Uk/thai Tax/residency Question

[TCA]

I am UK domiciled, resident and ordinarily resident and moving to Thailand next month with a view to staying permanently for several years. I am coming out on a Non Immigrant "O" visa (visiting friends) which I will likely use next year again as I have no family in Thailand, no employment lined up, am not retirement age, etc...

My question surrounds my tax liability and work and residency status especially as my visa prohibits employment.

I am currently self employed in the UK and earn commission from marketing overseas property on the internet. My income originates mainly in Spain and Morocco and I plan to now get this paid to an offshore account in the Isle of Man. My workload only amounts to a few hours per week on the net which I had hoped to continue in Thailand but am wary given the visa restrictions.

So my first question is that next year, according to the Thai tax website, I will technically be a "resident" of Thailand (staying more 180 days per calendar year) and liable to pay tax on income from sources in Thailand as well as income from foreign sources which is brought into Thailand. So if I live off savings I bring in to the country when I move, without any future income being sent into Thailand, would my few hours a week on the net constitute "employment" in the eyes of the authorities and would I therefore be breaking the terms of my visa (and the law)? If so, what can I do to get round this?

My other question is with regard to my UK tax status. I've posted the question on the odd forum and one reply suggested that if I could not prove I had gone overseas for a "settled purpose", then I would remain UK resident and liable to UK tax. To prove "settled purpose" would apparently entail showing proof of employment overseas or legal residence elsewhere (which the poster didn't think a visitor visa would do). Neither of which I'll then have. It seems bizarre that I could be stuck in the UK tax system on these grounds if I comply with the rules regarding number of days spent in the UK etc... Can anyone advise?

Does anyone here earn income which they don't remit to Thailand and manage to avoid tax altogether?

Thanks for any pointers.

[melbat]

...My other question is with regard to my UK tax status.

As far as I am aware and according to the Uk tax office Thailand and Uk dont have an arrangement for tax relief on income. If you are lible for tax in the Uk you will still have to pay it. It dont matter if u reside in Thailand or not. I am paying tax on my pension from Uk and I cant get tax exempt because I live here.I have lived here for 5 years now.

[samran]

best speak to a tax lawyer, but a good start is to send inland revenue a 'leaving the UK' form. P- somthing or other.

If after that, none of your income earning activites are in the UK, then you need to look at what liablities you have elsewhere, say Spain or Morrocco.

From the Thai perspective though, income earnt offshore and not transferred into Thailand in the year it is earned is deemed to be tax free.

So earn $10000 this year which gets paid to IOM, bank it for a year and then on Jan 1, 2008 transfer it to Thailand and it is deemed savings, rather than income.

[tubber]

I am classed as a seaman and if I am out of the U.K. for 183 days I am not liable for tax, and have never paid it, I do still put in annual tax returns. Not sure how it works for self employed people. What is that all about, paying Thai tax, never heard of that. If I have to jump through hoops every year for a non-imm extension and am only here 6 months of the year why should I be liable for tax? I spend 365 days a year out of the U.K. but am still a U.K. resident, my U.K. t

x 

lawyer advised me not become a non-resident.

[naka]

Here's what you need to read

IR 20

Naka.

[kudroz]

If you are receiving income for work you've performed while being physically present in Thailand, it means that you are carrying on a business or a trade in Thailand. The income you receive from your activities is deemed Thai source income and is subject to taxation in Thailand.

You are also prohibited from carrying on a business or a trade in Thailand without a work permit.

That being said, the odds of getting caught have been discussed here before. It's up to what you feel is right and what you're comfortable with.

Edited September 26, 2007 by kudroz

[LivinLOS]

You can structure your residency issues in the UK to not be liable for tax for non UK sourced income.. Speak to a pro..

If you are receiving income for work you've performed while being physically present in Thailand, it means that you are carrying on a business or a trade in Thailand. The income you receive from your activities is deemed Thai source income and is subject to taxation in Thailand.

You are also prohibited from carrying on a business or a trade in Thailand without a work permit.

That being said, the odds of getting caught have been discussed here before. It's up to what you feel is right and what you're comfortable with.

