Legal Strategies to Reduce Thai Tax

[Ben Zioner]

1 hour ago, Mike Lister said:

Let's make this as simple and crystal clear as we can for everyone:

 

1 - Cyril lives in Thailand year round with his lovely wife Nookie. He decides to give Nookie a present so he transfers 1,000 Pounds from his account with HSBC UK, to his wife's account in Thailand and says its a gift. Cyril's account at HSBC contains only savings that he earned a decade ago. The money that Cyril remitted to Nookie's account in Thailand was not assessable to Thai tax because it was savings earned before 1 January 2024. Nookie also had no tax liability because the amount was under the reporting threshold.

 

2 - The following year, Cyril decides to give Nookie another gift but this time the money, 1,000 Pounds, came from his account at Barclays Bank London which contains untaxed income he derives from his dealings in the UK. Once that income is remitted direct to Nookie's account in Thailand, it becomes assessable income that he must report on his Thai tax return. Nookie however doesn't have to report anything because the amount is under the Gift Tax threshold.

 

3 - In the third year, Cyril is fed up with Nookie so she doesn't get a gift and he transfers 1,000 Pounds from his Barclays account, to his own account in Thailand. That money is assessable to Thai tax and must be reported on a Thai tax return.

 

Agreed?

 

 

I agree totally.

 

But let's imagine a 2 bis case. Cyril transfers 1000 Pounds to one of his wife's overseas accounts, which she then remits to her own account. 2 ter would be the same but she declares it as income.

[Mike Teavee]

Why would Thaksin's ex-wife make a defence that the shares she transferred were "Simply a gift & not taxable" if there wasn't scope to remit Gift's tax free? 

 

And why did the prosecution counter her claim with "It wasn't a gift it was a business deal" if the Gifts were taxable anyway. 

 

Ex-Thai PM’s wife guilty of tax evasion

The wife of former Thai Prime Minister Thaksin Shinawatra has been sentenced to three years in jail for tax evasion. Thailand’s criminal courts found Potjaman Shinawatra guilty of failing to pay $16.3 million in taxes. Her case relates to a transfer of 4.5 million shares in the family company, Shin Corporation. Mrs Shinawatra told the court that the share transfer was simply a gift and was not taxable. Prosecutors disagreed and said it was a business deal and therefore she should have paid tax on it. Shinawatra told the court she was completely innocent of any wrongdoing. The high-profile case was televised nationwide. Mrs Shinawatra’s husband and children looked on gloomily as the verdict was read out.

The judge’s decision could have serious consequences for Thaksin Shinawatra. He is accused of a series of offences including major fraud, corruption and abuse of political power. Prosecutors will charge the former Prime Minister of redirecting funds from an illegal $120-million loan to Burma into his own bank account, and of a shady transfer of government land into his wife’s name. Thais are split over whether Mr Shinawatra should face trial. He is still seen as a hero by millions of farmers and poor people. A lecturer from a top Bangkok university said the convictions of Mr and Mrs Shinawatra would be the “beginning of transparency, legitimacy and counter-corruption” in Thailand.

 

https://breakingnewsenglish.com/0808/080801-tax_evasion.html

 

[Mike Lister]

42 minutes ago, Mike Teavee said:

Why would Thaksin's ex-wife make a defence that the shares she transferred were "Simply a gift & not taxable" if there wasn't scope to remit Gift's tax free? 

 

And why did the prosecution counter her claim with "It wasn't a gift it was a business deal" if the Gifts were taxable anyway. 

 

Ex-Thai PM’s wife guilty of tax evasion

The wife of former Thai Prime Minister Thaksin Shinawatra has been sentenced to three years in jail for tax evasion. Thailand’s criminal courts found Potjaman Shinawatra guilty of failing to pay $16.3 million in taxes. Her case relates to a transfer of 4.5 million shares in the family company, Shin Corporation. Mrs Shinawatra told the court that the share transfer was simply a gift and was not taxable. Prosecutors disagreed and said it was a business deal and therefore she should have paid tax on it. Shinawatra told the court she was completely innocent of any wrongdoing. The high-profile case was televised nationwide. Mrs Shinawatra’s husband and children looked on gloomily as the verdict was read out.

