Legal Strategies to Reduce Thai Tax

[Mike Lister]

2 minutes ago, jerrymahoney said:

More than I remit.

So you're in good shape it sounds like.

[jerrymahoney]

8 minutes ago, Mike Lister said:

So you're in good shape it sounds like.

I hope so. My finances were structured with the 65k+ baht transfer going back to the US Embassy income affidavit days and before I was SocSec eligible -- but on occasion a US Consular would ask:

 

You do realize that Thai IMM can ask for corroboration to your affidavit?

Edited May 19 by jerrymahoney

[JimGant]

13 hours ago, connda said:

The problem is - it doesn't work that way.  The DTA outline the conditions under which a country can lay claim to you as an tax resident as well as which country gets the first shot at taxing your income.  You need to read your DTA.  Like, the fine print. 

Excellent point. For example, per the US-Thai DTA -- if I remit a private pension to Thailand, Thailand gets first taxation rights and the US secondary taxation rights (under the saving clause). As such, Thailand keeps all the taxes collected, and the US absorbs a tax credit for those Thai taxes. Pretty important point, if a country is concerned about getting all the taxes it's entitled to under the DTA.

 

As such, this from the 'Intro to personal income tax....' is misleading:

 

Quote

j) As long as the rules of the relevant DTA are followed, there should be no double taxation and income that is taxed overseas should not be taxed over again in Thailand. It is likely that any tax paid on income overseas can be credited and used to offset any Thai tax assessment on the same income. This may result in a refund/credit of tax already paid, payment of additional tax, or nothing at all.

 

In my US example, private pensions taxed in the US *would* be subject to Thai taxation -- as the DTA is currently written. As such, Thailand, having primary taxation authority on this private pension, could tax this income over again after the US has taxed it. But in this case, it's not Thailand absorbing a US tax credit -- it's the US absorbing the credit, and losing in tax collection the amount of taxes paid to Thailand. Thailand gets to keep the whole enchilada.

 

Now we've heard rumblings that Thailand will not bother to tax foreign income, as long as it's been taxed in the home country. If so, this is a real lazy approach that, yeah, avoids having to deal with tax returns of foreigners. But also gyps Thailand out of revenue allowed by DTA. Thailand can do this without violating the DTA, since the OECD has dictated that domestic laws that change a DTA are allowed -- as long as they don't materially affect the intent of the DTA. And in this case, protection against double taxation is not affected. But, will Thailand really want to cheat themselves out of money they're entitled to? Stay tuned, I guess.

[Mike Lister]

33 minutes ago, JimGant said:

Excellent point. For example, per the US-Thai DTA -- if I remit a private pension to Thailand, Thailand gets first taxation rights and the US secondary taxation rights (under the saving clause). As such, Thailand keeps all the taxes collected, and the US absorbs a tax credit for those Thai taxes. Pretty important point, if a country is concerned about getting all the taxes it's entitled to under the DTA.

 

As such, this from the 'Intro to personal income tax....' is misleading:

 

 

In my US example, private pensions taxed in the US *would* be subject to Thai taxation -- as the DTA is currently written. As such, Thailand, having primary taxation authority on this private pension, could tax this income over again after the US has taxed it. But in this case, it's not Thailand absorbing a US tax credit -- it's the US absorbing the credit, and losing in tax collection the amount of taxes paid to Thailand. Thailand gets to keep the whole enchilada.

 

Now we've heard rumblings that Thailand will not bother to tax foreign income, as long as it's been taxed in the home country. If so, this is a real lazy approach that, yeah, avoids having to deal with tax returns of foreigners. But also gyps Thailand out of revenue allowed by DTA. Thailand can do this without violating the DTA, since the OECD has dictated that domestic laws that change a DTA are allowed -- as long as they don't materially affect the intent of the DTA. And in this case, protection against double taxation is not affected. But, will Thailand really want to cheat themselves out of money they're entitled to? Stay tuned, I guess.

Ok, fair enough, we can modify that. It's still true that there will be no double taxation but there is a question about where the tax will collected et al, subject to the terms of. Individual dta s. Does that sound correct?

