Tax questions

[Hurricane51]

This might be TOO obvious, as I don't find it specifically mentioned in any of the Thailand tax guides. Are pension benefits simply considered wages for the purposes of personal income tax?

Here's a more complicated question. The U.S. exempts $80,000 of personal income for expats who reside in the U.S. for less than 30 days per calendar year. Assuming I met the residences constraints, if I earned $80,000 per year from a U.S. pension (I wish!), and deposited it in a U.S. bank, then my Thai PIT liability would encompass only the funds I actually transferred to Thailand, correct?

[kwiz117]

Yes you are correct. The Revenue Code in Thailand will not give a clear guidelines about Personal Income Tax of Expats in detail. But it does, define who is an Alian and what are the principles of recognistion of Taxable Income.

Let me express my Opinion.

If you reside in Thailand and have a source of Income [Employed or Otherwise] legally you are suppose to File a Personal Tax Return.

As per my understanding about Thai Revenue Code, You are suppose to Pay Personal Income Tax based on your Assesable In

1. Are pension benefits simply considered wages for the purposes of personal income tax?

[kwiz117]

Please disregard my previous reply. It got posted by mistake while I was typing.

Sorry.

Yes you are correct. The Revenue Code in Thailand is not giving detail guidelines about Personal Income Tax Assessment of Expats in detail. But it does, define who is an Alien and what are the principles of recognition of Taxable Income.

Let me express my Opinion, based on my understanding about the Thai Revenue Code.

If you reside in Thailand and have a source of Income [Employed or Otherwise] as per the Thai Revenue Code you are suppose to File a Personal Tax Return and pay Taxes Accordingly.

If you are employed the Company will withhold the Tax in each month and then will adjust at the End of the Year based on your Final Assessment.

Let me try to answer your Two Questions.

Q1. Are pension benefits simply considered wages for the purposes of personal income tax?

You have not clearly indicated whether this Question is related to US Law or Thai Law.

I am not familiar with the US Tax Regulations. But in General, Income from Pension will consider as a Separate Source of Income in many countries. I have not heard any country, where they categorise Income from Pension under Income from Employment. If you do not have any source to cross check this in US, let me know so I can try to find this information for you.

Q 2. [ The U.S. exempts $80,000 of personal income for expats who reside in the U.S. for less than 30 days per calendar year. Assuming I met the residences constraints, if I earned $80,000 per year from a U.S. pension (I wish!), and deposited it in a U.S. bank, then my Thai PIT liability would encompass only the funds I actually transferred to Thailand, correct?]

As I said before, I am not familiar with US Revenue Code. But let me try to answer your question related to Basic Tax Principles by dividing your question in to following points.

A . [ US exempt $80,000 of Personal Income if residency is less than 30 days in each year.] ? Assuming that above Figures and days are accurate, and then your Income from Pension will be entitled to this Benefit.

But you should find out whether ?Pension is considered as a Taxable Source of Income in US?. If yes, then it will be exempted as it will be a part of your PIT; if No, then it will not be exempted.

B. [deposited it in a U.S. bank, then my Thai PIT liability would encompass only the funds I actually transferred to Thailand] ? In my opinion, you need to answer below question in order for me to express an Opinion.

Did you disclose the Amount of Pension you get and you are hoping to Transfer to the Revenue Department, or Immigration Department at the time of applying for your VISA. If you are living in Thailand with a Retirement Visa, then it will depend on the Amount of Pension that you have disclosed in Thailand.

I am not very much familiar with the treatment of Pension Income under Thai Revenue Code. But will find out and update this topic.

If anyone has any specific questions related to Tax this forum will be a very good place to share your experiences.

[lopburi3]

The U.S. exempts $80,000 of personal income for expats who reside in the U.S. for less than 30 days per calendar year.

Don't think so.  If you American and have US income you pay for life.

Believe you are thinking of the foreign earned income exemptions for those who are aorking/residents of foreign countries.  If does not exempt your US incomes.  But would be most happy to be wrong.

