Paying Tax In Thailand

[statman78]

I have read many posts along with information from official sites and I still need to clarify some things about paying income taxes. Below is a summary of my potential situation along with what I may be doing next year. It all depends on my tax liability.

1. US Citizen currently working in the US for a US company

2. I may be assigned to my companies Thai office for 1-5 years

3. My pay will be in US dollars deposited into my US bank account.

4. I will be keeping my house in the US

5. I will be in Thailand long enough each year to be considered a Thai resident (more than 180 days)

6. I will only bring into Thailand enough money to live on (rent, food ...)

Below is taken from a Thai Gov website http://www.rd.go.th/publish/6045.0.html

"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 as well as on the portion of income from foreign sources that is brought into Thailand."

Based on this I am assuming the following:

As long as I am paid by my US company in US dollars deposited into my US bank account I would only need to pay Thai income tax on the money I bring into Thailand to live. Does this sound right?

Am I also correct in assuming that because of tax agreements, I would be able to deduct the Thai tax I paid from the amount I owe the US government?

Any help is appreciated.

[Maestro]

For a start, you will need a work permit to work at the Thai office of your US employer. To get a work permit, you must be employed by a company in Thailand, ie this Thai office of the US company, and one of the documents the Thai office has to submit with the work permit application is the employment contract. It is highly unlikely that the application will be approved if the employment contract states a salary paid by the US company, not by your Thai employer.

Given the projected period of your employment in Thailand you will probably want to apply for one-year extensions of stay for the reason of working in Thailand and with this application for extension of stay you will have to submit, among other documents, evidence of receiving a salary of not less than THB 50,000 per month (annex A of Police Order 777/2551)

[statman78]

Maestro,

Thanks for the info. I forgot to mention that my company will work with me to get the work permit. I was not aware of the 50,000 baht per month requirement. This is about the same amount I was planning to bring into Thailand for living expenses.

[Maestro]

I believe you will have to declare worldwide income and assets in your US tax return but will be able to deduct taxes paid in Thailand.

The accountant of your Thai employer will probably assist you with the Thai tax return.

Sent from my Nexus 4 using Thaivisa Connect Thailand mobile app

[statman78]

My main concern is limiting my tax liability legally. From my investigation it looks like that my total tax bill would be greater if all of my income was taxed in Thailand rather than in the US. My research indicates that I may be able to have may income considered as US income and that I would only be liable for Thai tax on the money I bring into Thailand for living expenses. This looks like it would have to be a minimum of 50,000 baht per month so that I can get a work permit. I have been trying to work with our corporate tax group in the US to get this clarified but have not received any good information yet.

[Sceptict11]

Your problem most likely will not be associated with obtaining an initial visa or work permit.

The difficulties will arise in securing on going "extensions of stay" from immigration without a complete package of documentation which includes details of salary /tax paid in Thailand .

.Importing cash for living expenses would not be "salary" and tax would not be taken.

Edited December 18, 2013 by Sceptict11

[ubonjoe]

You will have to be set up on company payroll here and have monthly deductions for income tax and social security.

[asiaexpat]

Most US companies provide expats what is called "tax equalization."This a process whereby the company hires an international personnel management company that will manage your taxes in both USA and the target country. Under this type of program you pay taxes as if you were in the USA making your USA salary. The company pays the remaining taxes due if any. This the best way if you can get your company to do it as it simplifies your tax reporting and usually offers the least taxes paid by you. Otherwise you will need to file both US and Thailand tax forms and pay taxes to each. Thailand and USA have a tax treaty that allows you to declare a tax residence and deduct taxes paid in Thailand from your USA taxes if you desire. After 40 years as an expat working around the world, I found tax equalization to be the best way to go. I have also had to manage multi country income tax reporting and found that US accountants are not very proficient with expat taxes so I managed my own at times.Your tax situation should be a part of and documented in your expat agreement with the company.

[CWMcMurray]

You mention that you taxes would be higher if paying in Thailand, but not sure if you are aware of some of the tax deductions that you could make in Thailand...

Life insurance premium... Up to 100,000 thb

Contributions to company provident fund (similar to 401k in US with matching contributions by company)... 15% of total income up to 500,000 thb

Contributions into Long term equity funds (must keep invested 5 yrs) 15% of total income up to 500,000 thb

Plus if out of USA for at least 330 days, you pass the residency test from USA that says you do not need to pay taxes on your first 97,600 usd income earned from overseas is tax free in the US

Give the above, you may want to take another look

So if you don't actually

[mahjongguy]

Also, note that Thailand has new lower tax rates beginning January 1 2014.

