"long stay" visas and taxes

[caughtintheact]

I'm wondering if anyone has seen this article in the Bangkok Post and understands what it means?

http://www.bangkokpost.com/breakingnews/14Oct2003_biz59.html

It seems to imply that there is some new kind of visa called a long stay.  It makes no mention of tax treaties, and is pretty confusing.  

Tax Corner

Longer stay, greater tax

Unclear criteria on personal income tax may derail plan to promote long-stay tourism

LAW ALLIANCE LIMITED

The Thai government has been trying to promote the tourism industry in Thailand by way of various campaigns, such as the familiar Amazing Thailand and the new Unseen Thailand. Part of the campaigns is to promote Thailand as a place where foreigners can stay for a long period of time, i.e. more than one month, especially after their retirement, known as ``long stays''. The only condition is that the foreigners who come to stay in Thailand under the ``long-stay'' programme are prohibited from working in Thailand. Certainly, the government puts a lot of time and effort into this campaign by relaxing immigration regulations, among other things. The government figures that foreigners will bring in and spend a large amount of foreign currency and that this will be a shortcut to help boost the property market, such as residential condominium and leasehold property that remain unsold. More or less, it is believed to provide some excitement to the public, as well as the government's profile.

For tourists wishing to buy the package and stay peacefully in Thailand, they should ensure that their savings or pension received from the home country that will be brought to Thailand will not be subject to Thai tax. From time to time, we have experienced cases where cash brought to the country was required to be included in the tax base merely because the owner became a Thai tax resident despite the income being sourced outside Thailand. Similar questions have been raised for discussion with the Revenue Department and the Thai tourism authority.

Finally, the tax authority gave a clear answer: the brought-in savings (earned in the preceding years) will not be subject to personal income tax even if the tourists become Thai tax residents. However, pension received from the home country and brought to Thailand in the same calendar year will be subject to personal income tax in Thailand if the tourists reside in the country for a period or periods of 183 days or more in that calendar year. In the latter case, they must file a tax return and pay tax (if any) before departure.

The Revenue Department's response comes as no surprise, being consistent with previous answers in the past decade. But what most people would like to hear from the tax authorities most is what is the criteria to prove that the savings and pension brought to Thailand in any given year are earned in the preceding years so that they will not be subject to tax. This inquiry has not been answered.

For example, pensions are deposited every year in a tourist's offshore savings account as evidenced by the passbook. When the funds are withdrawn and brought into Thailand, the passbook will only show the sum withdrawn and transferred as well as the net balance, but no one can tell that the withdrawn amount came from the pension received by him in 2002 (which will be tax free in Thailand) or in the current year (which will be taxable in Thailand if he resides in the country for 180 days or more). In most cases, the sum can never be identified or matched.

One can predict that there could be three possibilities that the tax authority might undertake on this matter: (i) the bought-in money is deemed to be the pension earned in the current year _ more like LIFO (last in, first out method), which is taxable in Thailand if the tourist stays for 180 days or more in the relevant calendar year; (ii) the brought-in money is tax-free as it is deemed to be taken out from those of the preceding years _ similar to FIFO (first in, first out method); or (iii) as a matter of government policy to promote the programme, just let go of this issue.

Unfortunately, the Revenue Department's position has remained unanswered and so is the destiny of the tourist who wants to join the long-stay programme.

Should the tourist submit a tax return and pay tax on his/her retirement fund in this case? Of course, it is no fun seeing your pension or savings earned outside Thailand taxed in Thailand simply because it is brought into the country. So, if the government still wants this project to be viable, let's forget this issue!

- Prepared by Piphob Veraphong, Thanasak Chanyapoon and Prangtip Anantavipat. They can be reached at [email protected] or 02-651-5490.

[Whiplash]

Bah..  I think it's a another try to justify milking the farang out of more money.. call it 'government forced spending' instead of tax..  they don't want the farang to live here cheap, to get along just eating rice and namplick...

But if the longstay farang only has his/hers required funds in the Thai bank and never deposit his monthly pension or retirement check into a Thai bank, just let it sit in the bank of his/hers home country ??  and use the VISA card at the ATM when in need of money..

How can the government know on which amount to take the tax from ??   They cannot tax money that I never take into the country!

