Dividends From Abroad Paid To A Thai Tax Resident -- Tax-Free

[falang07]

Hello, I was not able to find out the proper procedure for avoiding the tax from dividends paid from abroad. It is supposed to be tax-free if remitted to Thailand after more than 12 months since it was earned. Now my question is, do these 12 months start counting from the time it was earned by the company paying the dividends, or from the time it was paid to the Thai shareholder? If the later one applies, this would mean the Thai shareholder needs to have a bank account opened abroad and keep the payment in there for at least 12 months. Any suggestions where to do it easily, perhaps even online (Paypal, Moneybookers, etc.?)? Thank you very much for your input.

[samran]

They can be earned on the 31st of Dec. So long as they are transferred into Thailand of Jan 1, then they become tax free.

[falang07]

So not full 12 months, just the next calendar year? And by earned is meant when the company earned it, or does it need to be first wired to a foreign account of the shareholder, and only then to Thailand in the next calendar year?

Edited June 5, 2012 by falang07

[samran]

So not full 12 months, just the next calendar year? And by earned is meant when the company earned it, or does it need to be first wired to a foreign account of the shareholder, and only then to Thailand in the next calendar year?

needs to be in your hands first before the clocks starts ticking.

[falang07]

OK, so the Thai shareholder needs to travel abroad, make a bank account in there, receive the dividends to this foreign account by 31 December and wire them to Thailand on 1 January or later, and no tax applies, Is it correct?

[samran]

OK, so the Thai shareholder needs to travel abroad, make a bank account in there, receive the dividends to this foreign account by 31 December and wire them to Thailand on 1 January or later, and no tax applies, Is it correct?

well, so long as the dividends are from a foreign source of income.

If they are derived from a Thai source, then transfering this cash overseas isn't going to work if you are a Thai tax resident.

[falang07]

Yes, these dividends are from a foreign company not operating in Thailand, just this company has a Thai shareholder who, as it seems, might receive the dividends tax-free (which, after all, is nothing special, many countries do not tax dividends since they were taxed already by the company paying them out). Just this silly requirement to wire it to Thailand in the next year means they need to setup a personal account for the shareholder abroad.

[samran]

Yes, these dividends are from a foreign company not operating in Thailand, just this company has a Thai shareholder who, as it seems, might receive the dividends tax-free (which, after all, is nothing special, many countries do not tax dividends since they were taxed already by the company paying them out). Just this silly requirement to wire it to Thailand in the next year means they need to setup a personal account for the shareholder abroad.

Dunno why you are calling it silly. It is a great requirement. Essentially makes Thailand a tax haven for all offshore income.

The alternative is you have what most countries do, and it becomes taxable the second the dividend is paid.

[falang07]

I call silly the requirement to make a bank account abroad just for this reason. If they do not plan to tax it then why this silly requirement, I do not get it.

[fletchsmile]

I call silly the requirement to make a bank account abroad just for this reason. If they do not plan to tax it then why this silly requirement, I do not get it.

As Samran says the rule is based on calendar year which is also the same as the tax year. Other jurisdictions have more complex rules, and others want you to distinguish between payments from income and payments from capital. Demonstrating whether your transfer is from income or capital can be a grey area. Thailand is providing you with a very simple solution, and as Samran says, if managed allows you to avoid further tax. i.e from previous year is not taxed, from current year is taxable income.

You might also want to consider opening at least 2 bank accounts, then alternate the one you pay into each year, with the transfer out done the following calendar year. This is to avoid "tainting" the income, so there is no argument as to exactly which money is being transferred and which year it arose in, to clearly demonstrate it's from prior year, if ever queried

Edited June 6, 2012 by fletchsmile

[letitbe]

dont worry just forget so called regulations and rest. TIT it does not worry about laws just look at Taksin and follow his example. My wife had received dividends from UK and USA and never declared 1 satang for last 12 years no problems. COme on your in Thailand not in grips of USA IRA or UK HMCR for gods sake. It does seem however she could have avoided UK tax at leat.

People fret about such trifles. Worst case if someone here bothers to check. you tell me but if youve

been here 17+ years you'll know nothing to care 1 minute about

[JimGant]

just this company has a Thai shareholder who, as it seems, might receive the dividends tax-free

Dividends can be (and are) taxed by the source country -- the US taxes dividends of non resident aliens (NRAs) by "withholding at the source." For a Thai citizen, who qualifies for US tax purposes as a NRA, this means (per tax treaty) that 15% of the dividends are effectively taxed up-front (i.e., the NRA doesn't have to file a tax form, so the "withholding" acts as an instant tax, rather than as a credit in a tax filing).