And here lies the catch 22.. Its not possible to be self employed and to legalize yourself here is going to involve company formations, taxes, work permits, possibly Thai employees (to extend incountry anyway) etc etc etc..

So your going to have to get used to living in limbo, not paying tax, having no basis of long stay visa or facing some higher level of costs to legalise yourself which may not be possible depending on profit generated etc or just being illegally working..

[Guderian]

TCA,

You mention that you will open an offshore bank account in the IoM – are you aware of the EU Withholding Tax provisions? If you are an EU citizen, then until you can prove that you are permanently resident outside the EU, all banks in the IoM and the CI will apply these rules. The tax rate on offshore interest is currently 15%, but it will go up to 20% next year, and then to 35% in 2011. It even applies to Swiss accounts.

I was fortunate in that my bank in Jersey was aware that I lived in Thailand before the tax came into effect in 2005, and so I have always been "outside the scope of the EU Withholding Tax", as they put it. I know other people who have had a very hard time proving to the banks that they are living and working outside the EU. My impression is that if you have a full-time job overseas and are paying full local taxes, then it should be simple enough. But if you are working as a small, self-employed outfit, or even simply retired, it can be much more difficult to get outside the Withholding Tax Directive unless you can prove that you are paying local taxes. Does anyone else have experience with this? I would be interested to learn of different experiences.

For a quick introduction, see

http://en.wikipedia.org/wiki/European_Union_withholding_tax

and a Google will throw up plenty of other information. Sadly, it is no longer quite as easy as it once was to get outside of HMRC's tax net . Professional advice is indicated, IMHO.

[TCA]

Thanks to all who have replied so far. It sounds like some expert advice is required.

Guderian - when opening an offshore account you now have the option of allowing exchange of information (as opposed to them with withholding tax),which I opted for. Which means they will inform HMRC of my interest payments. I thought this happened every April so my plan was to inform them of my residence in Thailand when I got there but am unclear as to what proof they will require. But I have also heard it happens weekly. My main reason for using the account was so that no income enters the UK (or Thailand), which I hoped would pave the way for non UK residency.

Naka - IR20 is probably too simplistic for my situation. This is where the vague "settled purpose" phrase is used, which I may struggle to satisfy as employment seems to be a pre-requisite.

If anyone else has any thoughts I'd like to hear them.

Cheers

TCA

[Guderian]

Hi TCA,

The option of allowing the banks to declare your interest to HMRC was always available. If you genuinely want to base yourself outside the UK and are sure that you will become non-resident and not ordinarily resident for tax purposes (which takes three full consecutive tax years from 6^th April to 5^th April), then it should not be a problem as far as I can see. However, the EU Withholding Tax seemed (to me living in Thailand anyway) to appear from nowhere and without warning in mid-2005. It all sounded a bit sinister at the time, so I was very glad that my bank was reasonable about putting me outside the scope of the directive. However, if I hadn't happened to have been making a trip back to the UK at that time, I would have missed the letters sent from Jersey about my offshore accounts and would have ended up stuck with paying the 15% withholding tax, at least until I could have convinced them otherwise.

One more point to consider perhaps: I keep some funds in the UK to pay the running costs on my house there, and to provide me with pocket money when I am back in the UK. These are all old accounts from when I lived and worked in the UK. Before leaving the country in early 2004 to work in Geneva, I visited each bank, filled in a form, and now they all have interest paid gross. However, back in June of this year I was in the UK and wanted to open another such account (for reasons not worth going into here), but I was told by Barclays that non-residents cannot open accounts that pay interest gross. I really didn't understand this at all, as surely it is only non-residents who may qualify to receive interest gross??? But I checked a few sites on the internet and they seemed to say much the same thing. I was only going to lose about £6 in tax on this new account if it was not receiving interest gross, so I did not make a fuss or look into the matter further. Based on this somewhat bizarre experience, my advice to you would be to make sure that you get interest paid gross on any accounts that you have in the UK BEFORE actually leaving the country. If you get professional advice, make sure that this sort of thing is explained to you.

I hope this helps a litttle.

Regards.

[tmd5855]

Thanks to all who have replied so far. It sounds like some expert advice is required.