It's just another of thoose 'not very thought-out proposals' that we read or hear of on a pretty regular basis..  :cool:

[caughtintheact]

That would be Ok in some countries, but this is Thailand, and the tax people can always use an arbitrary figure on which to base income, just like they do with salaries, i.e., divide your annual living requirements (which is B800,000 per year because that is what you must have in the bank or in the form of a pension) and then you pay taxes on B6x,xxx per month, which is the same as a Managing Director of some companies.  At any rate we can speculate all day and night on this, but I was asking if anyone had some firm information about something called a "long stay" visa as opposed to a retirement visa.  My suspicion is the article was incorrectly written, and the source for the information was guessing or the authors just want to scare people to gin up more business--- they are lawyers after all.

[lopburi3]

AFAIK the "long stay" and "retirement" visa are one and the same.

The newspaper article seems to be correct.  There are some incomes (fewer than we might think) that would be exempt by tax treaty but in effect, due to the 'current year' exemption, don't believe anyone is being taxed unless they want to be.  This report seems to be the same information provided by a large western accounting firm to expats; and nothing new.

[caughtintheact]

Ok, many thnks.  The article didn't sound right because if there is a tax treaty, income earned abroad in the home country is not subject to tax in the other country, no matter when it was earned.  I don't know any retirees who pay taxes either when their country has a treaty.

[Arnold]

What is the simple answer in this matter.

Does a farang bringing 60,000 bht / month into Thailand have for file and /or pay tax?

Anyone?  ???

[lopburi3]

Does a farang bringing 60,000 bht / month into Thailand have for file and /or pay tax?

If it is current income yes.  If it is savings (earned in a prior year) no would be my reading at this time.

The article didn't sound right because if there is a tax treaty, income earned abroad in the home country is not subject to tax in the other country, no matter when it was earned.

The treaty spells out the details; not the fact that there is a treaty.  In the case of the US treaty only government paid pensions seem to follow that rule from my reading (although admit I am no expert at legalize).

[caughtintheact]

Maybe that's what threw me off.  I read the treaty terms a long time ago, but only remembered the part that said that said if the money is derived and taxed abroad, and then brought here, then it will not be taxed again.

[ray23]

Well this would really raise some very interesting issues for many of us, for example my retirement is based on a disabality and as such is not taxable in the states. Am I now to pay taxes on it here even when it is exempt at the source.

It's not savings and it is money paid in the year that I will be in Thailand.

I have to admit that I really do like Thailand but this is really getting to be a bit much.

[lopburi3]

It's not savings and it is money paid in the year that I will be in Thailand.

To date do not believe anyone is 'out to get you' so why not just deposit your money into a savings account and draw from that when you need money in Thailand?  Laws can not always be black and white in a world of color.

[ray23]

Well,

That really is what I do the retirement is paid into a savings account in the states, then I draw 65K a month to meet my annual visa requirements. I don't really need that much here, just meeting what they say I have to do.

I'm at the end of my first year here, so I don't have that much history to draw from in evaulating, what is really happening these days.

Is this part of election year politics?

Are the the recent things that have come up a reaction from the  threats in the world today?

Is this another approach to getting rid of those who seemed to have been marked as undesireables?  If so are there not laws in place alraedy to effect that?

Being a newbie all of these recent upheavels are difficult to understand. It truly makes me wonder if I will spend the balance of my retired life jumping through one hoop after another, to retire here.

[oldguy]

ray23 Do I understand correctly from your last that you withdraw 65k each month from your account here in Thailand because you must as a requirment for your retirement visa? Or, is it that the 65k should be deposited into your Thai account and only withdrawn as needed?  Thanks, I'm looking at getting a retirement visa next year, so I'm following all this with some interest.

[oldguy]

ray23  I read your last again and I understand. Please disregard my last. thanks

[dr_Pat_Pong]

If you can live more frugally, put 800,000 baht into a bank in Thailand, or a combination of income and bankings.

[Guest IT Manager]

There was a program on radio 98 some months ago that makes me think long-stay is about Thailand's advanced medical facilities and the propensity of some people to look for somewhre scenic to recuperate. I agree that Thailand is "scenic", I am more than a little concerned at the idea of throwing the "advanced" medical facilities here, into the same pot.

It may well be worth asking the Doc to ask his mate.

[ray23]

Well,

it is certainly different then anything I was expecting many of the farrangs that I have met here have lived in this country for over 15 years and I have never heard any discussion as to thier retirements being taxed. That is why it really threw me.

[lopburi3]

If you check the below page at the Royal Thai Embassy web site you will find the application for retirement visa, O-A, is called "long stay".

Retirement

[dr_Pat_Pong]

If I read it right Lop....the O/A is useless....an O would be the way to go. Much easier ?

