Thai tax tangle: Expats warned of new rules on overseas income

[Guavaman]

9 minutes ago, NoDisplayName said:

She hacked the system, meaning she fudged the numbers manually.

Normally, withholding tax complies with the Thai tax system for employers and banks for withholding tax on income derived in Thailand.  Fudging the numbers is falsifying a report of payment of withholding tax to the RD that did not occur. Signing a tax return with known falsification of data is illegal.  Slippery slopes ...

[ChaiyaTH]

17 minutes ago, MartinBangkok said:

Wrong! 180 days, not 179!

From 180 days you are a tax resident so the limit would be 179. Technically speaking you can still be considered an economic resident too if you would be here for less than that but earn clearly here while also having your main economic activities here.

[MartinBangkok]

33 minutes ago, ChaiyaTH said:

From 180 days you are a tax resident so the limit would be 179. Technically speaking you can still be considered an economic resident too if you would be here for less than that but earn clearly here while also having your main economic activities here.

The poster said you become a tax resident if you stay here 179 days. An obvious mistake which obviously went above you.

[anrcaccount]

40 minutes ago, JimGant said:

Money cashed out from my IRA, not to exceed the value on 12/31/23, is certainly all pre 2023 income -- the tax deferred earnings used to fund the IRA, plus the annual reinvested capital gains. And, for sure, any post 2023 withdrawals, turned into cash, would NOT be post 2023 earned income, if remitted to Thailand. That it took 15 hours to convert the IRA withdrawal to a bank deposit -- how does that make it so different from a liquid bank account on 12/31/23?

 

Spot on, couldn't agree more. The same goes for any non tax advantaged brokerage account, oh I see you mention that below.

 

Any moderately wealthy Thai foreign investor ( of which there are many)  would challenge being taxed on this principle ( not the IRA itself normally!)  , wait and see, if they ever actually try to tax it.

 

40 minutes ago, JimGant said:

 

Sell my car, bought with pre 2023 income, and send that money to Thailand post 2023. No remitted income here (and, as a non collector's item, no cap gain). Samo samo golf clubs, household furniture, boat, blah blah.

 

Stock mutual funds held by Schwab. All cap gains/dividends have either been reinvested or paid to me. In either case, the value of this mutual fund on 12/31/23 represents all pre 2023 income. Sell enough to represent 12/31/23 value and remit to Thailand -- no post 2023 income here.

 

Yep, IRA or not, doesn't matter, value at 12/31/23 is pre 2023 income. Tax that, TRD cannot.

 

 

40 minutes ago, JimGant said:

 

That some advisors are saying "only cash in the bank only qualifies as pre-2024 income" -- doesn't cut it, when contrasted to the other side of the Por 162 coin, namely: Only post 2023 earnings are subject to Thai income tax, if remitted. All those cash-outs I've mentioned hardly qualify as "post 2023 earnings." (assuming you didn't exceed their 12/31/23 value).

 

If I had to guess I'd say the "advisors" are simply taking the easiest/most conservative route because they simply don't have the knowledge, the clout with the TRD, or the precedent to do anything else.

 

Even the TRD itself probably doesn't know how they'd treat this kind of income yet. From the real world reports we are seeing posted here, anything beyond a standard Thai sourced income return is already too difficult. I still haven't seen a single credible report of foreign remitted income actually taxed. 

 

The status quo remains -  foreigners who don't work in Thailand, don't pay tax in Thailand. 

 

 

[SHA 2 BKK]

5 minutes ago, MartinBangkok said:

The poster said you become a tax resident if you stay here 179 days. An obvious mistake which obviously went above you.

Yes I concede my Mickey Mouse badge to you good sir.  Do enjoy and wear with pride. 

[Guavaman]

14 minutes ago, JimGant said:

All those cash-outs I've mentioned hardly qualify as "post 2023 earnings." (assuming you didn't exceed their 12/31/23 value).

More from my one hour phone consultation with the TRD call center today:

 

Q: If I invested income 40 years ago into a life insurance annuity and now I am receiving return of original capital, is that receipt of the original capital exempt from Thai taxes upon remittance under P. 162A regarding pre-2024 income?