[Arkady]

In order to renew your WP after the first year, you will also need to show evidence of paying tax. If you are not a director of the local company, you should also be registered and paying for social security. The exemptions on income arising abroad and not remitting to Thailand within 12 months legally only apply to income arising abroad but if you are being paid abroad for work done in Thailand, that is taxable. To cover yourself, you should have a separate contract for the work done abroad. Most Western companies gave up these types of arrangements after being penalised for them by authorities in places like Malaysia and Korea that decided that dual contract schemes for travelling expats were a fraudulent way of evading local tax. Expats were re-assessed for tax at a number of the authorities' choosing. I never heard of this happening in Thailand but companies stopped doing it here also for fear of problems with local authorities and reputational risk. Baring Securities was discovered doing something similar in Tokyo after it went tits up courtesy of Nick Leeson and the Japanese authorities investigated its books in detail. The expat employees were heavily penalised. If you are working for a small company you might be able to stay below the radar but there is not much advantage for US citizens anyway, due to global taxation.

[rotary]

You might look at doing the Physical Presence using the earned income exclusion. You would have to stay out of the USA 330 days each year. I would get a good tax accountant that knows overseas taxes for US Citizens.

[Suradit69]

I believe you will have to declare worldwide income and assets in your US tax return but will be able to deduct taxes paid in Thailand. The accountant of your Thai employer will probably assist you with the Thai tax return. Sent from my Nexus 4 using Thaivisa Connect Thailand mobile app

Depending on your resident status per the US IRS, you may be allowed a partial salary exclusion and housing allowance when filing US taxes. It's been several years since I last filed for the exclusion for salary earned outside the US, but the full exemption then was up to $80,000 if you qualified for the full year and a fraction of that for less time out of the US. It has obviously increased for inflation (see below).

If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude from income up to an amount of your foreign earnings that is adjusted annually for inflation ($91,500 for 2010, $92,900 for 2011, $95,100 for 2012, and $97,600 for 2013). In addition, you can exclude or deduct certain foreign housing amounts.

http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Earned-Income-Exclusion

and check out the other info at the link. If you use Turbo Tax (or your company pays someone to do the tax) it's fairly painless to figure out the exclusion to which you are entitled. There is also info here on deductions of foreign taxes paid, if applicable.

Sometimes you have to file in your first year overseas based on your total salary and then file an amended return for that year once you've met the minimum time out of the country to be either a "bona fide resident" or "physically present" in Thailand by IRS rules.

Also if you maintain a bank account in Thailand, check out the FBAR requirements: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Report-of-Foreign-Bank-and-Financial-Accounts-FBAR

Edited December 18, 2013 by Suradit69

[statman78]

Most US companies provide expats what is called "tax equalization."This a process whereby the company hires an international personnel management company that will manage your taxes in both USA and the target country. Under this type of program you pay taxes as if you were in the USA making your USA salary. The company pays the remaining taxes due if any. This the best way if you can get your company to do it as it simplifies your tax reporting and usually offers the least taxes paid by you. Otherwise you will need to file both US and Thailand tax forms and pay taxes to each. Thailand and USA have a tax treaty that allows you to declare a tax residence and deduct taxes paid in Thailand from your USA taxes if you desire. After 40 years as an expat working around the world, I found tax equalization to be the best way to go. I have also had to manage multi country income tax reporting and found that US accountants are not very proficient with expat taxes so I managed my own at times.Your tax situation should be a part of and documented in your expat agreement with the company.

I am also talking to my company about "tax equalization". I had that agreement when I had a 16 month assignment in Shanghai a couple of years ago. This was absolutely necessary since I had housing paid for and I also received a per diem. For this possible assignment the company is willing to pay me my US wage package instead of the lower Thai package as long as there are no significant additi0onal costs to either party. When I was in Shanghai the company contracted with an international tax accounting firm that had offices in the US and China. I will check to see if they also have an office in Thailand.

[TravelerEastWest]

Statman78,

You have received lots of good advice about work permits and visas etc on this thread.

Enough to get you thinking.

Here is another thought:

1) If you are an employee you will need to pay social security taxes in the US unless you are paying them in Thailand. Thai social security as I recall is lower.

2) If you work for a large company you are most likely going to be offered what has already been mentioned an "equalization package" US CPAs at large firms are good at this and your company will typically pay for everything.

3) If your company is small and leaving you to take care of everything - find a small American CPA firm that specializes in Expats and a small Thai CPA firm.

4) Unless your company is paying for school expenses as well as transportation and housing etc 50.000 baht will not be anywhere near enough to live on.