The judge’s decision could have serious consequences for Thaksin Shinawatra. He is accused of a series of offences including major fraud, corruption and abuse of political power. Prosecutors will charge the former Prime Minister of redirecting funds from an illegal $120-million loan to Burma into his own bank account, and of a shady transfer of government land into his wife’s name. Thais are split over whether Mr Shinawatra should face trial. He is still seen as a hero by millions of farmers and poor people. A lecturer from a top Bangkok university said the convictions of Mr and Mrs Shinawatra would be the “beginning of transparency, legitimacy and counter-corruption” in Thailand.

 

https://breakingnewsenglish.com/0808/080801-tax_evasion.html

 

I suspect this was more about the fact the shares were in a company that she had an interest in  rather than a plain vanilla gift of some kind.

[Ben Zioner]

7 minutes ago, Mike Lister said:

I suspect this was more about the fact the shares were in a company that she had an interest in  rather than a plain vanilla gift of some kind.

Aren't all gifts taxable above 20M Baht (about 550000 USD)?

[Mike Lister]

21 minutes ago, Ben Zioner said:

Aren't all gifts taxable above 20M Baht (about 550000 USD)?

Ah, yes, guilty then!

[JimGant]

3 hours ago, topt said:

Sorry if this has been posted already but you have any official link for that? 

Nope. Not sure there are any official links mentioned on this, and similar, threads.

[JimGant]

2 hours ago, Mike Lister said:

If a Gift to a charity, you get to write that off as a deduction

Right. But only after you declare that assessable income on your tax return -- so (I don't know what charitable deduction rates are) it's probable the deduction won't completely zero out the tax on your remitted assessable income.

[Mike Lister]

2 minutes ago, JimGant said:

Right. But only after you declare that assessable income on your tax return -- so (I don't know what charitable deduction rates are) it's probable the deduction won't completely zero out the tax on your remitted assessable income.

Agreed

[JimGant]

2 hours ago, Mike Teavee said:

if she did give monetary gifts to her staff then why if she was still liable to pay tax on the money?  

Because it became income, not a gift. Why she, not the workers, had to pay the tax -- dunno. This whole drill was a sham.

[Mike Lister]

As a core principle we said that:

 

The TRD does not consider what the purpose is of remitted funds, only whether they are assessable or not. 

 

Then we said:

 

The third scenario suggests that if the foreigner gifts offshore assessable income, direct to a Thai resident, the foreigner must report that income as if they themselves had received it directly.

 

If that third scenario is not true, neither is the first statement. That means the TRD does care what the purpose is of the remitted funds. They want to know if the remittance represents assessable income, or a Gift that will negate the assessability of that income. If the assessability of that income was negated, the gifter would surely have to report it, would they not? It doesn't make sense that the third scenario is not true.

[Mike Teavee]

1 hour ago, Ben Zioner said:

Aren't all gifts taxable above 20M Baht (about 550000 USD)?

 

57 minutes ago, Mike Lister said:

Ah, yes, guilty then!

The case was from 2008 & the 20/10Million rule brought in 1st Feb 2016 to limit the amounts that could be class as a Gift without incurring Gift Tax, there's no mention in the new rules about the remitted Gifts now being assessable income. 

 

I think I've provided enough links that show Gifts are not specifically stated to be assessable income, perhaps somebody could show 1 article that suggests they are.

 

[JimGant]

2 hours ago, Mike Teavee said:

What's the point in having Gifts at all then as by the logic being proposed here If I were to Gift my wife 30Million out of untaxed funds from the UK, I'd have to pay the tax on the whole 30Million & then she'd have to pay Gift Tax on 10Million... Isn't that a classic example of double taxation?