Guderian - when opening an offshore account you now have the option of allowing exchange of information (as opposed to them with withholding tax),which I opted for. Which means they will inform HMRC of my interest payments. I thought this happened every April so my plan was to inform them of my residence in Thailand when I got there but am unclear as to what proof they will require. But I have also heard it happens weekly. My main reason for using the account was so that no income enters the UK (or Thailand), which I hoped would pave the way for non UK residency.

Naka - IR20 is probably too simplistic for my situation. This is where the vague "settled purpose" phrase is used, which I may struggle to satisfy as employment seems to be a pre-requisite.

If anyone else has any thoughts I'd like to hear them.

Cheers

TCA

Do not know if this is of any use to you since everybody does not have identical circumstances?

Your worries appear (to me?) to be one of, 1) Visa/residence. 2) Tax exposure/liability

1) Live in Thailand, work in the offshore industry 4wks on/off, so at present use the 30dayTV route. There are people on this site that can advise you better on your circumstances.

2) Have my salary paid into a UK bank (Halifax) but salary slip and details are posted to my Thai address.

Used the 90 day residence rule (Maximum amount of days allowed in the UK in one tax year. Day arrive/leave do not count) to claim my tax back 2005-06, 2006-07. Did not have to wait for 3 tax years to get a NT coding, recieved it last month after filling in the correct form from the internet and faxing it.

3) Since I am seperated? They understood why I were still paying to maintain a property in the UK??

4) Be up front with the HMRC they have a lot of discretion, tell them why its unlikely you will be back in the UK for more than 90 days. If they think your pulling a dodge, forget it.

Hope this helps somewhat, remember everybody has slightly different circumstances for tax so play that right, the rest will follow suit. Enjoy Thailand its a lovely place if you can mix, understand and want to live here. Try and understand/speak the langauge that helps mixing.

Take care.

[TCA]

Guderian - thanks for the tip. the gross interest thing is in the back of my mind somewhere because it'll be covered by my UK tax return for 2007/08 anyway. but definitely one to get sorted while it's easy to do so. cheers.

tmd5855 - thanks also for sharing your experiences. from reading replies across forums i've posted on it seems the lack of full time employment in thailand (i'm self employed in the uk) may be the sticking point in becoming non uk resident. i found out yesterday that my mate who works in thai real estate does so through his own thai limited company, so there may be an option there of gaining a work permit by working for his business in some capacity. i will investigate. p.s. the thai phrasebook is on my shopping list.

[Naam]

So earn $10000 this year which gets paid to IOM, bank it for a year and then on Jan 1, 2008 transfer it to Thailand and it is deemed savings, rather than income.

Samran,

i learned that from TV-Forum a long time ago and it was confirmed by third parties too. however, i could find nowhere a valid "official version" when i searched the internet.

do you have a link perhaps?

thanks

[Naam]

You mention that you will open an offshore bank account in the IoM – are you aware of the EU Withholding Tax provisions? If you are an EU citizen, then until you can prove that you are permanently resident outside the EU, all banks in the IoM and the CI will apply these rules. The tax rate on offshore interest is currently 15%, but it will go up to 20% next year, and then to 35% in 2011. It even applies to Swiss accounts.

Guderian,

an innocent question with intended pun: what kind of EU-citizen would be &(*(%^ enough and open under prevailing legislation an offshore account in the EU, Switzerland or the Channel Islands to share with the taxman his/her hard earned money?

[Guderian]

You mention that you will open an offshore bank account in the IoM – are you aware of the EU Withholding Tax provisions? If you are an EU citizen, then until you can prove that you are permanently resident outside the EU, all banks in the IoM and the CI will apply these rules. The tax rate on offshore interest is currently 15%, but it will go up to 20% next year, and then to 35% in 2011. It even applies to Swiss accounts.

Guderian,

an innocent question with intended pun: what kind of EU-citizen would be &(*(%^ enough and open under prevailing legislation an offshore account in the EU, Switzerland or the Channel Islands to share with the taxman his/her hard earned money?

Well, the OP for one it seems.

