Non-o Visa, Working In Thailand, Taxes

[maikee]

A lot of pieces have fell into place with a permanent move I am planning on making to Thailand. Final thing to clear is which plan my company will use to support my effort. Here are the particulars.

1. Moving to Thailand mid-December

2. Marry my fiance mid-January

3. Apply for a non-O visa shortly thereafter

I understand the requirement to stay in Thailand is to have a bank account with 400,000 baht and that you can show money coming in monthly. No problem there. Already have the bank account with 400k. Setting up monthly wire-transfers with my bank will be no problem either.

Here is my work situation. I'll be doing the same work I do in the U.S. only I'll be doing it in Thailand. I'll be doing some code writing and traveling outside of Thailand supporting work for my company. None of this has anything to do with Thailand. Tele-communting... only from another country.

My understanding from reading the threads is that I would not be subject to Thai tax.. I would however be subject to U.S tax (however that should be tax free up to the first 80k).

Am I understanding things correctly? Lopburi3, Up2U, or Indo-Siam, I'd really appreciate any help you could provide on this.

Specifically, could you point me to a Thai Taxing authority document which explains your answer? I need to provide some "official" information to my company.

Thanks much

Mike

[Indo-Siam]

Hi -

You are in the position I was in when I first came to Thailand as"Asain Technical Manager" for a US Company. All of your assertions are correct.

I did not have my overseas pay deposited to a Thai account. I simply had it paid to my US account, and then withdrew funds here via ATM card (with a limit of 15,000 baht per day, at the time). I came over on a one-year Class O visa, and I never bothered to extend it - because I departed Thailand more often than once per month - and each time I returned, I received a fresh 90 day entry permit. If you will travel at least once each quarter, and you can arrive with a one-year Class O visa, you also need not pursue a one-year extension until near the end of your first year (except that - you may want to begin accumulating extension time immediately, for purposes of making you eligible to later apply for permanent residency).

The best tax reference in English is: http://www.rd.go.th/publish/6000.0.html

But - basically - if you have no Thai employer withholding personal income tax, and you are paid your salary outside Thailand, you have no tax liability in Thailand. Technically (and legally), you would probably be best off having salary paid to a personal account in a US bank - with provisions that a monthly wire payment then automatically occur, forwarding money to your personal account in Thailand. Then - no question about whether your salary was paid to you outside Thailand.

Key US Tax document is Form 2555 - download at http://www.irs.ustreas.gov/formspubs/lists...d=97817,00.html

Good luck!

Steve

Indo-Siam

[Sumitr Man]

But - basically - if you have no Thai employer withholding personal income tax, and you are paid your salary outside Thailand, you have no tax liability in Thailand.  Technically (and legally), you would probably be best off having salary paid to a personal account in a US bank - with provisions that a monthly wire payment then automatically occur, forwarding money to your personal account in Thailand.  Then - no question about whether your salary was paid to you outside Thailand.

<{POST_SNAPBACK}>

Steve:

Not often that I find something to disagree with you about, but:

(1) filing an income tax return in Thailand is a personal obligation/liability - not one placed on your employer. PAYE is one method of paying income tax, not the only. Moreover, in April each year it is up to each individual in Thailand (liable to tax) to submit their own tax declaration form - which can be done online.

Thus, your comment regarding "Thai employer withholding personal income tax" does not make sense to me.

(2) provided that you reside in Thailand for more than 180 days in any year - thereby making you a resident of Thailand for tax purposes - you are required to submit a tax return, under the Revenue Code - even if your return is nil (Practically, this is not enforced as it is not workable).

(3) based on the assumption you are a tax resident in Thailand, you are required to pay tax on your worldwide earnings, PROVIDED THAT:

(i) you bring such income into Thailand;

(ii) you bring such income into Thailand in the same year as the year in which such income was earnt.

Therefore, in the OP case, in the event he lives in Thailand for more than 180 days, he would be required to pay income tax in Thailand on earnings he has earnt THAT YEAR and which he has BROUGHT INTO THAILAND.

To avoid any income tax assessment issue, the OP would need to survive in Thailand (vis-a-vis living expenses) on savings he earnt the previous year; thereby exempting these earnings.