[statman78]

Thanks to everyone for the advice. This assignment is a win-win for me and the company but it is now coming down to how much more it could cost me or my company. We have worked out most of the details but it looks like the biggest unknown cost would be the taxes. I would be receiving my US compensation package which will definitely put me in the top Thai tax bracket. I have significant tax deductions in the US like alimony, along with property taxes and mortgage interest on my us residence. I'm not sure if these are allowed in Thailand.

Based on a thread from 2011 (I think) it looked like the most cost efficient option would be to have a Thai income which meets my living needs while keeping the remainder in the US. Work permit should not be an issue since my company always has several expats working at the Thai office.

Always good advice found here but in the end I am planning to find a good international tax consultant. I am hoping that this can work out. I have a Thai wife and we are planning to retire in Chiang Rai in 5-6 years (just built a house). This assignment would ease me into retirement while filling a company need. It will also get my wife out of the northern US cold.

[cosmosis]

My advice would be to Split your employment into two contracts: 1. Simply hires you in Thailand for work to be done in Thailand at whatever the appropriate level of remuneration you will be spending 2. Employment contract employs you for your services in the rest of the world at a much higher level... Local Thai accountants can help you with contract 1... US CPA can help you with contract 2.

[ubonjoe]

You should get an extension of stay based upon marriage. You can work on this extension and would not have a minimum salary requirement and there would not be a need for company documents. You would need to 40k baht income or 400k baht in the bank. Just get a single entry non-o and then apply for the extension. To prove the income you would just need tax payment receipts and your work permit.

[wordchild]

My advice would be to Split your employment into two contracts: 1. Simply hires you in Thailand for work to be done in Thailand at whatever the appropriate level of remuneration you will be spending 2. Employment contract employs you for your services in the rest of the world at a much higher level... Local Thai accountants can help you with contract 1... US CPA can help you with contract 2.

this would be the way many companies deal with your situation and is good advice.

[ubonjoe]

Off topic post removed.

[statman78]

My advice would be to Split your employment into two contracts: 1. Simply hires you in Thailand for work to be done in Thailand at whatever the appropriate level of remuneration you will be spending 2. Employment contract employs you for your services in the rest of the world at a much higher level... Local Thai accountants can help you with contract 1... US CPA can help you with contract 2.

this would be the way many companies deal with your situation and is good advice.

Good advice. I will follow up on this along with the possibility of "tax equalization" which was mentioned earlier.

[schnazzy]

1. US Citizen currently working in the US for a US company

2. I may be assigned to my companies Thai office for 1-5 years

3. My pay will be in US dollars deposited into my US bank account.

4. I will be keeping my house in the US

5. I will be in Thailand long enough each year to be considered a Thai resident (more than 180 days)

6. I will only bring into Thailand enough money to live on (rent, food ...)

Some notes, some things repeat what others said. Note I am not a CPA or attorney in any country. This is not tax advice or legal advice just someone on the internet saying something. Having said that, I have personally consulted a Thai tax accountant and Thai lawyer (and paid).

1) as a US citizen you pay tax no matter where you live or where you work. Even while working on the moon. Sucks, I know.

2) you may be eligible for the (publication 54) Earned income Exclusion (of up-to 94k+ per year. Even if you own 1 or more homes (abode) in the US. See a CPA that understands this rule/deduction.

3) if you are assigned to work, or otherwise work for a thai company in Thailand, you need a work permit (and there are regulations on the minimum amount of pay, max foreign employees, and type of work). You will pay taxes in Thailand and in the US for this pay. Note that you should be able to write off the Thai tax you paid, on the IRS forms.

4) you should try to stay outside of the US (including flight days, and us territories) for more than 330 days in a 365 day window so that you MIGHT be able to take advantage of pub 54.

It is my understanding that if you work for a US company (cannot be a thai branch of a US company) and are paid in the US (us bank account in us dollars) AND the work you do is in the US (liberal interpretation is emails, conference calls etc, computer work even done remotely)... and most importantly... you don't bring any of that income into Thailand... you MAY not be required to pay any taxes (although you may have to file a tax form).

It gets pretty sticky based on what you do but I'd get real legal advice and at least try for the Earned Income Exclusion (pub 54).

[statman78]

schnazzy,

Thanks for the reply. Unfortunately as a US citizen I end up paying "Uncle Sam" no matter where I work. I am working on getting several professional opinions both from experts in the US and Thailand. Fortunately, I know several expats in Bangkok that can recommend tax professionals. My questions posted in this thread were designed to at least give me different perspectives so that I can ask intelligent questions when I talk to my company and tax professionals. I feel that I am now better prepared and hopefully won't miss anything.