Nope. Two kinds of taxation -- income and gift. If I give my nephew $20000 out of my after tax savings, I'm nailed for a gift tax on $1000 (other countries, the recipient would be nailed for the gift tax). Certainly not double taxation in the classical sense. I'm afraid some of the confusion on this thread is not differentiating between income and gift taxes. And it certainly doesn't help that Thai RD refers to gift taxes as "PIT."

[JimGant]

22 minutes ago, Mike Lister said:

They want to know if the remittance represents assessable income, or a Gift that will negate the assessability of that income.

There's no free lunch for grif..., er, gifters.

[Mike Teavee]

2 minutes ago, Mike Lister said:

As a core principle we said that:

 

The TRD does not consider what the purpose is of remitted funds, only whether they are assessable or not. 

 

Then we said:

 

The third scenario suggests that if the foreigner gifts offshore assessable income, direct to a Thai resident, the foreigner must report that income as if they themselves had received it directly.

 

If that third scenario is not true, neither is the first statement. That means the TRD does care what the purpose is of the remitted funds. They want to know if the remittance represents assessable income, or a Gift that will negate the assessability of that income. If the assessability of that income was negated, the gifter would surely have to report it, would they not? It doesn't make sense that the third scenario is not true.

 

That argument only makes sense if you accept the argument that the sender of the Gift has to treat it as assessable income, for those of us who argue they don't & it's only the receiver of the gift that TRD is interested in then Point 1 can be true whilst the 3rd scenario is false. 

 

 

 

Feel like we're arguing around in circles now so in the absence of anybody being able to show anything at all that suggests Gifts remitted directly to the Giftee are considered Assessable Income to the Gifter, I'm going to draw a line under it & leave you guys to it.

 

[Ben Zioner]

42 minutes ago, Mike Teavee said:

I think I've provided enough links that show Gifts are not specifically stated to be assessable income, perhaps somebody could show 1 article that suggests they are.

Yes, but if I were RD I wouldn't tax the donee, but I'd consider that to make such donation someone has remitted these funds to Thailand and hence is taxable, if these funds were earned after Dec 31, 2023.

 

I don't believe one second RD would leave such a gaping hole open.

[Mike Lister]

Let's put it on the list of unknowns and move on, what say you?

[Mike Lister]

This is the draft of how it will appear in the tax document:

 

First and foremost, our confidence levels that we understand all the Gift Tax rules is not high.

  

The TRD does not consider what the purpose is of remitted funds, only whether they are assessable or not. If a foreigner remits non-assessable funds and then gifts them in Thailand, that is the end of the matter for the gifter.

 

If however the foreigner remits assessable funds to Thailand and then gifts them inside Thailand, those funds must be reported as assessable income on the foreigners tax return, no matter that they are later gifted.  

 

The third scenario is not agreed by everyone and is contingent upon further input from the TRD . It suggests that if the foreigner gifts offshore assessable income, direct to a Thai resident, the foreigner must report that income as if they themselves had received it directly. There are substantial arguments for and against this being correct.

 

What the Rules Say

 

66) "PIT is levied on gifts given by persons who are still alive. The tax is collected on the assets or the amount given to parents, ascendants, descendants, spouse, or others based on the value of the gift that exceeds a prescribed threshold, which depends on the type of gift and donor. Assets or amounts given that do not exceed the threshold are exempt from tax.

 

67) The following gifts are exempt from PIT:

 

a) Income derived by a parent from the transfer of ownership or possessory right in an immovable property without any consideration to a legitimate child, excluding an adopted child, in the amount not exceeding THB 20 million throughout a tax year in respect of each child.

 

b) Maintenance income or gifts from ascendants, descendants, or spouse, in the amount not exceeding THB 20 million throughout a tax year.

 

c) Maintenance income derived under a moral obligation or gifts made in a ceremony or on occasions in accordance with established custom from persons who are not ascendants, descendants, or spouse, in the amount not exceeding THB 10 million throughout a tax year.

 

d) Income from gifts in the case where the person who receives the gifts will use them for religious, educational, or public benefit purposes according to the intention of the donors under the criteria and conditions referred to in the Ministerial Regulations.

