Thai Bank Interest- USA Taxpayers-Foreign Tax Credit

[Bababooey]

Americans are supposed to report and pay taxes on the interest earned in overseas bank accounts. And if we have more than 10K USD in overseas accounts there are additional reporting requirements.

Has anyone ever claimed the Foreign Tax Credit on their 1040 for taxes paid to Thailand on their bank interest?

My Krungsri bankbook breaks down the interest and taxes.

[Pib]

Do you have any interest income taxes being withheld by the Thai bank? If it's a "regular" savings account and unless more than Bt20K interest is being earned the Thai bank is not withholding anything as tax. And if it's a "fixed" saving account then 15% of total interest is being withheld regardless of amount of interest earned, but you can obtain a refund of that by filing a refund form in Jan-Mar of each year...easy to file...local tax office will help with the form...takes 2 to 6 weeks to get the refund...I've been doing it for several years on the 15% tax withheld on my Thai bank fixed savings accounts

And if you don't attempt to get the refund from the Thai govt (i.e., file for the refund and it's disapproved--which it won't be), then the IRS rules say can't deduct it/get a credit for it on your U.S. tax return.

[Pib]

Regarding my earlier comment if you don't attempt to get the interest tax refund...below is a partial quote from the Form 1116 Foreign Income Credit Instructions. I underlined the part about "...including amounts eligible for refund by the foreign country..." to emphasis the part about you can only try to claim the interest credit if you applied for the refund and was disapproved--which you won't be.

You cannot take a credit for the following foreign taxes.

1. Taxes paid to a foreign country that you do not legally owe, including

amounts eligible for refund by the foreign country. If you do not exercise

your available remedies to reduce the amount of foreign tax to what you legally

owe, a credit for the excess amount is not allowed.

[Misty]

To the OP - yes, every year - on taxes withheld for interest on regular savings account and stock dividends. I don't qualify for a refund on the Thai tax.

[Pib]

To the OP - yes, every year - on taxes withheld for interest on regular savings account and stock dividends. I don't qualify for a refund on the Thai tax.

Why don't your qualify if I may ask?

[Bababooey]

Thanks for the replies guys! I'm doing my taxes now, due on October 15th with the 6 month extension.

Yes, I have over 20, 000 baht interest for 2013. It's in a Krungsri account which pays higher interest than regular savings accounts but I can only make 2 withdrawals a month.

It's not a "fixed income" account. Once I hit 20,000 in interest they start taking out tax. The tax amount is in my bankbook.

I "assume" the tax withheld equals the tax due. Is this correct if I have no other Thailand income except for a very small amount of interest in other accounts.

Would I still be required to attempt to get a refund from Thailand?

If so, i guess it's too late for 2103.

The amount of tax is about $200.

I certainly wouldn't want to trigger an audit but it seems I am eligible to take the credit.

[Bababooey]

Or would I be eligible for a refund since my interest income is far less than 150K baht?

[Bababooey]

First off, thanks for the input guys!

It seems doing further research that I am eligible for the Thailand refund since my only Thailand income is about 35,000 baht in interest which is way below the 150,000 exemption.

So that means I would not be able to claim the foreign tax refund on my USA taxes.

Is it too late to claim my 2013 refund?

Does anyone know where I'd go to try to claim a refund in the Pattaya area?

On a side note, someone at Krunsri told me I could open multiple accounts to avoid going over the 20,000 limit.

[Pib]

First off, thanks for the input guys!

It seems doing further research that I am eligible for the Thailand refund since my only Thailand income is about 35,000 baht in interest which is way below the 150,000 exemption.

So that means I would not be able to claim the foreign tax refund on my USA taxes.

Is it too late to claim my 2013 refund?

Does anyone know where I'd go to try to claim a refund in the Pattaya area?

On a side note, someone at Krunsri told me I could open multiple accounts to avoid going over the 20,000 limit.

No, it's not too late...you can claim 3 years back. You would have normally applied during Jan-Mar for 2013 taxes, but now there will be a late filing fee of only approx Bt200.