[TRIPxCORE]

Well personally, what I planned on doing when I get to LOS and I have suggested before, is to open an offshore bank account in Switzerland, Isle of Man, somewhere like that.  Have your pension direct deposited to this bank account and only keep what is absolutely necessary in a Thai bank.  If all your money is going to the offshore account, you avoid paying any tax to the USA on interest you make, and you avoid any tax to the Thai authorities completely and legally because Thai tax law states that Thailand can only tax money that is brought INTO the country.  As none of your pension is being brought in-country, then no tax is due.  

    I have posted this link on here before but just for you, here it is again.  This should be very helpful with Thai tax questions.  You must have Adobe Acrobat reader to view it ok.Thai tax booklet

[Hurricane51]

Thanks for the responses. Let me try to clarify a few things.

I am presently residing in the U.S. I am planning on retiring to Thailand, but IF and WHEN are dependent upon some financial issues (isn't that usually the case!).

I did some additional checking, and it's clear that I will need to get professional guidance on both the U.S. and Thai tax laws. The more I read, the murkier it becomes.

I discovered that the $80,000 U.S. tax exemption apparently applies only to FOREIGN (non-U.S.) income, but that's only my interpretation of the U.S. tax code. Apparently my entire pension would be taxable in the U.S.

Tripxcore, I THINK I understand what you are saying, but wouldn't it be necessary to bring money into Thailand to pay for my living expenses? Regardless of how I do it (ATM, wire transfer, bank check), I AM getting income into Thailand. My concern is avoiding double-taxation (both U.S. and Thailand). It's my understanding that tax treaties are designed to avoid this, but my information is lacking. Here's a quote from the U.S. tax code:

"If you are a U.S. resident, nongovernment pensions and annuities you receive may be exempt from the income tax of treaty countries."

"Most treaties contain separate provisions for exempting government pensions and annuities from treaty country income tax, and some treaties provide exemption from the treaty country's income tax for social security payments."

Clear as mud! Even worse, the defintion of "non-government" is questionable, as I believe it refers only to Federal-government pensions and I have a municipal-governemnt pension. I'm getting a headache!

Thanks again for the help.

[lopburi3]

You pension will always be taxed in the USA and any interest income worldwide is also subject to US tax AFAIK.  

I do not believe the Thai government is actively taxing retirement income, at this time, so do not believe you would be subject to double tax, even if your pension does not fall under the "government" provision of the tax treaty.

The treaty is on the web somewhere if you really want a headache.  

[TRIPxCORE]

Tripxcore, I THINK I understand what you are saying, but wouldn't it be necessary to bring money into Thailand to pay for my living expenses? Regardless of how I do it (ATM, wire transfer, bank check), I AM getting income into Thailand. My concern is avoiding double-taxation (both U.S. and Thailand). It's my understanding that tax treaties are designed to avoid this, but my information is lacking. Here's a quote from the U.S. tax code:

If you have an offshore account you would be pulling money out of that account occasionally via an ATM to use for expenses, spending money, whatever.  You are not pulling large sums of money and no one pays attention to your ATM withdrawls so that doesnt count.  No you would not be taxed on your ATM withdrawls.  The money the Thai government is looking to tax is money made in Thailand, or money you make outside of Thailand that you bring into the country and deposit in a local bank.  If you bring in money in increments, small amounts via an ATM, then its untouchable.  The only thing I am not sure about in your situation as your looking to retire is that, you need a sum of money in a local bank and you have to show monthly income as well?  If you need to show monthly income, and that income is coming from your pension, you are forced to show them this income as your means of support.  Its perfectly legal to send it to an offshore account and not pay Thai tax but will you get some tax bureaucrat that thinks you are doing something wrong by not paying taxes and start trouble when its actually perfectly legal.  Nobody is looking for a headache of trying to explain something to these ultra-proud Thai authorities that think we are stupid morons.

[Hurricane51]

OK, I think I've got the picture. One question remains. When I transfer the 800,000 baht (or whatever the amount is going to be) to a Thai bank as proof that I can support myself, will that 800,000 baht be taxed as income?

