Income Tax

[Brigante7]

Hi all just a quick question

If I have my money in an offshore account wich pays tax free interest every month and said interest is then transfered to my Thai bank account am I liable to pay any tax on the money I bring into Thailand?

I am a UK resident but when I move to Thailand I will cut all ties with the UK and so I won't be liable for any UK tax.

I am married to a Thai national and my wife was going to buy property to invest in but then that meant having to file tax returns, pay tax's and paperwork and more importantly having to find tenant's to rent the property I thought it would be easier to keep our money offshore and get around 6.5% a year and live off the monthly interest.

Any info will be greatly appreciated.

[samran]

The simple answer is that any income that is earned in that year (Jan-Dec) and then transferred to Thailand in the same year is then taxable at the marginal rate in Thailand.

However, if that income is not transfered to Thailand in that year, but in the subsequent year, it shall be deemed as savings, and thus not taxable.

So, if you have $100 in 2007 at 10%, then your income is $10. If that $10 is transferred to Thailand, then theoretically, it is taxable at your marginal rate.

If however, you hold off on transfering that $10 till 1 Jan 2008, then it is tax free as far as the Thai authorities are concerned.

[CWMcMurray]

Samran beat me to it, he is spot on.

[Naam]

Samran beat me to it, he is spot on.

but Samran (and others) never answered my (repeated) question where i can find an official statement concerning that "tax free" tale which i hope is not a fairy tale with a rude awakening in years to come.

[technocracy]

Well in reality if the address on your off-shore bank is a UK address - you should be paying tax on it in the UK . . . just hope the IR doesn't have a fishing trip to your bank . . . then again it's only in the IoM and Channel Islands they've been prodding around.

[samran]

Samran beat me to it, he is spot on.

but Samran (and others) never answered my (repeated) question where i can find an official statement concerning that "tax free" tale which i hope is not a fairy tale with a rude awakening in years to come.

good question.

I'm 100% sure that the english language wording in the revenue deparment site, used to say this, but a recent peep and it wasn't there in full, only that it is not there in full now.

from: http://www.rd.go.th/publish/6045.0.html

1. Taxable Person

Taxpayers are classified into "resident" and "non-resident". "Resident" means any person residing in Thailand for a period or periods aggregating more than 180 days in any tax (calendar) year. A resident of Thailand is liable to pay tax on income from sources in Thailand on a cash basis, regardless where the money is paid, as well as on the portion of income from foreign sources that is brought into Thailand. A non-resident is, however, subject to tax only on income from sources in Thailand.

Then there is Grant Thorton, who have the wording that I've seen about, and have been advised on (but not by them):

http://www.gthk.com.hk/cgi-bin/cms/upload/...pat%20Guide.pdf

Charge to tax

Thailand Tax is imposed on assessable income. A resident of Thailand is taxed on income earned in Thailand and on income earned offshore which is brought into Thailand in the year the income is earned. Non-residents are subject to income tax on all income earned in Thailand.

As always, though, if you are unsure, see a good tax lawyer or accountant.

[naka]

Well in reality if the address on your off-shore bank is a UK address - you should be paying tax on it in the UK . . . just hope the IR doesn't have a fishing trip to your bank . . . then again it's only in the IoM and Channel Islands they've been prodding around.

But you can have a UK "Care Of" address and still not be a UK tax resident.

Many people I know do this as it's pretty hard getting mail when your

drill rig is running all over the high seas. Oh, and many of us never spent

a day in the UK for years on end ... did our R&Rs in other places.

Naka.

[kudroz]

I am in a similar situation, and I have asked KPMG in Bangkok to produce an oppinion letter on this for my dealing with the Thai/Canadian tax authorities

In a nutshell, if you have foreign source income in a given year and also remit funds in Thailand in that same year; the portion you remit in Thailand is taxable. What you spend with your foreign credit card or you widthraw with your foreign debit card also applies.