 

68) Gifts in excess of the above thresholds will be subject to PIT at the rate of 5% and will not need to be included together with other income when computing the annual PIT liability.

 

69) For ascendants/descendants the threshold is THB 20 mill, nor non-ascendants and descendants, it's THB 10 mill".

 

What Some Members Think:

  

70) The following summary points compiled by a member may help guide readers in the use of Gift Tax:

 

a) Gifts must be traditional gifts based around a fixed date or occasion.

b) Traditional gifts include supporting the spouse or other persons, mainly family, based on a moral obligation.

c) Gifts to non-family members are more likely not to meet the moral obligation criterion.

d) A ceremonial act may be required, in particular for non-spouses.

e) Gifts must not be returned to the donor and used as a way to avoid income taxes, except under very specific Gift Tax rules which are likely to void the earlier tax advantage.

f) Moral obligation is subject to interpretation, there is no single definition.

g) TRD may apply additional criteria.

h) TRD assessment may differ from self-assessment which risk must be evaluated in each case individually.

 

71) Note: Because Gift Tax is predominantly a domain of the wealthy and depends to a large extent on local practice, there is a shortage of confirmed information on this subject. One field of thought is that Gift Tax cannot be used to escape Thai tax by Gifting untaxed money from overseas. On the other hand, many Western countries, including the UK, do not tax gifts from overseas. Members wishing to exercise this option should seek qualified advice before using this option to Gift untaxed funds.

 

72) Two additional points on this subject are: 1) Funds that are gifted, must be for the use of the person to whom they are gifted. 2) Gifts can be revoked later and reclaimed, under specific circumstances, such as if the receiver of the gift defames the Gifter or fails to take care of their serious medical needs. Issues arise here when the receiver is the spouse of the Gifter and under marital law, the gift is regarded as conjugal property. Until this becomes more clear, it is critical that anyone wishing to use Gift Tax, seeks professional advice.

[Yumthai]

58 minutes ago, Ben Zioner said:

Yes, but if I were RD I wouldn't tax the donee, but I'd consider that to make such donation someone has remitted these funds to Thailand and hence is taxable, if these funds were earned after Dec 31, 2023.

 

I don't believe one second RD would leave such a gaping hole open.

You go to your home country with your wife, withdraw $5K in cash from your local bank account and gift it to your wife. Then you both fly back to Thailand. Who is remitting $5K into Thailand? Your wife and it's a gift exempted from tax.

[Dogmatix]

6 hours ago, Neeranam said:

How many years do you estimate that it will take to implement the changes?

I'd guess at least 5.

 

The question was how might it take for Thailand to introduce global taxation?  At least 5 years is a reasonable guess but this is something that would require an act of parliament and would probably need to be part of government policy which it is not at the moment.

[Dogmatix]

24 minutes ago, Mike Lister said:

This is the draft of how it will appear in the tax document:

 

First and foremost, our confidence levels that we understand all the Gift Tax rules is not high.

  

The TRD does not consider what the purpose is of remitted funds, only whether they are assessable or not. If a foreigner remits non-assessable funds and then gifts them in Thailand, that is the end of the matter for the gifter.

 

If however the foreigner remits assessable funds to Thailand and then gifts them inside Thailand, those funds must be reported as assessable income on the foreigners tax return, no matter that they are later gifted.  

 

The third scenario is not agreed by everyone and is contingent upon further input from the TRD . It suggests that if the foreigner gifts offshore assessable income, direct to a Thai resident, the foreigner must report that income as if they themselves had received it directly. There are substantial arguments for and against this being correct.

 

What the Rules Say

 

66) "PIT is levied on gifts given by persons who are still alive. The tax is collected on the assets or the amount given to parents, ascendants, descendants, spouse, or others based on the value of the gift that exceeds a prescribed threshold, which depends on the type of gift and donor. Assets or amounts given that do not exceed the threshold are exempt from tax.

 

67) The following gifts are exempt from PIT:

 

a) Income derived by a parent from the transfer of ownership or possessory right in an immovable property without any consideration to a legitimate child, excluding an adopted child, in the amount not exceeding THB 20 million throughout a tax year in respect of each child.