Moreover, he would still be required to submit an income tax return in Thailand PROVIDED THAT he resided in Thailand for more than 180 days REGARDLESS of his visa status - which is actually more of an immigration issue than a tax/revenue issue. Again, this individual requirement to submit a tax return would, as I understand, arise from Day 180, even if you were here on a tourist visa [hence Section 4 of the Revenue Code].

SM

NOTE TO READER

All of the above has been gleened from my reading of the Thai Revenue Code. I have no practical application of whether or not these theoritical provisions in the RC are enforced, and practice by the Revenue Dept may differ from all of the above. Consquently, and in any event, anyone in such a position should seek professional advice from one of the many reputable accounting firms in Thailand - a large number of whom have good websites that can help (to some degree).

[maikee]

Indo-Siam and Sumitr Man,

Thank you for the replies. I have a question based on section 1 in the tax code that defines who a taxable person is:

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.

Both of you have touched on this point in your posts. If I understand correctly, If I wired money directly into my Thai bank account and lived in Thailand more than 180 days then I would potentially be subject to Thai tax, but by withdrawing the money through an ATM I get around that.... Is that correct?

Let's say that is correct, how do I correctly show that money is coming in from outside sources to provide support for my Thai wife under the rules of the Non-O visa? I didn't think cash deposits into the account qualified.

If I have to pay taxes in Thailand, I have to pay them. My company is working with me on this move, so I'm not interested in doing anything "suspect". I also want to ensure that everything is 100% correct when it comes to the Non-O visa if any question on monetary support came up. However, I only want to pay the minimum amount of tax that I am required to pay.

Thanks again.

Mike

[lopburi3]

You do not need to have monthly payments to extend a marriage based visa so I would advise doing wire transfers several times each year for higher amounts to save charges and that this money be from savings rather than current income to avoid any tax questions. At this point do not believe immigration is looking for a tax return for extensions and reports from those that have tried to file indicate tax authorities are not interested in 'no tax' tax returns; but if/when they do you can start.

I do not have any knowledge or experience with the US tax exemptions so can not comment on that.

[Sumitr Man]

Mike:

My understanding is such:

(1) your company pays you directly into a bank account in Thailand - income is taxable;

(2) your company pays you into a US bank account, which you then wire to Thailand or withdraw from the ATM (within the same tax year) - income is taxable;

(3) your company pays you into a US bank account, you leave it there until the SUBSEQUENT TAX YEAR (thus, the time period could be anything for 1 day to 360 days), then you wire it in to Thailand - exempt from income tax.

All three above work on the assumption you live in Thailand more than 180 days and relate directly to Thai Revenue Code provisions. I'm afraid my reading of Thai tax laws has not advanced to such a level where I feel confident reviewing (and commenting on) any Double Tax Treaties (DTTs) and domestic (to you, i.e. US) tax issues outside Thailand.

Best of luck

SM

[Indo-Siam]

I failed to mention that when I got here, and was living on Sukhumvit Soi 13, I decided that I wanted to pay my fair share of taxes - I like having repaired roads, schools, fire departments, etc. So, with an amateur translator (my wife) in tow, I went to the local tax office on Soi 11 to try to "do the right thing."

What a fiasco. They could not conceive of my situation. They did look at my passport - Class O visa, and maybe 30 entries and exits in past year. All they wanted to know was: who was my employing Thai company? As soon as they confirmed that I was not paid in Thailand by a Thai company, they told me to get lost. I was making close to 300,000 baht per month - I would have expected at least an attempt to draw some bribe from me. Not the case. "Go away".

No questions about a work permit (which I did not have - because: no Thai employer). In fact, I was never, ever asked for a work permit - except once to sign up for one mobile phone program! I had some routine encounters with police - as soon as they saw Class O visa/entry permit, that was enough.

I am certain that thing were different back when you had to show a tax payment receipt at Immigration to depart Thailand,if you were here on a non-im entry permit. But - that was before my time.

I agree that the written rules appear to require tax payments for "money brought into Thailand" - but - they have no routine procedures for processing such cases - particularly if you bring in all money as I did - via ATM withdrawals (money never even went into my Thai bank account). There was no documentation of "money coming in" (this was in 2000 - and they were not interested in ATM Receipts - which I had not saved anyway). They were also not interested in US Bank statements.