[JimGant]

1 minute ago, Mike Lister said:

Does that sound correct?

Right on.

[motdaeng]

a friend's son, who is not a tax resident in thailand, owns an apartment in hua hin and stays in thailand for around three months annually. my friend, a tax resident in thailand, transfers money to his son (new opened) thai account, which he accesses via atm. so he found a clever way (a little bit of a gray area) avoiding taxes in thailand ...

 

 

[Ben Zioner]

5 hours ago, Mike Lister said:

Sensible and practical things many will not even think about

Yes, but I'd like to bring to your attention that TRD has decided to slap 7% VAT on small overseas purchases.

[Mike Lister]

13 minutes ago, Ben Zioner said:

Yes, but I'd like to bring to your attention that TRD has decided to slap 7% VAT on small overseas purchases.

Ah, yes.....hmmmm 

[retarius]

Is it yet known what proof of tax paying in the US or other DTA country is acceptable. If it is an IRS filing or similar, what is the timing. For the past 15 years I have filed in October of the following year ie I will file 2024 taxes in the US on October 15th 2025. (6 month extension of the annual ex-pat date of June15th). So I will not have proof of my taxes paid until way after the Thai taxes are due. 

Not being resident is looking more and more attractive. 

[JimGant]

16 minutes ago, retarius said:

So I will not have proof of my taxes paid until way after the Thai taxes are due. 

1099's come out in Jan-Feb. Presumably, they'll show the up front withholding taxes you've paid. Or, an estimated tax form, if you paid estimated taxes to EFTPS. These forms will reflect that most of your taxes have been prepaid, as you are required to prepay a large percentage of what becomes your final tax bill, as then reflected on your 1040 filing. I solely used 1099's to get my LTR visa, since the 1040 was joint, and thus the numbers weren't delineated between me and the wife.

[jayboy]

20 hours ago, motdaeng said:

- transfer only savings (from before 2024) to thailand ... 

 

Yes that is a sensible approach and possibly in this scenario not necessary to file Thai tax returns since no assessable income.However with a few fortunate exceptions that pre-2024 pot of gold will run down after a number of years - since it cannot be added to. Then one will be very firmly in the sights of the RD, since, subject to any DTA relief, one would be subject to tax on remittances funded out of current income.

Edited May 19 by jayboy

[dayo202]

21 hours ago, motdaeng said:

- transfer only savings (from before 2024) to thailand ... 

Yip I agree 💯, I got another 10 year's before I can apply for my UK state pension.

The only funds I got is my savings, ISAs, premium bonds back in UK to live on before my state pension kicks in.

So I be correct in saying that I wouldn't be taxed in Thailand for a money I transfer ?

[Mike Lister]

5 minutes ago, dayo202 said:

Yip I agree 💯, I got another 10 year's before I can apply for my UK state pension.

The only funds I got is my savings, ISAs, premium bonds back in UK to live on before my state pension kicks in.

So I be correct in saying that I wouldn't be taxed in Thailand for a money I transfer ?

It seems to be so. Just make sure all the funds were earned before 1 January 2024 and that includes interest.

[Mike Teavee]

20 hours ago, Lacessit said:

3/ Bringing in cash to Thailand when returning from one's country of origin.

This could be viewed as "Evasion" if you plan to change it to THB, but I've brought £7,500 from the UK & plan to use it when I'm travelling outside of Thailand (I.e. exchange it for MYR, PHP, VND, TWD, SGD etc...), typically I'll get a better rate using GBP to buy other currencies than I would for THB so it's a double win for me. 

 

One way to reduce tax is to reduce how much money you need to remit by spending less in Thailand, for me that means taking more holidays outside of Thailand.  We typically spend >60 nights in hotels travelling around Thailand which we'll now spend most of visiting other countries Airfares* & Hotels being paid for on my UK credit cards - We planned on doing more overseas travelling anyway, this just gives me an added incentive to do it - a double loss for Thailand. 

 

*NB It's questionable whether the Airfare would count as remitting money to Thailand as I'm using a service from Thailand but I don't think anybody could argue that booking a hotel in Vietnam on a UK Credit Card would count as remitting money into Thailand.