 

b) Maintenance income or gifts from ascendants, descendants, or spouse, in the amount not exceeding THB 20 million throughout a tax year.

 

c) Maintenance income derived under a moral obligation or gifts made in a ceremony or on occasions in accordance with established custom from persons who are not ascendants, descendants, or spouse, in the amount not exceeding THB 10 million throughout a tax year.

 

d) Income from gifts in the case where the person who receives the gifts will use them for religious, educational, or public benefit purposes according to the intention of the donors under the criteria and conditions referred to in the Ministerial Regulations.

 

68) Gifts in excess of the above thresholds will be subject to PIT at the rate of 5% and will not need to be included together with other income when computing the annual PIT liability.

 

69) For ascendants/descendants the threshold is THB 20 mill, nor non-ascendants and descendants, it's THB 10 mill".

 

What Some Members Think:

  

70) The following summary points compiled by a member may help guide readers in the use of Gift Tax:

 

a) Gifts must be traditional gifts based around a fixed date or occasion.

b) Traditional gifts include supporting the spouse or other persons, mainly family, based on a moral obligation.

c) Gifts to non-family members are more likely not to meet the moral obligation criterion.

d) A ceremonial act may be required, in particular for non-spouses.

e) Gifts must not be returned to the donor and used as a way to avoid income taxes, except under very specific Gift Tax rules which are likely to void the earlier tax advantage.

f) Moral obligation is subject to interpretation, there is no single definition.

g) TRD may apply additional criteria.

h) TRD assessment may differ from self-assessment which risk must be evaluated in each case individually.

 

71) Note: Because Gift Tax is predominantly a domain of the wealthy and depends to a large extent on local practice, there is a shortage of confirmed information on this subject. One field of thought is that Gift Tax cannot be used to escape Thai tax by Gifting untaxed money from overseas. On the other hand, many Western countries, including the UK, do not tax gifts from overseas. Members wishing to exercise this option should seek qualified advice before using this option to Gift untaxed funds.

 

72) Two additional points on this subject are: 1) Funds that are gifted, must be for the use of the person to whom they are gifted. 2) Gifts can be revoked later and reclaimed, under specific circumstances, such as if the receiver of the gift defames the Gifter or fails to take care of their serious medical needs. Issues arise here when the receiver is the spouse of the Gifter and under marital law, the gift is regarded as conjugal property. Until this becomes more clear, it is critical that anyone wishing to use Gift Tax, seeks professional advice.

 

If it remains unclear, how will professional advice be able to clarify it?  Many of the people claiming to be expert tax advisors appear to know a lot less than we do, judging by their podcasts etc.

[WhatMeWorry]

What I find interesting is that so many posters are living on the fringe.

[Yumthai]

14 minutes ago, Dogmatix said:

The question was how might it take for Thailand to introduce global taxation?  At least 5 years is a reasonable guess but this is something that would require an act of parliament and would probably need to be part of government policy which it is not at the moment.

That makes me wonder what the real intention of the Thai government is.

If they really want money in, they should better put their efforts on tax law enforcement rather than constantly updating and implementing countless rules.

[Mike Lister]

24 minutes ago, Dogmatix said:

 

If it remains unclear, how will professional advice be able to clarify it?  Many of the people claiming to be expert tax advisors appear to know a lot less than we do, judging by their podcasts etc.

Somebody, somewhere, knows. Sooner or later they will tell us.

[Mike Lister]

I updated the tax document with the new gift tax information. And I thought yesterdays discussion about Gift Tax was one of the best, calmest most rational and productive debates these threads have seen....well done everyone.

[redwood1]

11 hours ago, Dogmatix said:

 

The question was how might it take for Thailand to introduce global taxation?  At least 5 years is a reasonable guess but this is something that would require an act of parliament and would probably need to be part of government policy which it is not at the moment.

 

Yea right big corporations have a army of lawyers who do nothing but figure out ways to NOT pay any taxes.....Even Warren Buffet about the richest guy in the world admits he pays almost no taxes....lol........