I suppose that if you simply filled out a Thai personal income tax form with a bunch of numbers, attached copoies of your passport and a wad of Thai currency, and abandoned it at the tax office, they might process/accept it. More likely - someone would pocket the money and throw your documents into the trash. They have no procedure, and prefer not be bothered with trying to figure out a processing approach.

To put this into perspective: On Tuesday this week, I had lunch with a friend, and we were talking about the sorry state of banks in Thailand. He recounted a story from about eight years ago when he was involved in a large infratstructure construction project here. One requirement was that at the outset, his company had to place 200 million baht into a Thai bank account from which various subcontractor expenses would be paid. So - they went into a bank head office here, and applied to open a current account - into which they would then transfer from outside Thailand 200,000,000 baht. But - no. They were told that bank rules required that priorto opening a current (checking) account, they must first have a savings account for six months. My freind then tried to reason with them: "Listen lady, we want to open a checking account, and then are going to GIVE you 200,000,000 baht AND YOU WILL NOT HAVE TO PAY US INTEREST since it is a checking account. Now, may we proceed?" Answer: "No - cannot do. No procedure for initially opening a current account." And - by the way - this was a senior bank manager at this point. My friend walked out - and opened the account at another bank without problem.

It does not matter what is in the written regulations - if an office has no procedure, they will give you a pass, rather than try to create a procedure. That is the Thai way. (If we have no procedure, then you cannot be viloating that procedure by not complying).

Cheers!

Steve

Indo-Siam

[maikee]

Thanks all for the replies. I am fairly comfortable with what everyone has said... It does need to be more clear though for my company though.

Sumitr Man,

So, If I understand you correctly. There is merely a 2 day window between what is considered income and therefore taxable and what is considered savings and there for non-taxable. I should choose option 3 and:

1. December 28 (It could be any date), transfer a lump sum to my U.S. Savings account (Don't want any of the "savings" money mixing with the "income" money.

2. January 2nd, wire part or all of the money in the U.S. Savings account to my Thai account.

3. You mentioned something about money taken from the ATM being taxable, obviously that would be difficult to keep track of... Not sure what the taxing authority is looking for here. ( I see Steve already alluded to this )

So, in my case. I will move here December 15th. December 28th, I'll transfer some money into U.S. Savings account. January 2nd I'll wire the money into my Thai account. This will be for 2004. As I haven't resided in Thailand 180 days, no issue, but it establishes the pattern and a paper trail. I'll repeat the pattern next year and thus should fall into the non-taxable category. Is that correct?

Could you point to the portion of the Thai tax code that spells out (or alludes) to option 3?

By the way, I understand you cannot comment on US tax codes and I'm not expecting any advice there... Only the Thai portion.

Thanks again.

Mike

[lopburi3]

No need transfer funds around but if it makes it clearer and you feel better it should work out fine. You could have money in a current account for years so it is not likely to ever be questioned for a non criminal type.

As I am not involved with any payment of Thai tax so have not studied it more than to see it could be very inclusive if used by the letter but in fact it is not so used. Like most things here policy is the name of the game and this is often not published.

[Sumitr Man]

A couple of things need to be cleared up here:

(1) I'm not a tax adviser, Thai or otherwise, so please read what I write as FYI purposes only - please do NOT rely on this;

(2) the relevant sections of the Revenue Code you need to review are found in Division 2: Personal Income Tax, Sections 40 - 64 (inclusive) - a copy of the Revenue Code can be obtained from CU Books in Siam Sq.

(3) for option 3, it is my understanding that you need to rely on the final paragraph of Section 40(8). This reads:

The amount of tax under the first paragraph which is paid for the taxpayer by the payer of income, or by an other person, at whatever stage, or in whichever year, shall be treated as income of the same category and of the same year as the income in respect of which the tax is paid.

(4) whilst all of the above maybe theory, and practice may differ, S. 26 of the RC provides:

Save as otherwise provided in this title [Revenue Code], in the case of an assessment under S. 25 or S. 25*, the tax-payer is liable to a penalty equal to twice the amount of tax payable. *failure to submit a tax return

Moreover, under S. 27 you are further subject to a surcharge of 1.5% per month of the tax payable (exclusive of penalities).

Depending on how much tax you are paying, this may or may not be a deterent to non-submission of a tax return

Have a nice day

[Dancali]

I did a lot of research into the American and Thai tax situation and this thread looks to contain the best information we have.