Go to this ThaiVisa thread for more info...crossfeed from folks like me who filed and get the refunds...several posts in the thread where people filed outside the normal Jan-Mar filing window also. Your local tax revenue office should be helpful...I know mine is...and it seems most of the posts indicate the same....just be sure you got to the office that deals with personal income tax versus VAT or something like that as each district seems to have a couple of tax offices dedicated to different types of taxes.

[TallGuyJohninBKK]

For those of you with significant interest-earning Thai bank accounts, do you get any kind of calendar year-end summary accounting of your interest earned from your bank? Or do you need yourself to manually total the interest amounts credited to your bank book?

I'm trying to understand how an American comes upon the Thai bank account interest earnings amount to report on one's IRS filing? (Never had anything but de minimus Thai interest earnings, until this current year now).

[Pib]

Thanks for the replies guys! I'm doing my taxes now, due on October 15th with the 6 month extension.

Yes, I have over 20, 000 baht interest for 2013. It's in a Krungsri account which pays higher interest than regular savings accounts but I can only make 2 withdrawals a month.

It's not a "fixed income" account. Once I hit 20,000 in interest they start taking out tax. The tax amount is in my bankbook.

I "assume" the tax withheld equals the tax due. Is this correct if I have no other Thailand income except for a very small amount of interest in other accounts.

Would I still be required to attempt to get a refund from Thailand?

If so, i guess it's too late for 2103.

The amount of tax is about $200.

I certainly wouldn't want to trigger an audit but it seems I am eligible to take the credit.

From looking at this post and another thread where you posted a question about a Krungsri Mee Tae Dai account I'm going to assuming the account you are talking about is a Mee Tae Dai account which is currently paying 2.3%. I also have such an account.

To avoid hitting the Bt20K interest earned each year level in any one account which triggers a tax withholding, why don't you break that money up into "two" (or more) Mee Tae Dai accounts....other folks have done this and they say their Krungsri branch even recommended that approach. Now, technically maybe a bank should be looking at all your accounts in aggregate to see if you exceed Bt20K interest earned but apparently they don't. So, break your savings up into chunks that don't exceed Bt20K interest earned per year...this way no tax withheld...and you don't need to go file to get the withholding tax refunded.

[Pib]

For those of you with significant interest-earning Thai bank accounts, do you get any kind of calendar year-end summary accounting of your interest earned from your bank? Or do you need yourself to manually total the interest amounts credited to your bank book?

I'm trying to understand how an American comes upon the Thai bank account interest earnings amount to report on one's IRS filing? (Never had anything but de minimus Thai interest earnings, until this current year now).

TallGuy,

I've never got any such year end statements....Thai banks just don't do that to the best of my knowledge. Maybe you can go ask for one...I couldn't say...but it probably wouldn't be anything other than a printout of all your transactions and interests transactions for the year. I just keep track of interest earned in my passbook savings book and/or printout from my ibanking....scan/save that data to my computer tax file. Then I just create a 1099INT entry in my federal return tax software (I use TaxAct) to report the interest earned to Uncle Sam. Been doing this for years. Heck, I even report interest amounts for less than $10 which U.S. banks are not even required to generate a 1099INT for....to this day I don't think adding in those under $10 amounts...usually way less than $10...has increased my taxes by one penny.

Now for my "fixed" savings accounts where 15% tax withholding is applied I do go to my Thai bank each year for them to give me the tax form letter (it free and only takes about 10 minutes to get) where they confirm the 15% tax withholding...I need that letter along with a copy of my passbook showing the withholding to file with my refund request at my local Thai tax revenue office each year.

Pib

[meatboy]

For those of you with significant interest-earning Thai bank accounts, do you get any kind of calendar year-end summary accounting of your interest earned from your bank? Or do you need yourself to manually total the interest amounts credited to your bank book?

I'm trying to understand how an American comes upon the Thai bank account interest earnings amount to report on one's IRS filing? (Never had anything but de minimus Thai interest earnings, until this current year now).

if its for fixed accounts you will get the tax certificate on maturity from the bank,then keep them to claim the tax withheld at the tax revenue the following yr.jan-march.also keep the pass books.banks yr.ends dec31st.

[TallGuyJohninBKK]

Thanks Meatboy... Unfortunately, mine is a NON-fixed account. More akin to the Mai Tee Dai type savings account.