[JohnDoe]

I have been working in Thailand for a year on non-immigrant business visa and I am working for an Internation Company who pay me to my Offshore Account. I have read somewhere that I am not liable to pay income tax in Thailand under these conditions but the Thai Sub-Contractor that I am supervising advised that I have to pay the income tax.

All helps will be appreciated.

[Up2U]

I have been working in Thailand for a year on non-immigrant business visa and I am working for an Internation Company who pay me to my Offshore Account. I have read somewhere that I am not liable to pay income tax in Thailand under these conditions but the Thai Sub-Contractor that I am supervising advised that I have to pay the income tax.

All helps will be appreciated.

Show some income in Thailand, to cover your daily cost-of-living (food, accomm., etc.). Say US $ 1,000 per month. Expect to pay tax on it at 15%.

Otherwise you may run foul of the taxman, and that ain't good!

[PvtDick]

JohnDoe,

What you are doing is considered tax evasion and is highly illegal. You are hiding Thailand-earned income offshore in order to evade paying local taxes on it. If the government ever found out, they would nail you to the wall. If your local colleagues know about this, you are in a very dangerous position indeed. All that needs be done is for one of them to get fired or otherwise become disgruntled, and they turn your ass in.

[mrmnp]

Hurricaine51: If you got anything out of the posts so far, your a better man than me.

I participated in a similar thread three months ago in this forum and I am a retired American with pension income going into a U.S. bank, so I have some experience with the issue. My taxes have been done by a CPA for 20 years so I follow the law in all respects.

Clearly U.S. income tax rules apply to you as the source of your income is the U.S as is mine, so I file IRS tax forms and pay whatever tax is required for my income level.

Likewise, there may be state tax rules that also apply to you depending on the state from which you obtain your income.

I receive some of my retirement income from California, so I must file a non-resident tax form with that state and pay whatever tax applies to my level of income from that state.

As far as Thailand is concerned, I brought over three million baht into Thailand when I arrived two years ago, and since the money was not earned in Thailand and the Thai government hasn't gotten around to enforcing their tax rule regarding taxing money brought into Thailand if earned in the year it was brought in, there was no tax liability.

Knowledgeable tax lawyers in Thailand in print and in this forum have postulated that there "may" someday be lax liability for pension income earned outside of Thailand if THAT MONEY IS BROUGHT INTO THAILAND IN THE YEAR IT IS EARNED.

Tax dilema is how does the taxing aurthorities determine whether you earned the pension money in the year your brought it into Thailand. Certainly, the money I brought into Thailand when I first got here was not earned in the year I brought it in. so it was not taxable in any case.

Being super cautious and not wanting to be double taxed, I have set up a savings account in my U.S. bank into which I place this years income, so that when I draw it out next year, it will be clear that it was not earned in the year it was brought into Thailand.

Since Thailand is actively encouraging expats to come to Thailand to retire, the political climate is favorable as to keeping the taxing aurhtorities at bay at this time.

When they do get around to it, if ever, the tax law will have to be changed from what it is now or the tax auditors will play ###### determining if the money brought into Thailand was earned that year or in another year and thereby exempt. Placing the burden on the tax payer to prove it is the easy way and they just may do that, but that is not a reasonably probability at this time.

Off shore accounts are great if the interest income or capital appreciation from your retirement fund is substantial and you want to avoid U.S. income tax.

However, if your pension is paid in the U.S., you will have to pay tax on the proceeds.

Don't hesitate to send me a personal message if you have any further questions.

[Basher]

Don't forget that if you only in the country for a max of 165 days then you are tax exempt.

Bash

[Digger]

I have been working in Thailand for a year on non-immigrant business visa and I am working for an Internation Company who pay me to my Offshore Account. I have read somewhere that I am not liable to pay income tax in Thailand under these conditions but the Thai Sub-Contractor that I am supervising advised that I have to pay the income tax.

All helps will be appreciated.