I'm glad that I'm not the only one paranoid about the taxman's "good" intentions!

But really, where else can you keep accounts with relatively limited funds in highly reputable banks? After the EU Withholding Tax thing became apparent, I looked at the options. Yes, Barclays have a private client's account available in both Dubai and Singapore, which did not sign up to the EU Directive. The snag is that a minimum investment of £1 million is required! A shade beyond my limited means, I am afraid.

I expect I could bank offshore in Burma with the local branch of Northern Rock, but that didn't much appeal to me even before the current financial panics.

Are you perhaps suggesting, Naam, that I should keep all my money in my SCB SFF account? Again, no thanks.

Sorry, I must be overlooking the point of your reply, for a Brit with less than a million quid in ready cash, I don't see the alternatives while still being able to sleep easy at night?

Please educate me if I am missing something.

Regards.

[naka]

TCA.

Your problem is that you want to go overseas and become non-resident right away

without giving a good reason for doing so i.e. full time work or retirement.

Normally you need to prove to the tax folks that you have been away permanently (sort of)

for at least three years before they will take you off their radar. You will obviously need to

submit a UK tax return for the current year anyway.

Regarding the EU withholding tax, I and a couple of my mates have recently opened fixed

term accounts at CI and IoM banks. Withholding tax is not applied as we all gave Thai addresses

for these accounts regardless that we all had EU country(s) passports. The tax is applied according

to your country of residence not your country of birth.

I am currently self employed in the UK and earn commission from marketing overseas property on the internet. My income originates mainly in Spain and Morocco and I plan to now get this paid to an offshore account in the Isle of Man.

If you do this then make sure you open the account with a Thai address NOT a UK address ! Very Important.

Here is an excellent UK tax website where you can address your question, you need to

register but it's worth it, and you will (hopefully) get answers from experts.

Tax Web

Naka.

Edited September 28, 2007 by naka

[Guderian]

TCA.

Regarding the EU withholding tax, I and a couple of my mates have recently opened fixed

term accounts at CI and IoM banks. Withholding tax is not applied as we all gave Thai addresses

for these accounts regardless that we all had EU country(s) passports. The tax is applied according

to your country of residence not your country of birth.

I am currently self employed in the UK and earn commission from marketing overseas property on the internet. My income originates mainly in Spain and Morocco and I plan to now get this paid to an offshore account in the Isle of Man.

If you do this then make sure you open the account with a Thai address NOT a UK address ! Very Important.

Here is an excellent UK tax website where you can address your question, you need to

register but it's worth it, and you will (hopefully) get answers from experts.

Tax Web

Naka.

Naka,

Interesting. Different banks seem to have different levels of proof required to get outside the scope of the EU Withholding Tax. You seem to have got out of it very easily, as did I (even though I have left my offshore accounts in my UK address).

When I left Geneva to come and live in Thailand, a Scottish friend decided to stay on there. He was banking in the CI with RBS. When the EU Withholding Tax was first implemented in mid-2005, his bank insisted that he get a letter from his Swiss employer stating that he was in full time employment and was expected to stay there for at least another full year, a copy of the lease on his flat in Champel, and a notarised statement that he was living legally in Switzerland and had a valid work permit. Only when he sent them this lot would they put him outside the EU Withholding Tax, even though Switzerland is not part of the EU, and even though all the money going into his RBS account for the last year had originated in Switzerland!

I can only advise TCA to avoid opening an offshore account with RBS. I am with Barclays in Jersey and the IoM, and they seem reasonable enough.

Regards.

[Naam]

1. But really, where else can you keep accounts with relatively limited funds in highly reputable banks? After the EU Withholding Tax thing became apparent, I looked at the options. Yes, Barclays have a private client's account available in both Dubai and Singapore, which did not sign up to the EU Directive. The snag is that a minimum investment of £1 million is required! blink.gif A shade beyond my limited means, I am afraid.

2. Are you perhaps suggesting, Naam, that I should keep all my money in my SCB SFF account? Again, no thanks.

1. you can do that in Singapore if you don't elect one of the fancy/high and mighty swiss banks i am banking with. one of the reputable banks is UOB.

2. definitely not!