[ray23]

It would appear that I have created some confusion guys I already have my annual visa, my only concern is will I be taxed on my retirement in the U.S. and then taxed again when I bring the money to Thailand as income?

[ray23]

I may have answered my own question, I looked up the income tax treaty between Thailand and the U.S.A. Dated in 1996.

Article 16 refers to the long stay as 183 days and seems to conform to the news article.

However, Article 20 refers specifically to pensions, ect, it states that pensions paid to a resident of a contracting state shall only be taxable in the state where they arise.

Based in that it would appear that a person who is on a pension is subject to the countries laws and taxation from the country who is paying the pension andnon taxable here.

If this effects anyone I would recommend reading it yourself and make your own conclusions I'm not an attorney nor have ever been one.

I located it in the Thailand Law Forum

[curveblade]

Ray23,

I am in about the same boat as you. I am retired on disability also and was wondering if I would be taxed in Thailand even though I'm not in the States. I don't arrive in Thailand until March. Had planned to get an O visa and retire there. However, with the new price increase of 800,00 BT in a bank account plus the high monthly increase, it may not happen.

[ray23]

The answer seems to be that your retirement won't be taxed in Thailand as I read it.

On the visa I was sepcifically told byimmigration in Nong Kia that the single financial requirements for single people would not changed, that is 800 K in Thai bank or 65 K a month placed in a Thai bank. You must prove that the money is from the U.S.

I obtained my annual via deposit from my American account to a Thia bank each month. I didn't have the 800 K and was issued a visa with no problems what so ever.

Mine was issued from a Non Immigrant B visa obtained in Thailand, as far as I know you can not apply for the annual visa without first obtaining a Non  immigrant visa. You may be able to obtain that visa in the states instead of the tourist visa which would put you ahead of the game.

There were a lot of documents that I had to provide, but nothing compared to the stamps they had to do.

I found immigration in Nong Kia easy to work with, as long as you don't walk in and tell them how to do thier jobs and recognize that they know much more then you do. The only thing I ran into that was a problem with a Sgt. who was under the impression that you had to have both the 800K and 65K a month. A descrete meeting with the commander resolved that issue and then it was smooth sailing.

The guys on this forum are much more qaulified to guide you as to specific guidelines, just post a topic and ask they are very helpful.

[caughtintheact]

Curveblade,

You may be misunderstanding the money requirements.  The total money needs to be about B800,000 per year.  It can be a combination of both monthly pension and funds in the bank, but if you have or bring in pension money of B65,000 per month, you do not need B800,000 or any money except the pension deposits in a bank account.  

Here's how it works:

1.  Suppose your pension is equal to B40,000 per month. Multiply by 12.  This equals B480,000.  

2.  Subtract this amount from B800,000.  This comes to B320,000.  Thus B320,000 is what you need in a bank account to show immigration at the time you either get your retirement visa or for renewals.  

If you have at least 65,000 baht a month pension, no need for any additional funds in the bank.  Just make sure that you deposit B65,000 per month in your local bank account.  

In case you are wondering how this works because  B800,000 divided by 12 is B66,666 per month, not B65,000 per month, don't worry about it.  Only be concerned about the specific amounts required by immigration.

Taxation:  This remains a question mark for pensions which are not taxed at source.  "However, Article 20 [of the Thai-USA tax treaty] refers specifically to pensions, ect, it states that pensions paid to a resident of a contracting state shall only be taxable in the state where they arise".

I'd read this as meaning that if the or country where the pension originates chooses not to tax the money, Thailand will honor that....but having said that, I recommend that you contact   "Ronachai Krisadaolarn - Bangkok International Associates" .  He's originally an American but now a naturalized Thai citizen, and should be able to answer your question quickly, or perhaps the good Dr. Pat_Pong can advise.

[dr_Pat_Pong]

I think CITA has accurately and concisely portrayed it as it is.

[ray23]

I guess I need to write more accuaretly, I did exactly what Cita said as to the 65K per month, when they issued the annual visa there was only 13 K in the account and no problem whatsoever.

At this juncture I think my question as to taxation has been answered

[caughtintheact]

Thanks Dr., and of course everything is always subject to change and to the mood of the officials on the day one visits.  I somehow think that the Thai government will honor the fact that the pension is exempt from taxes.  If you are not asked, say nothing. This is important.

For curveblade, the key things are to make sure you have all the documents that are required, no more, no less, and preferably in a form that is easily understandable.  For example, a letter from the source of the pension should state that the pension is for life and the current amount of the pension is_.  