Do you have a work permit? This will then identify the amount of revenue that you are being paid IN Thailand. It is perfectly legal to have two employment contracts if you do a lot of work AND travel extensively outside of Thailand. I had one for a number of years and it was written by the tax partner at one of the big 4 accountants. However, you must travel and work abroad extensively (circa +50% of your time). Your secnd contract must be from an overseas entity and you need to be very carefull not to fall foul of the other countries tax laws. e.g from memory, if you spend less than 30 days a year in HKG you do not pay any income tax on HKG derived and paid income. However your Thailand contract must also be at a fair rate for income tax purposes.

This accountant also explained to me that the tax authorities are going after loads of Japanese who had proclaimed to be earning 60,000 baht a month and their job title was something like Managing Director, Sony Thailand. Of course said guy was living in a 200,000 baht a month house which somehow does not add up !!!. These are the characters the authorities are pursuing for tax evasion and they are doing it very extensively.

[JimGant]

Hurricane,

The tax treaty betweeen the US and Thailand says your pension, annuities, retirement fund distributions, and social security are taxed solely by the US. When it comes to government pensions (Fed, State, and Local), Thailand could only, per treaty, tax this if the pensioner had earned it while a resident alien in the US, and then returned to Thailand to collect. And if this person had become a dual US-Thai citizen (my wife's situation), then that would be the same as if he/she were strictly a US citizen, i.e., not taxable by Thailand. So, don't worry. Thailand isn't going to ask you for your 1099s -- and you don't sound like a resident alien.

mrnnp's observation about Thai revenuers sniffing around farang bank deposits got my attention. If they ever taxed these deposits, they'd have every economist in the country going bonkers. Which doesn't say it couldn't happen in Thailand. Strictly speaking, if they levied these taxes on somehow-determined 'income,' the tax treaty would allow for an offsetting credit on your US taxes. Of course the US could say this is not a legal tax, per treaty, and disallow such a credit. But since the tax treaty only applies to income, the Thais, then, would probably characterize the tax as non-income, say, a 'tariff on foreign derived bank accounts.' And the tax treaty wouldn't pertain.

I think the chances of anything like this happening are really slim. (But, who would've ever thunk about adult curfews!) Msmnp is probably right, tho', in being cautious. I usually send one chunk of cash per year to Thailand, as it saves on wire fees. Maybe now I'll send it Jan 1st.

[JimGant]

Mrmnp,

I receive some of my retirement income from California, so I must file a non-resident tax form with that state and pay whatever tax applies to my level of income from that state.

Just curious. You say 'retirement income,' so I assume this isn't real estate rental income(?). So, just why, as a non-resident of California, are you paying California taxes? Do they still have a long arm out for newly non-residents collecting on their IRAs/401ks?

Just curious. I'm in Virginia, and, fortunately, our tax deferred retirement funds become tax exempt when we bail out to Thailand. Somehow I'd thought a court case awhile back went against California's long arm.....

[mrmnp]

JimGant: Your last two posts were superb. For the life of me I don't understand why a member of a U.S. Law Firm with a Thailand office would be speculating about money brought into Thailand being taxed if it were protected by treaty.

It definitely was stated as income brought into Thailand in the year it was earned that was taxable while income earned in another year was not. I sure will raise the treaty issue if they every get around to me.

Another poster P.M. me with information that California passed a law, which you may have alluded to, in which it is stated that pension income earned in California was taxable only in the state in which the pensioner lives, presumably thailand would make it not taxable in California.

Since my California income is based on the use of my name, even though it is from my former firm which bears my name, I am characterizing it as the sale of a capital asset and offsetting it by massive loses suffered in the stock market in 2001, my first year in Thailand. It will be a number of years before that loss carrry-forward is depleted, and it the firm hasn't stopped using my name by then, will worry about re-characterization at that time.

[JimGant]

Mrmnp,

Thanx for the response.

Yes, those tax losses of recent years sure linger on, especially if you're banging them against ordinary income (max:$3,000), and not cap gains.