 

A:  Unless the life insurance annuity is with a Thai company, the RD considers that assessable income arises when you receive the annuity payment from the life insurance company regardless of the fact that you deposited the funds 40 years ago. 

 

Q:  According to a prominent Thai tax advisory services company website, annuities are to be reported under income category 40(3); is this correct?

 

Understanding Assessable Income from Intellectual Property and Annuities (Section 40(3))

Paragraph 3 of Section 40 of the Thai Revenue Code addresses income derived from intellectual property rights, annuities, and similar revenues. This category includes:

• Goodwill: Payments received for utilizing a business’s strong reputation or brand identity.
• Copyrights and Other Rights: Income from intellectual property such as copyrights, trademarks, patents, or other proprietary rights.
• Annuities: Ongoing payments from sources like private retirement plans, investments, or insurance products.
• Annual Payments: Regularly received fixed sums stipulated by a will or other legal agreements.
• Income from Juristic Acts or Court Decisions: Payments mandated by legal rulings, including settlements or other court-awarded compensations. 

https://www.expattaxthailand.com/understanding-assessable-foreign-sourced-income-in-thailand/

 

A:  Assessable income from a life insurance annuity is to be reported under category 40(8) under "other," not under category 40(3), which only applies to court-ordered payments of compensation. The fact that you deposited assessable income into the annuity under a legal contract 40 years ago is irrelevant for Thai income taxation. The tax year when you receive the repayment of your principal is when you receive assessable income that is subject to taxation upon remittance to Thailand. 

 

The overwhelming influence of the recent RD Order P. 162A vis-a-vis the tax code and standard Thai taxation practices does not appear to have been taken into consideration by the call center official.  

 

P. 162A is only now undergoing it first test in the real world of the Thai remittance-based income tax system.  Live & learn!

 

[NoDisplayName]

1 hour ago, JimGant said:

Thanx for the reply. Only Bangkok post offices seems a little lame...

 

Wonder if local branches have a drop box at reception to collect tax form submissions rather than requiring an interview........

[MartinBangkok]

16 minutes ago, SHA 2 BKK said:

Yes I concede my Mickey Mouse badge to you good sir.  Do enjoy and wear with pride. 

Thanks @SHA 2 BKK for giving me a badge. Not often I receive gifts. As a return, I give you a badge back (as friends do): (PS: It's Goofy)

[NoDisplayName]

1 hour ago, JimGant said:

Money cashed out from my IRA, not to exceed the value on 12/31/23, is certainly all pre 2023 income --

 

Yes, but those are all pre-tax contributions.  Withdrawals of a traditional IRA are considered income in the year of withdrawal.  Not classed as "earned" income, but still taxed as income by IRS. 

 

I don't believe IRA's are covered by the DTA, so would be assessable if remitted, but you get to claim the foreign tax credit, or you could if there were a provision on the tax forms.

 

Roth IRA withdrawals are tax-free in the US, so no tax credit you can't take.

[Jingthing]

8 minutes ago, NoDisplayName said:

 

Yes, but those are all pre-tax contributions.  Withdrawals of a traditional IRA are considered income in the year of withdrawal.  Not classed as "earned" income, but still taxed as income by IRS. 

 

I don't believe IRA's are covered by the DTA, so would be assessable if remitted, but you get to claim the foreign tax credit, or you could if there were a provision on the tax forms.

 

Roth IRA withdrawals are tax-free in the US, so no tax credit you can't take.

TRD doesn't care about the U.S. tax rules.

Both Roth and Traditional withdrawals are classed as accessable PENSION income if remitted.

 

[NoDisplayName]

Are the officials and employees always right?

 

Last July needed a bank withholding letter for 2023 tax return.  Local branch (lady at the service desk) gave me one statement, told me the bank only provides the statement for fixed accounts.

 

Went in today to get the withholding letter for 2024.  This time was directed to the regular customer line.  Clerk took my five passbooks, made out five withholding statements without question.

 

 

[NoDisplayName]

9 minutes ago, Jingthing said:

TRD doesn't care about the U.S. tax rules.

Both Roth and Traditional withdrawals are classed as accessable PENSION income if remitted.