[meatboy]

Thanks Meatboy... Unfortunately, mine is a NON-fixed account. More akin to the Mai Tee Dai type savings account.

not sure about those accs.do they stop any tax? if so ask for a tax certificate at the end of the yr.

[JMWPACIFIC]

Thanks for the great info. I have declared the income and taken a credit on my U. S. Tax Return for a few years now and was never aware of the IRS rule of not allowing a credit if a refund is available from the local tax authority. So far, the IRS has not picked up on this as far as I am aware.

A couple of questions:

1) can anyone provide me with the address in Pattaya where is the applied for?

2) some of my fixed deposits have been opened in my wife's married name but with her Thai ID (even though she is a U. S. Citizen) and some in my name. Has anyone made a claim with the Thai tax people for a fixed deposit in wife's name? I am assuming it is not claimable for a refund but any advice would be appreciated.

[JMWPACIFIC]

Sorry, one more questions---what is this 150,000 Exemption someone mentioned above?

[watcharacters]

Do you have any interest income taxes being withheld by the Thai bank? If it's a "regular" savings account and unless more than Bt20K interest is being earned the Thai bank is not withholding anything as tax. And if it's a "fixed" saving account then 15% of total interest is being withheld regardless of amount of interest earned, but you can obtain a refund of that by filing a refund form in Jan-Mar of each year...easy to file...local tax office will help with the form...takes 2 to 6 weeks to get the refund...I've been doing it for several years on the 15% tax withheld on my Thai bank fixed savings accounts

And if you don't attempt to get the refund from the Thai govt (i.e., file for the refund and it's disapproved--which it won't be), then the IRS rules say can't deduct it/get a credit for it on your U.S. tax return.

.

You may have answered a question I've asked before but to which I didn't get a proper answer.

Thanks.

[Pib]

Thanks for the great info. I have declared the income and taken a credit on my U. S. Tax Return for a few years now and was never aware of the IRS rule of not allowing a credit if a refund is available from the local tax authority. So far, the IRS has not picked up on this as far as I am aware.

And they may never pickup on it until you are audited some day...for incomes below $200K the audit rate is only around 1%. But with FATCA finally coming into effect 1 Jul 14, Thai banks reporting interest earned to the IRS, etc., it may become easier for Uncle Sam to flag returns not identifying foreign interest earned and also taking a closer look at folks who claim a foreign interest tax credit. Seems foreign income &credits, etc., may now be more in the IRS spotlight. I prefer just not to be concerned about it by just applying for the refund which is easy enough to do....get the money back from the Thai govt...let the U.S. govt have have some of it instead.

Heck, depending on what tax bracket you fall-in, your effective U.S. tax rate will probably be lower than the 15% tax withholding which goes to the Thai tax man until you apply/get the refund. My effective tax U.S federal rate for last year was 6.1% (i.e., total tax paid compared to total income)...that 6.1% is a lot lower than letting the Thai tax man keep 15% of my interest earned. Yeap, I'm better off tax-wise and money left in my pocket by getting the refund and letting Uncle Sam have his share.

But it does make sense that Uncle Sam would not give a person credit and lose-out on tax dollars just because a person doesn't apply for a refund from the local tax authority...a refund that's easy to get.

[Pib]

Sorry, one more questions---what is this 150,000 Exemption someone mentioned above?

That's dealing with income earned in Thailand...a Thai tax return....exempt from taxes on the first Bt150K of income. See this Thai Revenue webpage and look at the tax rate table in Para 3.1

I guess a person could kinda think of it like how the U.S. "standard deduction" exempts the first $XXXX of income from taxes.

[JMWPACIFIC]

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Thanks for the great info. I have declared the income and taken a credit on my U. S. Tax Return for a few years now and was never aware of the IRS rule of not allowing a credit if a refund is available from the local tax authority. So far, the IRS has not picked up on this as far as I am aware.