Edited May 19 by Mike Teavee

[Mike Teavee]

38 minutes ago, dayo202 said:

Yip I agree 💯, I got another 10 year's before I can apply for my UK state pension.

The only funds I got is my savings, ISAs, premium bonds back in UK to live on before my state pension kicks in.

So I be correct in saying that I wouldn't be taxed in Thailand for a money I transfer ?

Savings - No Tax,

Cash ISA - No Tax,

Premium Bonds - No Tax

Stocks & Shares ISA (Or other Investment accounts) - Could be liable for tax on Capital Gains & Dividends

[Lorry]

Bringing in cash "under the radar" can have many variations (you may want to pay your next ST with a 50 or 100 dollar bill, the receiver will probably not report you to the BOT) - all of which I would consider illegal IF they reduce your tax burden.

But IF your tax burden is zero anyway  (because of low remittances, TEDA, DTA, etc) this is just one more layer of protection. It makes it more difficult to build a case against you. 

 

The same applies imho to usage of ATMs or paying with foreign debit cards.

I wouldn't dare to do it to evade taxes, to obvious a paper trail. But it might be some additiinal  protection if you are honest to the taxman.

 

[tomkenet]

With limited pre 24 savings the strategy can be to combine remitting income and savings.

If I remit 750k baht each yearly, 1.5mthb total, I will end up around 5% tax on the total, which is acceptable.

A good way of capping the higher tax rates.

[Lacessit]

2 hours ago, Mike Teavee said:

This could be viewed as "Evasion" if you plan to change it to THB, but I've brought £7,500 from the UK & plan to use it when I'm travelling outside of Thailand (I.e. exchange it for MYR, PHP, VND, TWD, SGD etc...), typically I'll get a better rate using GBP to buy other currencies than I would for THB so it's a double win for me. 

 

One way to reduce tax is to reduce how much money you need to remit by spending less in Thailand, for me that means taking more holidays outside of Thailand.  We typically spend >60 nights in hotels travelling around Thailand which we'll now spend most of visiting other countries Airfares* & Hotels being paid for on my UK credit cards - We planned on doing more overseas travelling anyway, this just gives me an added incentive to do it - a double loss for Thailand. 

 

*NB It's questionable whether the Airfare would count as remitting money to Thailand as I'm using a service from Thailand but I don't think anybody could argue that booking a hotel in Vietnam on a UK Credit Card would count as remitting money into Thailand.

You may be right. However, IMO it does depend on the amount of cash brought in.

 

If I was to have AUD 50K on my person, exchanging that to 1.2 million baht with a money exchanger would IMO definitely draw attention. However, I doubt AUD 5 K would raise any eyebrows. Money exchangers and banks see transactions at that level by the hundreds.

[proton]

On 5/18/2024 at 5:28 PM, patman30 said:

How much are you allowed to gift the Thai wife each year?
what is the tax threshold for a child's allowance/income?

 

20 million baht to the wife, obviously this is the answer as there are no rules about what she does with the gift. !0 mil to gf, the whole topic is ridiculous.

[Mike Lister]

3 minutes ago, proton said:

 

20 million baht to the wife, obviously this is the answer as there are no rules about what she does with the gift. !0 mil to gf, the whole topic is ridiculous.

There are no rules except one, the Gift must not be for the benefit of the gifter.

[K2938]

9 hours ago, Mike Lister said:

It seems to be so. Just make sure all the funds were earned before 1 January 2024 and that includes interest.

Well, these funds presumably continue to yield income after Jan 1, 2024 and then the interesting - and so far unanswered question - is how to delineate what is old and new if both old and new funds are in the same account/investment/etc.

[soi3eddie]

20 hours ago, Lacessit said:

On 5/18/2024 at 3:23 PM, Ben Zioner said:

Would need to be THB, changers in Thailand will record ID.

Yes they do. Does that get reported to the tax authorities, though?

 

For this reason, I always give to my GF and she uses her ID when changing money. Trouble is, she then knows what cash I have 🙂 

 

[soi3eddie]

9 hours ago, Mike Teavee said:

Credit Card would count as remitting money into Thailand.