 

 

Understood.  I was just pointing out the cost basis or the original contributions may not matter.  In one case, the IRS taxes the entire withdrawal, in the other zero tax.

 

The entire IRA withdrawal would appear as income on a 1040, and would (allegedly) allow a foreign tax credit in Thailand.  The other would be....what exactly?  If a Roth withdrawal is not income in the US, then could you claim it to be prior savings?

[Jingthing]

1 minute ago, NoDisplayName said:

 

Understood.  I was just pointing out the cost basis or the original contributions may not matter.  In one case, the IRS taxes the entire withdrawal, in the other zero tax.

 

The entire IRA withdrawal would appear as income on a 1040, and would (allegedly) allow a foreign tax credit in Thailand.  The other would be....what exactly?  If a Roth withdrawal is not income in the US, then could you claim it to be prior savings?

No you can't

The full amount of the withdrawal is the relevant number for Thailand in both cases.

They are both retirement accounts. Not bank accounts. Not regular investments, One was taxed by the IRS going in, the other going out.

[oldcpu]

9 minutes ago, Jingthing said:

TRD doesn't care about the U.S. tax rules.

Both Roth and Traditional withdrawals are classed as accessable PENSION income if remitted.

 

 

Have you checked the DTA wording? 

 

The Canadian-Thai DTA, when talking about pensions, says "pensions and other similar remunerations".  Those words "other similar remunerations" is a pretty big encompassing category.  Does the USA-Thai  have that sort of wording as a big net for catching various pension type incomes?

[oldcpu]

13 minutes ago, NoDisplayName said:

Are the officials and employees always right?

 

Last July needed a bank withholding letter for 2023 tax return.  Local branch (lady at the service desk) gave me one statement, told me the bank only provides the statement for fixed accounts.

 

Went in today to get the withholding letter for 2024.  This time was directed to the regular customer line.  Clerk took my five passbooks, made out five withholding statements without question.

 

 

 There is only one answer for that (which you know):

 

"This is Thailand".

 

lol.

[JimGant]

6 minutes ago, NoDisplayName said:

Yes, but those are all pre-tax contributions.  Withdrawals of a traditional IRA are considered income in the year of withdrawal. 

Yes, tax deferred income -- but pre 2023 income nevertheless. And, yes, when I take my Required Minimum Distribution of my traditional IRA in 2025, it will be fully taxable by the IRS. And per DTA -- if Por 162 had never come about -- Thailand has exclusive taxation on my remitted IRA (but the US also taxes it, per the saving clause, but has to absorb a tax credit for the Thai taxes).

 

But, Por 162 did come about. And, by my reckoning, it says it is now not taxable by Thailand, 'cause it's pre 2023 income. So, what we're left with is: IRA withdrawal still fully taxable by IRS. But no tax credit to absorb, since Thailand can't tax it, per Por 162. So, you now pay full fare to Uncle Sam -- and nothing to Thailand. Bottom line: Full fare taxation to US, no taxes to Thailand under Por 162 would probably be same/similar, in total taxes paid, to paying taxes to Thailand, but having that same amount subtracted from US taxes, per credit. Thus, a wash.

[NoDisplayName]

2 minutes ago, Jingthing said:

No you can't

The full amount of the withdrawal is the relevant number for Thailand in both cases.

They are both retirement accounts. Not bank accounts. Not regular investments, One was taxed by the IRS going in, the other going out.

 

I'm just speculating, not disagreeing with you.

 

One is taxed, and appears on the 1040, and should result in a foreign tax credit.  Will the 1040 be acceptable documentation to claim the credit?  What about the Roth from already taxed contributions?  Is there no way to claim only the gain as assessable?

 

We'll have to see what happens when someone declares income from IRA/Roth/401 on a Thai tax return.

[Guavaman]

8 minutes ago, oldcpu said:

Does the USA-Thai  have that sort of wording as a big net for catching various pension type incomes?

Department of the Treasury Technical Explanation of the Convention between the United States and Thailand which was signed on November 26, 1996.

 https://www.irs.gov/pub/irs-trty/thaitech.pdf

 Article 20 (Pensions and Social Security Payments)

Article 20 deals with the taxation of private (i.e., non-government) pensions, annuities, social security, and similar benefits.