And they may never pickup on it until you are audited some day...for incomes below $200K the audit rate is only around 1%. But with FATCA finally coming into effect 1 Jul 14, Thai banks reporting interest earned to the IRS, etc., it may become easier for Uncle Sam to flag returns not identifying foreign interest earned and also taking a closer look at folks who claim a foreign interest tax credit. Seems foreign income &credits, etc., may now be more in the IRS spotlight. I prefer just not to be concerned about it by just applying for the refund which is easy enough to do....get the money back from the Thai govt...let the U.S. govt have have some of it instead. alt=tongue.png>

Heck, depending on what tax bracket you fall-in, your effective U.S. tax rate will probably be lower than the 15% tax withholding which goes to the Thai tax man until you apply/get the refund. My effective tax U.S federal rate for last year was 6.1% (i.e., total tax paid compared to total income)...that 6.1% is a lot lower than letting the Thai tax man keep 15% of my interest earned. Yeap, I'm better off tax-wise and money left in my pocket by getting the refund and letting Uncle Sam have his share.

But it does make sense that Uncle Sam would not give a person credit and lose-out on tax dollars just because a person doesn't apply for a refund from the local tax authority...a refund that's easy to get.

I agree with you that it appears easy to apply for a refund and that I should do so, even if it is an account of my wife's opened in her name with Thai ID that could be denied. Also I should apply for my own & joint accounts just to get on the same page with the IRS rules. Whether or not to apply for a refund for past years (someone said 3 years?) and do amended U. S. Tax returns for those years, is the question I have to answer for myself.

I also agree that FATCA may prove to be troublesome to those who ignore the refund process or don't report Thai interest income.

Any isea where to apply near Pattaya?

[Pib]

No, I don't know where the tax office is in Pattaya...I live in Bangkok that has multiple offices. But hopefully others who live in Pattaya and filed taxes/for refunds will chime in.

[JMWPACIFIC]

No, I don't know where the tax office is in Pattaya...I live in Bangkok that has multiple offices. But hopefully others who live in Pattaya and filed taxes/for refunds will chime in.

Thanks, I'll find it.

What is the origin of this refund process (taxation with representation---tax treaties?) and where can I find more in writing?

Thanks again. You and this forum no doubt have saved me future grief with the IRS!

[Pib]

No, I don't know where the tax office is in Pattaya...I live in Bangkok that has multiple offices. But hopefully others who live in Pattaya and filed taxes/for refunds will chime in.

Thanks, I'll find it.

What is the origin of this refund process (taxation with representation---tax treaties?) and where can I find more in writing?

Thanks again. You and this forum no doubt have saved me future grief with the IRS!

You can review the Thai Revenue Dept website...like this page which lists tax agreements between countries.

[TallGuyJohninBKK]

TallGuy,

I've never got any such year end statements....Thai banks just don't do that to the best of my knowledge. Maybe you can go ask for one...I couldn't say...but it probably wouldn't be anything other than a printout of all your transactions and interests transactions for the year. I just keep track of interest earned in my passbook savings book and/or printout from my ibanking....scan/save that data to my computer tax file. Then I just create a 1099INT entry in my federal return tax software (I use TaxAct) to report the interest earned to Uncle Sam. Been doing this for years. Heck, I even report interest amounts for less than $10 which U.S. banks are not even required to generate a 1099INT for....to this day I don't think adding in those under $10 amounts...usually way less than $10...has increased my taxes by one penny.

Thanks Pib.... Now that Thai banking is getting into the FATCA world, I wonder if they'll start generating anything like a 1099 for their U.S. account holders. I doubt it, but, you never know.

Edited October 6, 2014 by TallGuyJohninBKK

[Bababooey]

No, it's not too late...you can claim 3 years back. You would have normally applied during Jan-Mar for 2013 taxes, but now there will be a late filing fee of only approx Bt200.

So in November of this year I can apply for a refund for 2011, 2012, and 2013.

I guess I'm too late for 2010?

[JimGant]

You cannot take a credit for the following foreign taxes.

1. Taxes paid to a foreign country that you do not legally owe, including

amounts eligible for refund by the foreign country. If you do not exercise

your available remedies to reduce the amount of foreign tax to what you legally

owe, a credit for the excess amount is not allowed.

But here's the conundrum. Thai banks, withholding at the source, a flat 15% of interest -- are completely in accord with the income tax treaty with the US (and no doubt with most other countries that march to OECD guidlines). They're allowed to tax US citizens 15% of interest earnings, per the treaty -- so, yes, you can take a credit for this 15%. Only if they withheld more than the treaty allowed -- say 25% -- would you not be allowed a credit for that extra 10% withheld. But the 15% withholding, which per treaty you do "legally owe", qualifies, then, for a tax credit. The fact that the Thai tax folks offer to refund the whole enchilada is the mystery to all of this -- why are they not collecting what they legally can? And, is this for all farangs, including those who won't pay taxes to anyone -- Thailand or home country? (Pib, what does the application ask for re bonafides?)