 

Spending on a credit card is not your money. It is the bank's money. A grey area but not a remittance by you  into Thailand. 

[Presnock]

15 hours ago, JimGant said:

1099's come out in Jan-Feb. Presumably, they'll show the up front withholding taxes you've paid. Or, an estimated tax form, if you paid estimated taxes to EFTPS. These forms will reflect that most of your taxes have been prepaid, as you are required to prepay a large percentage of what becomes your final tax bill, as then reflected on your 1040 filing. I solely used 1099's to get my LTR visa, since the 1040 was joint, and thus the numbers weren't delineated between me and the wife.

so, they do just accept 1099R where as for me after I submitted my 1099R for 2 years, they kept insisting I provide them with my 1040's for the 2 years.  Once I did provide those, I was approved less than a week later.  Strange in that the 1099 is necessary for me to fill in my 1040.  just saying...

[Mike Lister]

1 hour ago, soi3eddie said:

 

Spending on a credit card is not your money. It is the bank's money. A grey area but not a remittance by you  into Thailand. 

That is not entirely correct and is no basis on which to conclude that credit card spending is not assessible income. The Introduction to tax says this:

 

CREDIT CARD SPENDING USING FOREIGN CARDS

 

1) 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.

 

f) Revenue authorities in several countries, including the UK, regard Credit Card spending as assessable income.

 

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

 

It's worth pointing out that many countries regard credit card spending as assessable income, including, in the case of non-doms, the UK.

 

 

 

 

[Mike Lister]

1 hour ago, K2938 said:

Well, these funds presumably continue to yield income after Jan 1, 2024 and then the interesting - and so far unanswered question - is how to delineate what is old and new if both old and new funds are in the same account/investment/etc.

I strongly suggest you read the tax guide, all these answers are in there:

 

COMINGLED FUNDS

 

1) Funds from various sources that are all contained in the same bank account are referred to as commingled funds. Trying to account for them separately can be difficult, unless you keep complete records that show the individual sources of those funds. Much of this comes down to individual discipline and the ability to retain and file receipts and statements.

 

2) Many tax authorities have policies regarding commingled funds, policies such as LIFO, (last in, first out) which is primarily an inventory management technique but could be used with commingled fund accounts. The UK says that capital and gain entering a mixed or commingled account, loses its identity and that any remittance from the fund, is income first, capital second. Yet another option might be that any remittance is viewed as comprising interest/gain or income first and capital second. We are not aware of the TRD policy regarding commingled funds or even if one exists. If you hold funds in this way, until such time as the TRD policy on this is made clear, you only have two options open to you. The first is to keep detailed records that describe all the feeds into the commingled account and hope that will be sufficient, or separate the sources into their own accounts.

 

 

[CartagenaWarlock]

9 hours ago, Lorry said:

The same applies imho to usage of ATMs or paying with foreign debit cards.

I wouldn't dare to do it to evade taxes, to obvious a paper trail. But it might be some additiinal  protection if you are honest to the taxman.

This sounds like a ridiculous use of grand proportions. They are going to track every ATM and credit card purchase and then match that with who is a resident (staying more than 180 days) and who is not. I doubt if Thailand will have that capability in the next fifty years when they cannot manage simple websites efficiently for a sustained period. 

[CartagenaWarlock]

Just now, Mike Lister said:

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:

Where did these debates take place? Thai taxes are determined by debates? 

[Mike Lister]

2 minutes ago, CartagenaWarlock said:

Where did these debates take place? Thai taxes are determined by debates? 

The probable answer to the question was researched and debated, not the tax! The debate comprised a number of forum members over weeks, including business, finance, banking professionals and two CPA's.

[Mike Lister]

9 minutes ago, CartagenaWarlock said:

This sounds like a ridiculous use of grand proportions. They are going to track every ATM and credit card purchase and then match that with who is a resident (staying more than 180 days) and who is not. I doubt if Thailand will have that capability in the next fifty years when they cannot manage simple websites efficiently for a sustained period. 

The issue is not whether the Thai Revenue Department will or can track all transactions but whether those transactions are considered to comprise assessable income or not.