I am so happy to hear of Indo-Siam's experience. I was considering doing something similar when I started to get paranoid thoughts of the border immigration stopping me for tax evasion. Besides the real good it would do, I am considering sending off 4,000 baht/month to Thai charities as my form of tax if they ever get interested.

Just a note on American taxes. You are still liable for social security/med regardless of your income exclusion. Your state might also keep its grip on you. I'm self-employed, so social security works out to 15% of my income up to about $87,000 -- not exactly a tax-free existence. California also assumes I'm going to pay their tax though I think my case for being away from California is clearly "non-transitory". I think my case for no California taxes will fly ok, but if I ever make over $200,000/year they have further provisions to figure out a way to tax me.

Keep us up to date if anything interesting pops up regarding your tax situation.

[Sumitr Man]

Mike:

Hopefully the following example can help clear up the basics of Structure 3.

*NOTE: Thai tax year runs 01.01. - 12.31

Pre Dec, 31 2004

STATUS

You are not a Thai resident for tax purposes, you have not lived in Thailand 180 days in this year

ACTION

You arrive in Thailand and bring in as much money as you need for your immediate start-up costs AND for 2005 living purposes

01.01.2005 - 12.31.2005

STATUS

Sometime during this period you'll establish residency for Thai tax purposes

ACTION

You survive off money you brought into Thailand during 2004 - you do NOT bring money into Thailand

01.01.2006 - 12.31.06

STATUS

Thai tax resident

ACTION

Obviously the money you have brought into Thailand in 2004 will run out at some stage, so during 2006 you start to bring money into Thailand. You can do this one of two ways:

(1) monthly

(2) bullet payments

(1) In the event that you bring money in during 2006 in monthly amounts, make sure you bring in the amounts you earnt monthly during 2005 - not at your 2006 monthly pay rate

(2) bring in bullet amount(s) up to your cumulative 2005 earnings

Onwards

Repeat step above.

Don't foget to check this with your Thai accountant.

[maikee]

Thanks all for the replies and thanks for your clarifications Sumitr Man! Lots of good information to go on.

Cheers all.

Mike

[maikee]

Hi all,

I've been looking at the Thailand tax codes and nothing really seems to spell out my situation or the situation as explained by the kind folks in this thread. While I am comfortable working this out with a lawyer in Thailand, there just doesn't seem to be anything (That I am seeing) that point to the scenarios mentioned.

I suppose this may be irritating to the folks that have commented in this thread, but bear with me. I've seen this excerpt as it applies to section 40(8) of the code

A. Personal Income Tax

Individuals, unregistered partnerships, sole proprietorships and other unregistered individuals are subject to the Thai personal income tax. If a person remains in Thailand for 180 days or more during any tax year, he or she is deemed to be a resident for income tax purposes. Non-residents are taxed only on income from Thai sources. Residents are subject to taxation from foreign sources as well, if such income is brought into Thailand.

Individual wage earners are not allowed to deduct actual costs and expenses. Instead, they are entitled to a standard deduction of 40% of their employment income, up to a maximum deduction of 60,000 Baht per year. A credit, set to a fairly complex formula, is allowed for dividends and profit sharing from Thai corporations. The personal income tax rate is progressive, from 5% up to 37% for all income over 1,045,000 Baht.

From everthing else I have read, I haven't seen anything about money coming in from savings. Obviously, folks are getting around this by using this "rule". So I'm wondering how others are getting around this... I don't really see how 40(8) applies to this unless I am being thick.

Thanks for bearing with me on this. I'm just trying to be clear in my mind and I also need to provide the appropriate information to the people that care. I have e-mailed a couple of accounting firms in Thailand, and the question to my specific scenario has yet to be answered. An e-mail address to the Tax Law God in Thailand would be great!

Thanks all.

Mike

[maikee]

Sorry all...

ok... looking at the tax code: Assessable income falls into 8 categories. So using the below rules you can "rule out" money transferred by savings.... is that correct? If so, since we are talking about tax years here and applying the transferring money from saving scenario, I suppose that is meeting the requirement? Does it stipulate anywhere in the tax code about money transferred in to Thailand from savings? Or is that something that just falls through the "if then else" logic?

Thanks guys.

Mike

Personal Income Tax (PIT) is a direct tax levied on income of a person. A person means an individual, an ordinary partnership, a non-juristic body of person, a deceased person and an undivided estate. In general, a person liable to PIT has to compute his tax liability, file tax return and pay tax, if any, accordingly on a calendar year basis.