 Paragraph 1

Paragraph 1 provides that private pensions and other similar remuneration paid in consideration of past employment are generally taxable only in the residence State of the recipient.

The phrase “pensions and other similar remuneration” is intended to encompass payments made by private retirement plans and arrangements in consideration of past employment.  In the United States, the plans encompassed by Paragraph 1 include:  qualified plans under section 401(a), individual retirement plans (including individual retirement plans that are part of a simplified employee pension plan that satisfies section 408(k), individual retirement accounts and section 408(p) accounts), non-discriminatory section 457 plans, section 403(a) qualified annuity plans, and section 403(b) plans.

https://www.irs.gov/retirement-plans/plan-sponsor/types-of-retirement-plans

Types of Retirement Plans

Individual Retirement Arrangements (IRAs)
Roth IRAs
401(k) Plans
SIMPLE 401(k) Plans
403(b) Plans
SIMPLE IRA Plans (Savings Incentive Match Plans for Employees)
SEP Plans (Simplified Employee Pension)
SARSEP Plans (Salary Reduction Simplified Employee Pension)
Payroll Deduction IRAs
Profit-Sharing Plans
Defined Benefit Plans
Money Purchase Plans
Employee Stock Ownership Plans (ESOPs)
Governmental Plans
457 Plans
Multiple Employer Plans

[Etaoin Shrdlu]

4 minutes ago, NoDisplayName said:

 

I'm just speculating, not disagreeing with you.

 

One is taxed, and appears on the 1040, and should result in a foreign tax credit.  Will the 1040 be acceptable documentation to claim the credit?  What about the Roth from already taxed contributions?  Is there no way to claim only the gain as assessable?

 

We'll have to see what happens when someone declares income from IRA/Roth/401 on a Thai tax return.

 

I understand that the RD considers IRAs to be self-directed pensions and under the terms of the US/Thailand DTA, Thailand has exclusive right to tax income from pensions.

 

Thailand therefore won't accept a tax credit for any US tax paid on remitted IRA withdrawals. Instead, Thai tax must be paid on the portion of distributions remitted to Thailand and then a tax credit applied to US taxes.

[JimGant]

24 minutes ago, Jingthing said:

Both Roth and Traditional withdrawals are classed as accessable PENSION income if remitted

Actually, per Por 162 they are not assessable income, since their funding and reinvested earnings are all pre 2023 income (except for any reinvested income post 2023). But, this premise is not in stone, since some folks maintain Por 162 exempted income only applied to liquid bank holdings on 12/31/23. But some folks are wrong.

[Jingthing]

1 minute ago, JimGant said:

Actually, per Por 162 they are not assessable income, since their funding and reinvested earnings are all pre 2023 income (except for any reinvested income post 2023). But, this premise is not in stone, since some folks maintain Por 162 exempted income only applied to liquid bank holdings on 12/31/23. But some folks are wrong.

You say they're wrong.

Both readings can't be right.

Hopefully, sooner or later, this rather major issue for Americans will be clarified.

Or maybe it won't be.

 

[JimGant]

7 minutes ago, Etaoin Shrdlu said:

Thailand therefore won't accept a tax credit for any US tax paid on remitted IRA withdrawals. Instead, Thai tax must be paid on the portion of distributions remitted to Thailand and then a tax credit applied to US taxes

Spot on. DTA gives Thailand "exclusive" taxation authority on remitted IRAs. But the US, per the saving clause, has secondary taxation rights -- but has to absorb a tax credit for the Thai taxes paid.

 

Por 162, in redefining IRA remittances as not post 2023 income, has trumped the DTA language, that gave Thailand exclusive taxation rights on remitted IRAs. Thus, taxation of US traditional IRAs is solely by the IRS.

[Etaoin Shrdlu]

2 minutes ago, JimGant said:

 

 

Por 162, in redefining IRA remittances as not post 2023 income, has trumped the DTA language, that gave Thailand exclusive taxation rights on remitted IRAs. Thus, taxation of US traditional IRAs is solely by the IRS.

