2024 income must be held in a savings account, in order to be non assessable from Thai taxes, is ludicrous. Look at Por 162 again:

How does that translate into: To comply, that income must be held in a bank account. Maybe logic would say it must be held in a financial account, allowing for liquidity or near liquidity (for whatever that's worth). But certainly, if liquidity was a requirement, I'd be allowed -- to realize greater interest -- to move that income from a savings account, to a brokerage, or to buy CDs -- or to an IRA account, to have US taxes deferred. Certainly TRD isn't putting out restrictions on what I can earn from where I park that pre 2024 income..... Somebody's certainly misinterpreting what they thought TRD said about: Must be kept in a bank or savings account. Or TRD is bonkers..... (rhetorical).

 

Anyway, I have an LTR visa, so this discussion is moot. But for Jingthing -- it won't likely make a hill of beans whether or not your IRA remittance is covered by Por 162, or not. If it is, then Thailand can't tax it -- but the US taxes it in full, without any Thai tax credit deductions. But, if Por 162 isn't a player, then the DTA takes full affect -- and Thailand has primary taxation authority on your IRA remittance -- but because of the saving clause in the DTA -- the US has secondary taxation rights, but has to absorb a tax credit for the Thai taxes. Bottom line: Only in the latter example, if Thai taxes exceed US taxes, will your total tax bill exceed US taxation only.

I think that in  order to decide what it is, you first have to decide what it isn't. Using that logic I conclude that those accounts are not cash and not freely convertible, by default they more closely resemble capital investments and the tax treatment of them is probably no different from that of any other form of markets based investment that incurs a capital gain. If the account was real estate, it also could have a valuation dated at year end, making past profit income free of tax under Por 162. But because you are unable to ring fence that income, the following day, on 1 January 2024, the value of the property increases and you have commingled funds.  

 

 

 

[oldcpu]

53 minutes ago, chiang mai said:

I think that in  order to decide what it is, you first have to decide what it isn't. Using that logic I conclude that those accounts are not cash and not freely convertible,

 

 ... and if they were 100% in cash on 31-Dec-2023? Do you still hold that opinion?

 

How about 95% in cash? Do you still hold that opinion?

 

How about 85% ?  75% ?  50% ?  25% ?

 

I think you see my point.

[chiang mai]

7 hours ago, oldcpu said:

 ... and if they were 100% in cash on 31-Dec-2023? Do you still hold that opinion?

 

How about 95% in cash? Do you still hold that opinion?

 

How about 85% ?  75% ?  50% ?  25% ?

 

I think you see my point.

It isn't necessarily just the contents of the account, it's the nature of the account itself which comes with rules and restrictions, particularly relating to withdrawal of funds and the taxation of those withdrawals. A cash account is fully convertible, fully flexible and comes without restrictions or tax.

[mudcat]

3 hours ago, chiang mai said:

It isn't necessarily just the contents of the account, it's the nature of the account itself which comes with rules and restrictions, particularly relating to withdrawal of funds and the taxation of those withdrawals. A cash account is fully convertible, fully flexible and comes without restrictions or tax.

 

Your description describes Roth IRA qualified distributions.  Roth IRAs were established contemporaneously with the Thailand-U.S. tax convention so their special character was not addressed in the convention or the the technical explanation.  

 

In the model convention from 2006 (https://home.treasury.gov/system/files/131/Treaty-US-Model-TE-2006.pdf) Roth IRA (Section 408A) plans were noted on page 11 and treatment of them was  discussed under the technical explanation of Article 17 paragraph 1 on pages 54-55: 

 

" 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 Contracting State in which the pension fund is established if the recipient were a resident of that State. Thus, for example, a distribution from a U.S. "Roth IRA" to a resident of the other Contracting State would be exempt from tax in the other Contracting State 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 same is true with respect to distributions from a traditional IRA to the extent that the distribution represents a return of non-deductible contributions. Similarly, if the distribution were not subject to tax when it was “rolled over” into another U.S. IRA (but not, for example, to a pension fund in the other Contracting State), then the distribution would be exempt from tax in the other Contracting State."

 

I recognize that this treatment of a Roth IRA is not binding, but it would provide support for argument that Roth distributions are not assessible income but rather savings to the extent of their valuation as of December 31, 2023. 

[chiang mai]

14 minutes ago, mudcat said:

 

Your description describes Roth IRA qualified distributions.  Roth IRAs were established contemporaneously with the Thailand-U.S. tax convention so their special character was not addressed in the convention or the the technical explanation.  