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.

2. TAX BASE

2.1 Assessable Income

Income chargeable to the PIT is called "assessable income". The term covers income both in cash and in kind. Therefore, any benefits provided by an employer or other persons, such as a rent-free house or the amount of tax paid by the employer on behalf of the employee, are also treated as assessable income of the employee for the purpose of PIT.

Assessable income is divided into 8 categories as follows:

(1) income from personal services rendered to employers;

(2) income by virtue of jobs, positions or services rendered;

(3) income from goodwill, copyright, franchise, other rights, annuity or income in the nature of annual payments derived from a will or any other juristic Act or judgment of the Court;

(4) income in the nature of dividends, interest on deposits with banks in Thailand, shares of profits or other benefits from a juristic company, juristic partnership, or mutual fund, payments received as a result of the reduction of capital, a bonus, an increased capital holdings, gains from amalgamation, acquisition or dissolution of juristic companies or partnerships, and gains from transferring of shares or partnership holdings;

(5) income from letting out of property on hire and from breaches of installment sales or hire-purchase contracts;

(6) income from liberal professions;

(7) income from construction and other contracts of work;

(8) income from business, commerce, agriculture, industry, transport or any other activity not specified earlier.

[Sumitr Man]

Mike:

Your questions are now starting to get more technical. You have asked about the Thai Tax God - well his name is Piphob Veraphong and he is widely regarded as the #1 tax lawyer here [do a Google search on his name]. He also happens to be the author of "Tax Corner", published by-weekly in the Bangkok Post.

Can I suggest that you drop him (and his team) an email. You can find out their details at http://www.lawalliance.co.th/

Provided you keep your question(s) concise, I'm sure Khun Piphob will be willing to help you - he is a very nice guy (one of the few).

SM

[muenwai2]

Wow. This is getting heavy. I don't think Mike is going to enjoy life in Thailand.

He needs to take a laid back attitude. Thai tax authorities couldn't care less about personal money from outside Thailand. They just want you to spend it.

Savings.

Money earned in the previous tax year or earlier is deemed savings and can be transferred to Thailand free of Thai tax. .

Earnings for the current tax year transferred to Thailand are taxable but any tax paid on those earnings outside Thailand can be written off against Thai tax.

But who the ###### cares - the Thais certainly don't.

[bkk_mike]

Aren't we all forgetting something here.

He's paying tax in the US on this money (even if there is some dispensation because he's living abroad). In that case, wouldn't the double taxation agreement apply.

Which usually says something like his US tax would be deducted from any Thai tax payable - so assuming he takes in an amount where the Thai tax would be less than the tax he's already paid in the US - he has no tax liability on that basis...

[maikee]

Thanks all for the patient replies.

If it was just a matter of me coming over and working with professionals to find my way through the white and grey areas, no problem. Unfortunately, that is not the case. My company is supporting this move for me (how cool is that!), however, the legal and accounting department is wanting to look at all options.

My move is depending on a positive outcome on this.

Other than that? I'm extremely laid back. Been coming to Thailand off and on the past 10 years and love it. When I make the move, I also want to stay here and not run into any problems either for myself or the company I work for, hence, my interest in details.

Sumitr Man, I'll be checking out the link you gave and will probably e-mail them as well. Thanks for the information.

Cheers all!

Mike

[Dancali]

Aren't we all forgetting something here.

He's paying tax in the US on this money (even if there is some dispensation because he's living abroad). In that case, wouldn't the double taxation agreement apply.

Which usually says something like his US tax would be deducted from any Thai tax payable - so assuming he takes in an amount where the Thai tax would be less than the tax he's already paid in the US - he has no tax liability on that basis...

<{POST_SNAPBACK}>

If he took the $80,000 exclusion I think the Thais would expect tax on that $80,000 he wasn't paying the us taxes on. Also, I'm not sure who gets first dibs at the tax money, but I think that the Thai's would get first dibs which he would then get to use as a credit for any remaining taxes due to the US.

Though the fact that he will still surely be paying loads of US taxes (I fit the exclusion but still pay something like 20% in federal taxes) will likely keep him safe if it ever came to the paranoid situation of the Thai tax authorities getting interested in him.