 

The  corporations will continue to pay almost zero taxes that is a certainty...

 

The LTR visa comes in very handy to make sure the very well to do dont have to pay any taxes ....

[JBChiangRai]

Fred is British and a Thai tax resident, he has a pension in the UK which is taxed at source.  All transfers are from his UK bank.

 

Fred has 3 daughters.

 

a) Daughter 1 is a Thai citizen, living in Thailand and Fred sends her 10M baht to her Thai bank account

b) Daughter 1 is a Thai citizen, living in Thailand and Fred sends her 10M baht to her UK bank account, subsequently maybe years later, she may or may not bring it to Thailand claiming gift allowance.

c) Daughter 2 is a UK citizen spending 4 months only in Thailand, Fred sends her 10M baht to her Thai bank account

d) Daughter 2 is a UK citizen spending 4 months only in Thailand, Fred sends her 10M baht to her UK bank account which she sends to her Thai bank to fund her holiday.

e) Daughter 3 is a Thai Citizen spending 4 month in Laos, Fred sends her 10M baht to her Laos bank account.

 

Which of those do you think count as assessable income for Fred? 

 

Case (b) is particularly interesting

[KhunHeineken]

17 hours ago, Mike Lister said:

Let's make this as simple and crystal clear as we can for everyone:

 

1 - Cyril lives in Thailand year round with his lovely wife Nookie. He decides to give Nookie a present so he transfers 1,000 Pounds from his account with HSBC UK, to his wife's account in Thailand and says its a gift. Cyril's account at HSBC contains only savings that he earned a decade ago. The money that Cyril remitted to Nookie's account in Thailand was not assessable to Thai tax because it was savings earned before 1 January 2024. Nookie also had no tax liability because the amount was under the reporting threshold.

 

2 - The following year, Cyril decides to give Nookie another gift but this time the money, 1,000 Pounds, came from his account at Barclays Bank London which contains untaxed income he derives from his dealings in the UK. Once that income is remitted direct to Nookie's account in Thailand, it becomes assessable income that he must report on his Thai tax return. Nookie however doesn't have to report anything because the amount is under the Gift Tax threshold.

 

3 - In the third year, Cyril is fed up with Nookie so she doesn't get a gift and he transfers 1,000 Pounds from his Barclays account, to his own account in Thailand. That money is assessable to Thai tax and must be reported on a Thai tax return.

 

Agreed?

 

 

I'll ask the obvious, but probably most relevant question to many expats here, what happens if Cyril transfers his pension to Nookie every month? 

 

Not savings.  Not earnings.  Not the proceeds from a sale of a property.  Etc etc. 

 

Nothing else but his pension, on an ongoing basis. 

[KhunHeineken]

11 hours ago, Yumthai said:

That makes me wonder what the real intention of the Thai government is.

If they really want money in, they should better put their efforts on tax law enforcement rather than constantly updating and implementing countless rules.

As I said before, legislation is useless with enforcement.  The Thai government must have something up their sleeve.  Currently, we are unable to discuss it because it's scaremongering. 

 

I guess we will all find out how they will collect it, and the punitive measures for evading it, or not paying it, early next year. 

[KhunHeineken]

13 hours ago, Ben Zioner said:

I don't believe one second RD would leave such a gaping hole open.

I agree 100%, and if such a gaping hole does exist, for sure they will move to close it, especially if it is being used as a tax avoidance strategy by the masses. 

 

On that basis, I would encourage members who may be seeking to rely solely on "gifting" as their only tax avoidance strategy to seriously consider a Plan B.

[tandor]

On 5/19/2024 at 7:17 AM, Mike Lister said:

So you're in good shape it sounds like.

Mike (or others)..do you know if the Australian Aged Pension (Services Australia or Social Security Dept) is Tax exempt here. It seems to me reading that an Australian Superannuation Pension (where one was a State Government employee) is Tax exempt), yet no real clarification from anyone..thanks in advance.