 

In the model convention from 2006 (https://home.treasury.gov/system/files/131/Treaty-US-Model-TE-2006.pdf) Roth IRA (Section 408A) plans were noted on page 11 and treatment of them was  discussed under the technical explanation of Article 17 paragraph 1 on pages 54-55: 

 

" 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 Contracting State in which the pension fund is established if the recipient were a resident of that State. Thus, for example, a distribution from a U.S. "Roth IRA" to a resident of the other Contracting State would be exempt from tax in the other Contracting State 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 same is true with respect to distributions from a traditional IRA to the extent that the distribution represents a return of non-deductible contributions. Similarly, if the distribution were not subject to tax when it was “rolled over” into another U.S. IRA (but not, for example, to a pension fund in the other Contracting State), then the distribution would be exempt from tax in the other Contracting State."

 

I recognize that this treatment of a Roth IRA is not binding, but it would provide support for argument that Roth distributions are not assessible income but rather savings to the extent of their valuation as of December 31, 2023. 

Yours is the best and most convincing evidence to date that it is exempt, thank you for saving everyone from wasting time with home grown arguments.

[mudcat]

A further point - you may need to show your end of 2023 statement - to establish the balance pre-2024 was savings in your Roth.

To show that 'taxes' were paid on contributions or conversions be ready with your f5498 (1099 for source taxable IRA) and f8606 (non-deductible IRAs with highlighted section 2 showing that taxes were due on the conversion) - I keep these documents with each year's tax return

 

 

[Jingthing]

I have a traditional IRA which was a rollover from a 401k which did include employer match contributions. 

Obviously more complex than Roth.

So practically speaking I'm more confused than ever how to deal with this.

You know dealing with tax clerks that don't speak English and don't know diddly squat about all the complexities of the different types of US retirement accounts. 

But they will know they are not social security which happily is explicitly exempt.

I was planning on doing an IRA withdrawal this year but now I won't. Rather I will wait until this shakes out with reports about people's actual experiences  it almost seems like the US embassy should get involved but of course they won't.

I have another question.

If I go to a THAI tax lawyer and follow his advice about my IRA If audited and the lawyer was wrong, is that protection from consequences above paying what TR says I should have paid?

I think tax planning at this point is nearly impossible.

[chiang mai]

6 minutes ago, Jingthing said:

I have a traditional IRA which was a rollover from a 401k which did include employer match contributions. 

Obviously more complex than Roth.

So practically speaking I'm more confused than ever how to deal with this.

You know dealing with tax clerks that don't speak English and don't know diddly squat about all the complexities of the different types of US retirement accounts. 

But they will know they are not social security which happily is explicitly exempt.

I was planning on doing an IRA withdrawal this year but now I won't. Rather I will wait until this shakes out with reports about people's actual experiences  it almost seems like the US embassy should get involved but of course they won't.

I have another question.

If I go to a THAI tax lawyer and follow his advice about my IRA If audited and the lawyer was wrong, is that protection from consequences above paying what TR says I should have paid?

I think tax planning at this point is nearly impossible.

I suspect not, although using a tax expert may provide some mitigation.

[JimGant]

1 hour ago, chiang mai said:

Yours is the best and most convincing evidence to date that it is exempt, thank you for saving everyone from wasting time with home grown arguments.

Ah, so now pre 2024 income, to be non assessable per Por 162 -- doesn't just have to be from a savings account -- but can also be from a Roth IRA. Good catch.

[Jingthing]

20 minutes ago, chiang mai said:

I suspect not, although using a tax expert may provide some mitigation.

Makes sense.

But at least that would prove there was no intention of evasion.

 

At this point I would almost prefer that it be treated as fully accessible pension income even if costs me some tax because at least I wouldn't be worried about maybe having  to fight with TR over a complex matter I have little confidence about.

I wonder how many months or years it will take to reach clarity about this 

[chiang mai]

23 minutes ago, Jingthing said:

 

I wonder how many months or years it will take to reach clarity about this 

One year longer than your life span. 🙂

[anrcaccount]

3 hours ago, JimGant said:

Ah, so now pre 2024 income, to be non assessable per Por 162 -- doesn't just have to be from a savings account -- but can also be from a Roth IRA. Good catch.

 

IMO POR 162 has nothing to do with “cash in the bank”, or the manufactured idea of “savings”. Haven't seen the word or concept of "savings" in the PORs or anywhere in the TRD. 

 

The only reference is to exempt INCOME earned prior to 2024 from being assessable upon remittance to Thailand. 

 

I'm yet to see any clear evidence to disprove that any form of investment balance as at 31-12-23 (be it stocks, bonds, managed funds, ETFs, cash, real estate, pension fund or any tax advantaged vehicle like an IRA, gold, etc) may be considered "prior income" and remitted to Thailand as exempt, non- assessable. 