Savings you remit in Thailand are not taxable. The Thai tax authorities interpret savings as registered intruments (term deposit) subscribed in previous years.

[Naam]

I'm 100% sure that the english language wording in the revenue deparment site, used to say this, but a recent peep and it wasn't there in full, only that it is not there in full now.

and neither do i see it mentioned "partially"

[Naam]

A resident of Thailand is taxed on income earned in Thailand and on income earned offshore which is brought into Thailand in the year the income is earned.

OOPS Samran! i stand corrected

[fletchsmile]

A resident of Thailand is taxed on income earned in Thailand and on income earned offshore which is brought into Thailand in the year the income is earned.

Just curious. Is the onus on the Thai tax authorities to prove it relates to current year so taxable. Or is the onus on you to prove it reates to previous years and not taxable.

I understand OP is talking about untaxed offshore income tho'. But I'd expect there would be some sort of double taxation agreement with many countries, saying that if your income is taxed in that country, you won't be taxed again in full in Thailand. You can earn up to a certain amount in UK tax free each year.

To OP I'd add that 6.5% might be a good return today. Bear in mind with inflation, it will be worth less each year if you spend all your interest. So you may wany to consider say keeping 2.5% building up each year,and living off 4%. You're also exposed to changes in interest rates. Are you OK if they fall,and to what level. You're also exposed to currency risk, if exchange rates move against you. Lastly to what extent are you protected by a compensation scheme if your bank/building society goes bust. You may want to spread it around a little

Edited October 12, 2007 by fletchthai68

[fletchsmile]

A resident of Thailand is taxed on income earned in Thailand and on income earned offshore which is brought into Thailand in the year the income is earned.

A couple more that struck me:

- If your interest is paid annually say Dec 31, and you withdrew your money on 30 Dec, before any interest is paid, couldn't you argue it is a deduction from your capital.

- If you transferred your money into a different bank account couldn't you then argue it's all capital. Or say put GBP 1,000 in an account, when GBP 65 interest is earned, you have GBP 1,065. You then transfer GBP 1,000 into a new account, leaving the interest where it is. You could then again deduct from the capital of GBP 1,000 isn't of the interest of 65.

To be honest I don't see how the Thai Revenue can sensibly check what is income and what is capital, or when it is earned. I'd be interested to know if anyone actually pays Thai tax on these amounts

[GreenSnapper]

I'm rather interested in this topic too.

Do the Thai authorities actually ever ask where does the money come from that you transfer from offshore? Or is it automatically assumed that this is from "savings"?

A retiree on a retirement visa is supposed not to work. But is he really a "resident"? I would say no, his visa is a bit more upscale than a tourist visa, but practically it is the same.

What do Thai people do with serious income from offshore?

[kudroz]

If you are a resident of Thailand for tax purposes, you have to file a personal income tax return by March and required to include all the taxable income received during the preceding year. If you do not file by March, you have a interest charge of 1.5% of the income tax payable and a one-time fine of THB 200. Although, if you receive a tax assesment prior to voluntarily filing your taxes, there will be a fine of 200% of the payable income tax.

The general rule is that if you remit money to Thailand in a year that you have earned foreign sourced income -- the portion you have remitted to Thailand is taxable -- unless you can prove that you have subsribed to a registered term deposit, in a previous year, that has come to maturity (cashed) in the current tax year.

*edit typo

Edited October 12, 2007 by kudroz

[kudroz]

Do the Thai authorities actually ever ask where does the money come from that you transfer from offshore? Or is it automatically assumed that this is from "savings"?

What you file on your tax return is assumed to be correct until the regional revenue department (near to where you live) elect to do an audit and assert otherwise.

A retiree on a retirement visa is supposed not to work. But is he really a "resident"? I would say no, his visa is a bit more upscale than a tourist visa, but practically it is the same.

A retiree on a Non-Immigrant "O" visa with an extension of stay based on retirement, generally speaking (it has been seen in some provincial offices), doesn't qualify for a work permit.