[TCA]

TCA.Your problem is that you want to go overseas and become non-resident right away

without giving a good reason for doing so i.e. full time work or retirement. Normally you need to prove to the tax folks that you have been away permanently (sort of)

for at least three years before they will take you off their radar. You will obviously need to submit a UK tax return for the current year anyway.

If you do this then make sure you open the account with a Thai address NOT a UK address ! Very Important.

Here is an excellent UK tax website where you can address your question, you need to

register but it's worth it, and you will (hopefully) get answers from experts.

Tax Web

Naka.

Thanks Naka. I've already opened the account with a UK address because I had no idea how difficult or how long it would take to open a Thai bank account (remember I'm not there yet) and I'll need a statement to prove my address. All I have to do is send them this and they will amend my permanent address which should remove me from the scope of the EU directive.

Re the taxation website, I've already posted on there (and elsewhere) and the upshot seems to be that unless I can prove "settled purpose", employment or the likes, then according to UK case law, then I'm doing nothing more than having a long holiday and will still be classed as UK resident. Seeking advice from a tax professional off the forum was advised and I will undoubtedly do so.

With regard to the being away for 3 years requirement - does anyone know how this works in practice? As Naka said I will have to complete a tax return for this year. If I do so citing departure dates from the UK etc...what happens next? Is my tax return (excluding income post departure) accepted at face value and I'll pay (less) tax as a non resident or is it the reverse position where I declare and pay tax on everything for 3 years and then have to claim back retrospectively when non residency is proven/granted?

Edited September 28, 2007 by TCA

[powwow]

Let me tell you about my situation and maybe it can help you.

I am a UK national living in Thailand on a non (O) Immigrant Visa as a retired person on a pension.

My pension is paid from the UK each month and I am taxed in England plus can claim tax allowances and all the rest of it.

I have my UK pension paid into my Thailand account once a year, to save bank charges £25 each transfer rather than have the dosh sent every month.

I am not taxed for this income in Thailand unless I choose to because the Uk and Thailand have a double taxation agreement which means I can either pay tax on my UK pension in Thailand or in the UK which ever I think is best for me.

I think we are considered being a resident in Thailand after 3 months, but check that, I could be wrong.

I had problems a few months ago with my London based bank accounts. I was told that because I am no longer resident in the UK I am not entitled to claim interested on my UK accounts. So I had to open and transfer my savings to an off shore International account with my UK bank. It was a nightmare doing it all from Thailand and costly with phone calls and stress.

Maybe a good idea that you check this out with your UK bank before coming to Thailand.

Hope that this helps.

Edited September 30, 2007 by powwow

[torrenova]

You don't pay a cent in tax.

Nothing in the UK, nothing here.

The ATM network is not going to spew out details of income for any government from your offshore account.

Just make sure you have the right visas, carry some cash when going out after 90 days and perhaps take the odd trip around SE Asia if you like the look of an Air Asia Bt88 fare somewhere !

[Farang99]

...My other question is with regard to my UK tax status.

As far as I am aware and according to the Uk tax office Thailand and Uk dont have an arrangement for tax relief on income. If you are lible for tax in the Uk you will still have to pay it. It dont matter if u reside in Thailand or not. I am paying tax on my pension from Uk and I cant get tax exempt because I live here.I have lived here for 5 years now.

I am in the same position - living here on retirement visa for the last 9 years. My pension provider specifically suggested that I might be eligible for UK tax exemption, and that I should apply to the IR for this. When I did so I received the same answer - there is no reciprocal taxation agreement between UK and Thailand, and UK income is liable to UK tax, even if domiciled in Thailand.

[hasher69]

You mention that you will open an offshore bank account in the IoM – are you aware of the EU Withholding Tax provisions? If you are an EU citizen, then until you can prove that you are permanently resident outside the EU, all banks in the IoM and the CI will apply these rules. The tax rate on offshore interest is currently 15%, but it will go up to 20% next year, and then to 35% in 2011. It even applies to Swiss accounts.

Guderian,

an innocent question with intended pun: what kind of EU-citizen would be &(*(%^ enough and open under prevailing legislation an offshore account in the EU, Switzerland or the Channel Islands to share with the taxman his/her hard earned money?