The first time you will need an affadavit from the U.S. Embassy if you are an American citizen or  a letter from your embassy.  Make a copy of it.  

Get the right size photos.  

Copy the pages of your passport that immigration wants, e.g., the issue page, the photo page, the page that shows the stamp when you entered the country, and the page for the most recent renewal.  Copy all the rest of the pages, but present only the ones required.  Then if the official asks for more, you will have them.  

Get a letter from the bank in thailand where you have your account.  Most of the banks know how to do this.  You  might even consider opening an account with a bank branch near immigration, since they have experience in issuing these letters.  All it needs to say is how much you have in the account on the day you get the letter, which should be not more than one day before the day you go get the retirement visa or renewal.  Make a copy of the bank letter.  

Make two copies of your bank deposit book for the last three months of transactions.  This will be the proof that you have been depositing money on a regular basis if you are not using the B800,000 method.  

Put all the documents and the photos in a folder neatly.  The officials appreciate neatness because it makes their job easier. If their job is routine, you will reduce the likelihood of any hassles.  

Smile, be polite, don't get angry or upset (or at least don't show it) if you have to go out and get some extra pages copies or you are missing something.  Be patient.  If you need more time to get something, ask for it.  If you happen to notice that some officials are very upset, you might even consider discretely leaving and coming back the next day.  

If an official says something is out of order (incorrect), be sure you understand what they mean before you go off on a tangent.  

You may even want to drop by Immigration a couple of days before you apply for anything to check and see if there are any new rules....hopefully they will be posted in this forum as well.  

The above has always worked for me for the past 9 years of being on a retired visa.

[lopburi3]

However, Article 20 refers specifically to pensions, ect, it states that pensions paid to a resident of a contracting state shall only be taxable in the state where they arise.

Based in that it would appear that a person who is on a pension is subject to the countries laws and taxation from the country who is paying the pension andnon taxable here.

Agree but with the provision that this is probably limited to "government" paid pensions as the title states.  Do not believe it would apply for other forms of income even if taxed at US source.

There is also the para 2 of article 21 which shifts tax to Thailand for a Thai resident/citizen (such as when a Thai wife starts to collect survivor benefits).  In that case tax is no longer paid to the US government but only to Thailand.

[curveblade]

Thanks ray23,caughtintheact and of course the good doctor.

That does ease things some. According to the formula then, I'd only need about 273,000 baht in a bank account and a letter comfirming my retirement check. It has been a long time since I was in Thailand and things have changed a lot it seems. Only had one experience with Thai immigration. That was when I got a visa for my Thai wife. They ran us back and forth for a few weeks until I finally got smart and paid the little extra that they wanted. Then everything went smooth.

I guess the best thing would be to apply for a 60 day visa here and then for an O visa after arrival in Bangkok. Do they ask you to have a phyical or heath cert.? Also, does any one know how much cash you are allowed to carry with you? With all the checking they're doing at the airports, I don't need any extra hassles.

[caughtintheact]

I believe that you will need a physical exam certificate to initially get your retirement visa, but check with the Thai Embassy where you intend to apply as to whether or not you need it for the initial visa.  

I have not heard of any limits on the amount of cash you can bring with you, but coming in with a suitcase loaded with cash might be deemed a bit suspicious....you could get hassled for possible money laundering, if not in Bangkok, then in the country of your origin.  Better to carry a reasonable amount of cash (say about $500), and perhaps a few thousand in traveler's checks - you might be wise to have proof of the source of the money....a bank withdrawal slip, a letter from the bank saying the money is from your savings, or similar.  You also want to declare the amount you are bringing in in your airline customs form.  This is in case something goes amiss and you have to leave suddenly, you will not have any problem proving where you got the money you are taking out (it will have to be less than you brought in .... or more possible hassles).  

Any additional funds you need, like the bank deposit for the retirement visa can be wire transferred to Thailand.  I just did a transfer from USAA Federal Savings Bank and it only took a day and a half until it was in my local account.  By the way, if you are retired U.S. military, let me know by email to [email protected] or [email protected] and I can give you some additional information that doesn't need to be posted on the forum.

[dr_Pat_Pong]

You'll be battling to change a tourist visa into a non-immigrant visa IN Thailand. Get the Non-Immigrant O visa before you leave home.

The money rules are simple. Any amount can be brought into the Kingdom, but to be permitted to take it out again, any monies in excess of $USD10,000 must be declared to Thai Customs on arrival. Always remit money from your home bank to your Thai bank through the banking system. That provides adequate evidence that the money came in from abroad.