Anyone who aggregates a stay of more than 180 days in any tax year is deemed to be a resident of Thailand for tax purposes. (nor for immigration purposes)

What do Thai people do with serious income from offshore?

They keep their money in a low-tax jurisdiction, or they remit it to Thailand and pay taxes on it.

[GreenSnapper]

Thanks, kudroz, from your posting I have the impression that the tax issues on offshore investments are not as easy as often claimed at Thai Visa.

To make sure I understood correctly, let me outline a possible way not to pay taxes on offshore income. I think this is quite a relevant issue, as I believe there are many retirees in Thailand who don't live from a pension, but from offshore capital and capital gains.

Let's say, I have an account "A" offshore (Singapore, HKG etc) which consists of bonds, stocks and such. It yearly pays a certain amount of money from dividends, interests from bonds or gains from trading stocks.

If I'd would just transfer those gains to Thailand for my retirement expenses, they would be fully taxed.

From what I read on the website mentioned above, taxes would average around 10-20% from the amount remitted to Thailand. Which is quite hefty, as I have to remit yearly at least 800,000 Bt for being able to receive the retirement visa alone.

But to avoid being taxed that way, I could just open another offshore account "B", probably at a different bank, to where I send money from account "A". Account B just holds a fixed term deposit.

The fixed term deposit at account "B" will be matured in the following year. Then I remit all the money from account "B" to Thailand and will not be taxed on this money. After that remittance, I start another fixed term deposit on account B to do the same for the next year after that.

So the money flow will go like that:

A -> B (fixed term) - (next year) -> Thailand

And so on. The amount of money I keep on account B will be the average amount of money I will spend in Thailand during one year.

Would that be a feasible legal construction to avoid being taxed on your offshore income and still have money to spend in Thailand?

[naka]

The problem is that account B will also contain interest earned in the current year !

Naka.

[kudroz]

Thanks, kudroz, from your posting I have the impression that the tax issues on offshore investments are not as easy as often claimed at Thai Visa.

To make sure I understood correctly, let me outline a possible way not to pay taxes on offshore income. I think this is quite a relevant issue, as I believe there are many retirees in Thailand who don't live from a pension, but from offshore capital and capital gains.

Let's say, I have an account "A" offshore (Singapore, HKG etc) which consists of bonds, stocks and such. It yearly pays a certain amount of money from dividends, interests from bonds or gains from trading stocks.

If I'd would just transfer those gains to Thailand for my retirement expenses, they would be fully taxed.

From what I read on the website mentioned above, taxes would average around 10-20% from the amount remitted to Thailand. Which is quite hefty, as I have to remit yearly at least 800,000 Bt for being able to receive the retirement visa alone.

But to avoid being taxed that way, I could just open another offshore account "B", probably at a different bank, to where I send money from account "A". Account B just holds a fixed term deposit.

The fixed term deposit at account "B" will be matured in the following year. Then I remit all the money from account "B" to Thailand and will not be taxed on this money. After that remittance, I start another fixed term deposit on account B to do the same for the next year after that.

So the money flow will go like that:

A -> B (fixed term) - (next year) -> Thailand

And so on. The amount of money I keep on account B will be the average amount of money I will spend in Thailand during one year.

Would that be a feasible legal construction to avoid being taxed on your offshore income and still have money to spend in Thailand?

That's the kind of question that is best asked to a tax professional. We can all read the rules and interpret ourselves what they mean - but a tax opinion letter from a tax professional will tell you exactly what you need to know.

[Naam]

A resident of Thailand is taxed on income earned in Thailand and on income earned offshore which is brought into Thailand in the year the income is earned.

Just curious. Is the onus on the Thai tax authorities to prove it relates to current year so taxable. Or is the onus on you to prove it reates to previous years and not taxable.

the fact is that "nobody knows nothing about no taxes which no farangs are supposed to pay in Thailand". ask any tax "professionals" (plural) and you will hear these kind of answers:

-why would you be concerned about taxes?