 

I would very much like for that to be the case, but short of a clarification from the RD to that effect, I'm not so sure.

[SHA 2 BKK]

59 minutes ago, MartinBangkok said:

Thanks @SHA 2 BKK for giving me a badge. Not often I receive gifts. As a return, I give you a badge back (as friends do): (PS: It's Goofy)

😜 Thank you Krap!!

[oldcpu]

1 hour ago, Guavaman said:

Department of the Treasury Technical Explanation of the Convention between the United States and Thailand which was signed on November 26, 1996.

 https://www.irs.gov/pub/irs-trty/thaitech.pdf

 Article 20 (Pensions and Social Security Payments)

Article 20 deals with the taxation of private (i.e., non-government) pensions, annuities, social security, and similar benefits.

 Paragraph 1

Paragraph 1 provides that private pensions and other similar remuneration paid in consideration of past employment are generally taxable only in the residence State of the recipient.

The phrase “pensions and other similar remuneration” is intended to encompass payments made by private retirement plans and arrangements in consideration of past employment.  In the United States, the plans encompassed by Paragraph 1 include:  qualified plans under section 401(a), individual retirement plans (including individual retirement plans that are part of a simplified employee pension plan that satisfies section 408(k), individual retirement accounts and section 408(p) accounts), non-discriminatory section 457 plans, section 403(a) qualified annuity plans, and section 403(b) plans.

https://www.irs.gov/retirement-plans/plan-sponsor/types-of-retirement-plans

Types of Retirement Plans

Individual Retirement Arrangements (IRAs)
Roth IRAs
401(k) Plans
SIMPLE 401(k) Plans
403(b) Plans
SIMPLE IRA Plans (Savings Incentive Match Plans for Employees)
SEP Plans (Simplified Employee Pension)
SARSEP Plans (Salary Reduction Simplified Employee Pension)
Payroll Deduction IRAs
Profit-Sharing Plans
Defined Benefit Plans
Money Purchase Plans
Employee Stock Ownership Plans (ESOPs)
Governmental Plans
457 Plans
Multiple Employer Plans

 

I'm no tax expert, but there doesn't appear to me to be much wriggle room there.

[monkfish]

Told the Mrs and she said a big load NOOOO way and refuses to take me to the revenue department so I think I'm gonna wait until they somehow officially inform me about it. Will put the money aside though just in case I have to back pay.

 

[JimGant]

1 hour ago, oldcpu said:

I'm no tax expert, but there doesn't appear to me to be much wriggle room there.

Hope the Por 162 redefines the DTA's taxability parameters.

[Wyabcp]

7 hours ago, SHA 2 BKK said:

It depends on when you move to Thailand - if you have concerns move here after July 2 and remit the funds then.  You won't become a tax resident until you stay here 179 days in a calendar year.  Yes your UK Tax payments should be offset by a DTA but it depends on the marginal rates of tax on the UK and Thailand.  But to be totally tax free in Thailand on remittances move here in the second part of the year and remit the funds before the end of the sane year.

I might go to Thailand for 89 days after my redundancy kicks in, on a 90 day Non O visa, and then come back to UK for 90 days. Then at the end of the year come for another 90 days on a Non O and then get my year extension. 

Only problem is I plan to get a condo on a one year lease, on the first trip, but it will then remain empty for the 90 days I'm back in the UK... not sure if it's worth it or should i just come this year for 180+ and figure out/pay any tax  due... 

[Nik23]

Does anybody knows how the TRD handles debit/credit cards transactions? (Pos, ATM withdrawals, cash advance withdrawals)

[Lorry]

10 hours ago, Guavaman said:

While all reports indicate a very user-friendly attitude of TRD assessment officers, a walk-in interview-based filing process with inspection of supporting documentation amounts to a pre-filing audit by someone who may or may not fully comprehend the implications of foreign-sourced income, P. 161/162, Royal Decrees, DTAs, etc.  

 

Sounds like a high-risk situation, depending upon your luck of the draw in which local tax officer "helps" you file, inspects your documents, applies their Thai taxpayer oriented guidelines, interprets DTAs, etc.  An unsafe Thai tax zipline bungee jump!

 

So e-filing is the way to do it?