Well, the OP for one it seems.

I'm glad that I'm not the only one paranoid about the taxman's "good" intentions!

But really, where else can you keep accounts with relatively limited funds in highly reputable banks? After the EU Withholding Tax thing became apparent, I looked at the options. Yes, Barclays have a private client's account available in both Dubai and Singapore, which did not sign up to the EU Directive. The snag is that a minimum investment of £1 million is required! A shade beyond my limited means, I am afraid.

I expect I could bank offshore in Burma with the local branch of Northern Rock, but that didn't much appeal to me even before the current financial panics.

Are you perhaps suggesting, Naam, that I should keep all my money in my SCB SFF account? Again, no thanks.

Sorry, I must be overlooking the point of your reply, for a Brit with less than a million quid in ready cash, I don't see the alternatives while still being able to sleep easy at night?

Please educate me if I am missing something.

Regards.

You can open an account in Dubai, with HSBC. I opened an account earlier this year.

However the 1 problem in doing this you must do it in person, but then just take your passport and fill in the neccessary forms and ina couple of days all will be done.

Regards

[naka]

Let me tell you about my situation and maybe it can help you.

I am a UK national living in Thailand on a non (O) Immigrant Visa as a retired person on a pension.

My pension is paid from the UK each month and I am taxed in England plus can claim tax allowances and all the rest of it.

I have my UK pension paid into my Thailand account once a year, to save bank charges £25 each transfer rather than have the dosh sent every month.

I am not taxed for this income in Thailand unless I choose to because the Uk and Thailand have a double taxation agreement which means I can either pay tax on my UK pension in Thailand or in the UK which ever I think is best for me.

I think we are considered being a resident in Thailand after 3 months, but check that, I could be wrong.

I had problems a few months ago with my London based bank accounts. I was told that because I am no longer resident in the UK I am not entitled to claim interested on my UK accounts. So I had to open and transfer my savings to an off shore International account with my UK bank. It was a nightmare doing it all from Thailand and costly with phone calls and stress.

Maybe a good idea that you check this out with your UK bank before coming to Thailand.

Hope that this helps.

You received seriously bad advice ! see my link for IR20 earlier in this thread.

Naka.

[flyer]

Hi TCA,

You have two separate questions actually.

UK is a EU country as is Spain where you say you earn some of your income.

There is a EU directive about income tax saying that you are liable for income tax in that (EU) country where you earn the biggest share of your income. Tax in EU is NOT residence bound but income bound! In your case i understand that you earn NOP in UK, so the EU country where you earn the biggest share of your income is Spain as you explain. That however is supposing that you have a local (spanish) company which is earning the money. For making it a little transparent and avoid any suspicion from the spanish tax people I would also let pay the income from Maroco into that Spanish company to avoid any tit-tat about who is the main income provider, especially that Marocco is not EU! . If you are self-employed in the UK and living from commissions paid to you from (work) abroad, this is however to be submitted to UK taxes. So from a tax point of view, the most obvious construction for you would be to own a company offshore (maybe a Thai company could be a good construction in this special case - taxes in Thailand are a breeze compared with the rip off in european countries) and have all your income paid to that company trough foreign accounts it would own in the countries where you work. Then pay tax in Thailand on all your income. A 2 mio THB Thai company would also solve your visa problem by the way! Another suitable construction could be to own a company in Andorra (spain) where to centralize all your income and taxes (almost zero!) . Gibraltar could be suitable in your case also.

As to the Thai taxes. If you don't have any earnings from INSIDE Thailand you are not liable to any taxes. You might be be asked by the Thai taxes to prove that you are tax payer somewhere else as European countries now consistently do ask it. UK might also ask for the same to you if you are a resident there. The prohibition to work with some of the visa's issued by Thailand only relates to work IN Thailand, not to any work that takes place AND generates income abroad and for which you can be paid whjile residing Thailand. IN such a case however you would also be liable to Thai taxes.

PS. The fact that you stay more or less then 180 days in UK each year has no impact on where you have to pay taxes in the EU as explained above. .