-you are tax free! why? because i'm telling you so!

-you don't pay taxes because you are a retired farang and everybody knows that during nights it is colder than outside. did Thaksin pay taxes?

-WHO or WHAT are taxes?

-only stupid people pay taxes.

-ssshhhhhhh... don't wake sleeping dogs!

a tax opinion letter from a tax professional will tell you exactly what you need to know

:D

Edited October 13, 2007 by Dr. Naam

[kudroz]

A resident of Thailand is taxed on income earned in Thailand and on income earned offshore which is brought into Thailand in the year the income is earned.

Just curious. Is the onus on the Thai tax authorities to prove it relates to current year so taxable. Or is the onus on you to prove it reates to previous years and not taxable.

the fact is that "nobody knows nothing about no taxes which no farangs are supposed to pay in Thailand". ask any tax "professionals" (plural) and you will hear these kind of answers:

-why would you be concerned about taxes?

-you are tax free! why? because i'm telling you so!

-you don't pay taxes because you are a retired farang and everybody knows that during nights it is colder than outside. did Thaksin pay taxes?

-WHO or WHAT are taxes?

-only stupid people pay taxes.

-ssshhhhhhh... don't wake sleeping dogs!

a tax opinion letter from a tax professional will tell you exactly what you need to know

:D

The tax attorneys at Tilleke&Gibbins and the tax directors at KPMG are well versed into Thai and international taxation laws and their advice is always supported by jurisprudence and in-depth Thai law research. The kind of answer you've quoted above is definetly not the kind of answer you will get from a reputable lawyer or accountant working in an international firm. Expect to pay THB 15,000 to 20,000 per hour for reputable advice.

Edited October 13, 2007 by kudroz

[skytraining]

How about if the income is from property rental abroad that you have already paid tax on? Surely this should be covered by a double tax agreement (my country has one with Thailand).

Obviously any interest on the proceeds from rental would be subject to tax on transferral.

Is this right?

[cclub75]

The tax attorneys at Tilleke&Gibbins and the tax directors at KPMG are well versed into Thai and international taxation laws and their advice is always supported by jurisprudence and in-depth Thai law research. The kind of answer you've quoted above is definetly not the kind of answer you will get from a reputable lawyer or accountant working in an international firm. Expect to pay THB 15,000 to 20,000 per hour for reputable advice.

Well... it might be usefull for big stuff (I seriously doubt it anyway, look at the Shin deal... Revenue Department gave one story to the Thaksin's family, and another one... in total contradiction after the Coup.... so give me a break about the "jurisprudence and in-depth thai law research" !!).

However, and for the small stuff like some income off shore... i would repeat exactly the "thai advice" of DR Naaam : only stupid farangs indeed would call the Revenue Department and ask to pay taxes !

And furthermore, to answer the question, there is a much easier way... Just take the cash with a debit card in Thailand... directly from your off shore account. Case closed.

[GreenSnapper]

only stupid farangs indeed would call the Revenue Department and ask to pay taxes !

That's another question. The first question is: what is the law. The second is: how seriously is the law enforced.

And furthermore, to answer the question, there is a much easier way... Just take the cash with a debit card in Thailand... directly from your off shore account. Case closed.

Would work with your daily expenses, but for getting a retirement visa you have to show the cash is remitted from abroad into Thailand.

So how are you expats handling the situation: As you have to deliver a tax declaration in March, you just tell them "no income" and the case is closed?

Are retired expats never asked about it and is it never checked by the RD where the money comes from?

[GreenSnapper]

The problem is that account B will also contain interest earned in the current year !

Yes, but then you will be only taxed on the interest earned on the money you transfer to Thailand, but not on the transferred amount itself. There are also some free allowances, so unless you transfer a big amount, these taxes would be neglectable.