Anyway, I don' know whether your "Thai shareholder" is a Thai citizen, or from what country the dividends derive from. But, if the US, "tax free" is a rare phrase in the IRS vernacular.

Just this silly requirement to wire it to Thailand in the next year means they need to setup a personal account for the shareholder abroad.

It becomes a little clearer if you consider a pensioner living in Thailand, receiving a pension from a country that doesn't tax its expats. Should he have that pension direct deposited into his Thai bank account? I wouldn't think so, since this would be a clear case of Thailand being in its rights to tax this pension, since there's no double taxation tax treaty issues here. (Having said that, however, I doubt that Thai tax authorities have any real interest, or capability, to investigate that expats have set up a filtering bank account abroad.)

[Time Traveller]

just this company has a Thai shareholder who, as it seems, might receive the dividends tax-free

Dividends can be (and are) taxed by the source country -- the US taxes dividends of non resident aliens (NRAs) by "withholding at the source." For a Thai citizen, who qualifies for US tax purposes as a NRA, this means (per tax treaty) that 15% of the dividends are effectively taxed up-front (i.e., the NRA doesn't have to file a tax form, so the "withholding" acts as an instant tax, rather than as a credit in a tax filing).

Anyway, I don' know whether your "Thai shareholder" is a Thai citizen, or from what country the dividends derive from. But, if the US, "tax free" is a rare phrase in the IRS vernacular.

I think he means the thai tax resident is not required to report this dividend income for tax purposes in Thailand. Most dividends are paid out of profits by companies that have already paid corporate tax anyway. Thailand is one exception where some BOI companies can get away without corporate taxes for 5 years, so only in that case could you call it truly tax free. And that's not even considered offshore income !

[JimGant]

I think he means the thai tax resident is not required to report this dividend income for tax purposes in Thailand.

Maybe not. My point was, some countries -- with the US as my main example -- will tax dividends paid to NRAs. Thus, the OP's look for a tax free situation may be thwarted by the source country, regardless of the Thai tax code in such situations (of which I have no knowledge as it regards Thai citizens otherwise paying income taxes on other forms of income).

[falang07]

The country where this company is incorporated has no withholding tax for dividends paid to non-residents, i.e. also Thais. It means the only tax paid will be the company tax. This double taxation of dividends in most of the countries in the world is sick anyway, along with the VAT and many other double taxation systems.

[Time Traveller]

I think he means the thai tax resident is not required to report this dividend income for tax purposes in Thailand.

Maybe not. My point was, some countries -- with the US as my main example -- will tax dividends paid to NRAs. Thus, the OP's look for a tax free situation may be thwarted by the source country, regardless of the Thai tax code in such situations (of which I have no knowledge as it regards Thai citizens otherwise paying income taxes on other forms of income).

Correct, what he refers to as tax free, might not be in reality. Do residents in US do not face the dividend withholding tax?

[JimGant]

Do residents in US do not face the dividend withholding tax?

No. They just face the fact that dividends, per a 1099--DIV statement, will have to be included as income in their tax filing. Foreign investors, most not subject to filing US tax returns, are just subject to whithholding of 30% of dividends (or less, per tax treaty). Thus, essentially, taxes paid up-front -- as there would be no other way to capture such taxes, since no related tax filing is required.

[falang07]

But I speak here of a Thai resident and citizen, not US one.

[JimGant]

But I speak here of a Thai resident and citizen, not US one.

....who, fortunately, is receiving dividends from a country that does not tax such dividends (unlike the US, who, again *would* tax dividends paid to a "Thai resident and citizen").

So, we're now back to the quirk in the Thai tax code that exempts from the personal income tax dividends (and other foreign source income) brought into Thailand in a later year from the year earned.

Probably easy to sidestep having such dividends identified as being earned in the same year as brought into Thailand (with one glaring exception -- having them direct deposited into your Thai bank account when paid). But, I'm not sure I'd recommend fraud, regardless of how easy it is to accomplish.

But, kosher or otherwise, it would seem a flltering bank account abroad would be a good idea. (Yeah, if the dividend check is cut in late December, you could still be kosher by cashing it in Thailand in January. Other dates would be more problematic -- but probably wouldn't be seen/investigated as fraud.)

[falang07]

Many thanks for all the valuable inputs. I am going to make a bank account abroad, send the dividends in December, and wire them from that personal account in January to a Thai bank account to fulfill the requirements. All should be OK this way, I hope