 

The 31-12-23 balance of any of these investments is compromised of capital and income earned pre 2024. Neither of these are assessable. 

[chiang mai]

4 minutes ago, anrcaccount said:

 

 

IMO POR 162 has nothing to do with “cash in the bank”, or the manufactured idea of “savings”. Haven't seen the word or concept of "savings" in the PORs or anywhere in the TRD. 

 

The only reference is to exempt INCOME earned prior to 2024 from being assessable upon remittance to Thailand. 

 

I'm yet to see any clear evidence to disprove that any form of investment balance as at 31-12-23 (be it stocks, bonds, managed funds, ETFs, cash, real estate, pension fund or any tax advantaged vehicle like an IRA, gold, etc) may be considered "prior income" and remitted to Thailand as exempt, non- assessable. 

 

The 31-12-23 balance of any of these investments is compromised of capital and income earned pre 2024. Neither of these are assessable. 

 

Apart from the practical aspect of valuing an asset as of 31/12/23 and separating the before and after components, there is no gain in Capital Gains, until the asset is sold when the gain is realised.

[oldcpu]

16 minutes ago, chiang mai said:

 

Apart from the practical aspect of valuing an asset as of 31/12/23 and separating the before and after components, there is no gain in Capital Gains, until the asset is sold when the gain is realised.

 

Neither is there any Capital Gains if a large amount of the money was held in cash.

[chiang mai]

Just now, oldcpu said:

 

Neither is there any Capital Gains if a large amount of the money was held in cash.

True, but now we have the added difficulty of trying to sub dividxe the account value three ways, for Thai tax purposes, cash that is not assessable, capital gains that is excluded under Por 162 and capital gains that is assessable under Thai tax law. None of that is even remotely simple of likely, IMO.

[Jingthing]

38 minutes ago, anrcaccount said:

 

 

IMO POR 162 has nothing to do with “cash in the bank”, or the manufactured idea of “savings”. Haven't seen the word or concept of "savings" in the PORs or anywhere in the TRD. 

 

The only reference is to exempt INCOME earned prior to 2024 from being assessable upon remittance to Thailand. 

 

I'm yet to see any clear evidence to disprove that any form of investment balance as at 31-12-23 (be it stocks, bonds, managed funds, ETFs, cash, real estate, pension fund or any tax advantaged vehicle like an IRA, gold, etc) may be considered "prior income" and remitted to Thailand as exempt, non- assessable. 

 

The 31-12-23 balance of any of these investments is compromised of capital and income earned pre 2024. Neither of these are assessable. 

Interesting.

 

But that is an opinion and if you're not a Thai tax lawyer how much power does that have with Thai Revenue?

 

The opinion from expat tax Thailand which has a foreign spokesman but is Thai owned with Thai tax expert staff has a very different opinion.

 

Who are Joe Sixpack expat Americans supposed to listen to?

[oldcpu]

32 minutes ago, chiang mai said:

True, but now we have the added difficulty of trying to sub dividxe the account value three ways, for Thai tax purposes, cash that is not assessable, capital gains that is excluded under Por 162 and capital gains that is assessable under Thai tax law. None of that is even remotely simple of likely, IMO.

 

Indeed - it is complicated if funds all mixed in one account.

 

I believe (albeit uncertain) that in the case of paying tax (on Capital gains) in Canada, one can at the end of any taxation year, declare a capital gain on a financial instrument, even thou one has not liquidated it.  ie one would use (and keep) an official brokerage statement that notes on (say 31-Dec-2023) at year end the financial instrument was worth some TBD amount if it were in cash.

 

Then AFTER declaring that on one's tax form, any subsequent change in valuation of that financial instrument would be a gain, or a loss. 

 

This leads me to speculate (where CLEARLY 'speculate' is the operative word) that if one has a brokerage statement for the close of business on 31-Dec-2023, can one then declare (keep a record) of that as the CASH value of that asset.  And then add the declared/recorded 'cash value' together with any actual cash, to produce a 'total declared CASH' estimate value.

 

After that the keep a spreadsheet of all account cash transactions (of money taken out).  Once the cash taken out surpasses the 'total declared/recorded 31-Dec-2023' cash value, than any other amount must be income.

 

Would that sort of tracking be acceptable?

 

Possibly not.  Possibly. Clearly this is PURE speculation by me - but I do note other tax jurisdictions allow one to declare a financial instrument's value without liquidating.

 

I assume over the course of the next decade, how Thai RD treats such will (maybe) become more clear.

.