[Naam]

So how are you expats handling the situation: As you have to deliver a tax declaration in March, you just tell them "no income" and the case is closed?

Are retired expats never asked about it and is it never checked by the RD where the money comes from?

i have no idea how my fellow expats are handling the situation and can speak only for myself. nobody ever asked me to file a tax return and nobody ever asked me where the money comes from i am spending in Thailand. that inspite of the fact that a government authority (immigration) has exact insight of my transfers and spendings as i have to submit my bank book.

when i settled in Thailand i intended to pay some "fair" share of income tax. asking around "where, how, when, to whom?" i got the answers (and a bunch more) which i stated before.

edited for addendum:

i would still prefer to pay income tax on the 800k i have to show each year. not because i am afraid to be saddled in a few years with back taxes and penalties but because being accused of tax evasion might jeopardize our retirement visa in Thailand.

Edited October 13, 2007 by Dr. Naam

[MahNuad]

Does anyone know if the Thai tax folks consider pension and U.S. Social Security benefits as income? I've been here for 5 years now on a "retirement visa" and immigration hasn't said a thing so far during the yearly peeks at my Thai bank account and my ATM activity on my US bank account. Except for the rare check written to deposit a larger sum, all my cash arrives here via ATM.

[kudroz]

Does anyone know if the Thai tax folks consider pension and U.S. Social Security benefits as income? I've been here for 5 years now on a "retirement visa" and immigration hasn't said a thing so far during the yearly peeks at my Thai bank account and my ATM activity on my US bank account. Except for the rare check written to deposit a larger sum, all my cash arrives here via ATM.

The tax treaty between the United States and Thailand clearly says that social security benefits and other similar public pensions sourced (originates) in the United States are only taxable in the United States.

You should also file a Thai tax return in March, which you will declare to have 0 payable tax income and claim treaty benefits on the income you've remitted to Thailand. Practically, most people don't file.

[kudroz]

Well... it might be usefull for big stuff (I seriously doubt it anyway, look at the Shin deal... Revenue Department gave one story to the Thaksin's family, and another one... in total contradiction after the Coup.... so give me a break about the "jurisprudence and in-depth thai law research" !!).

International firms will give you their interpretation of the law and will advise you according to the jurisprudence and how similar cases how usually dealt with. We all know that in Thailand they will sometime bend the law or modify it to please their political agenda. In most if not all of the situation referenced here, a tax opinion letter from an international firm will be spot on.

However, and for the small stuff like some income off shore... i would repeat exactly the "thai advice" of DR Naaam : only stupid farangs indeed would call the Revenue Department and ask to pay taxes !

I disagree. There are several reason why it would be advantageous to "get legal" and pay your taxes in Thailand. For one, you could be asked by your home country to provide evidence that you are a tax resident in another jurisdiction before you can be given a non-residence certificate in your home country (for tax purposes). The revenue department of Thailand issue these certificates regularly (in english) for this very particular purpose. http://www.rd.go.th/publish/21974.0.html

[Naam]

Expect to pay THB 15,000 to 20,000 per hour for reputable advice.

it should not take more than seconds to answer the simple question "income taxable if not transferred in the same year when earned?"

besides... the "reputable advice" or "opinion" won't be worth the paper on which it is written if the thai revenue department disagrees.

[kudroz]

it should not take more than seconds to answer the simple question "income taxable if not transferred in the same year when earned?"

The way it works with international firm is generally

1. You submit your questions

2. They may or may not perform due diligence on your person depending of the kind of services your require from their firm. For general tax advise, it is generally not required.

3. They will send you an engagement letter

4. They will send you a proposal re your questions

5. They will send you an invoice

besides... the "reputable advice" or "opinion" won't be worth the paper on which it is written if the thai revenue department disagrees.

That's why it's called a tax opinion letter and not a tax ruling. Thai tax regulations says that certain penalties can be avoided if you have relied on reputable professional advice and have substantial legal authority for your actions.