That you don't have to file a Thai income tax statement should be irrelevant for withholding at the source taxes (but I wonder if Thai tax authorities use this as their critieria for refunding farang withholdings......?).

Thai citizens, with no US person identity, earning dividends from US sources -- get 15% withheld at the US source (30% without filing a w8BEN). They are not required to file a US tax return -- it's just 15% off the top, and go. And Thai citizens, say in the Thai tax bracket of 37%, can opt not to include the interest withheld at the source, thus not obliged to now pay 37% on this interest, vice the flat fee 15% at the source tax. Again, withheld at the source is divorced from any income tax filing requirement.

And what about the Yank, who only visits Thailand one week per year -- but who has a fixed Thai bank account with 15% withholding at the source? Is he supposed to spend vacation time hiking around a Thai tax office, filing for a refund? Not likely. And, again, it IS a legal tax being applied -- so it is eligible for a tax credit, regardless that Thailand wants to give it back. (But, that would be an interesting discussion with the IRS -- legal tax vs. I wanna give it back. Doubtful the IRS looks at tax credits from Thai income as anything other than what's said in the tax treaty.)

And, Pib -- your effective tax rate of 6% isn't what your tax credit would be worth. Certainly you're well into the 15% US marginal tax rate -- and this is what that Thai interest would be taxed at, Thus, the 15% tax credit would exactly compensate. But, yeah, if it's so easy to get those taxes back from the Thais, why not avoid a potential weird conversation with the IRS.

[meatboy]

Thanks for the great info. I have declared the income and taken a credit on my U. S. Tax Return for a few years now and was never aware of the IRS rule of not allowing a credit if a refund is available from the local tax authority. So far, the IRS has not picked up on this as far as I am aware.

A couple of questions:

1) can anyone provide me with the address in Pattaya where is the applied for?

2) some of my fixed deposits have been opened in my wife's married name but with her Thai ID (even though she is a U. S. Citizen) and some in my name. Has anyone made a claim with the Thai tax people for a fixed deposit in wife's name? I am assuming it is not claimable for a refund but any advice would be appreciated.

myself and the wife claim refunds every yr.she holds dual citizen but as long as she has thai id.she also can claim any tax she has paid in her name.my wife went to the tax office here in korat and registered me,she was already in the system[worked in bkk] 80s.once you find out where to go give them a ring and they will tell your wife what to bring.i have had 4yrs of refunds and never been there.

[mania]

For those of you with significant interest-earning Thai bank accounts, do you get any kind of calendar year-end summary accounting of your interest earned from your bank? Or do you need yourself to manually total the interest amounts credited to your bank book?

I'm trying to understand how an American comes upon the Thai bank account interest earnings amount to report on one's IRS filing? (Never had anything but de minimus Thai interest earnings, until this current year now).

For myself I keep a Excel spreadsheet showing all my Thai accounts

Each month I update with interest, balances etc & most importantly for me YTD totals of interest earned

Reason being I have for instance 3 of the Ayudyha Mee Tae Dai accounts & it allows me to see in advance when I am

approaching the 20k interest in a calender year mark.

This allows me to transfer it to a lesser interest earned YTD MTD account & avoid any taxation from Ayudyha

They do not mail statements & while they are good about warning you if you are the type to visit a branch etc.

I do 99% of my banking online so keep track myself

Also handy when filing US tax returns as I have all the totals ...Not that I pay any US taxes as we do not hit the threshold of income

earned requiring payment

Edited October 7, 2014 by mania

[Misty]

For those of you with significant interest-earning Thai bank accounts, do you get any kind of calendar year-end summary accounting of your interest earned from your bank? Or do you need yourself to manually total the interest amounts credited to your bank book?

I'm trying to understand how an American comes upon the Thai bank account interest earnings amount to report on one's IRS filing? (Never had anything but de minimus Thai interest earnings, until this current year now).

No, we don't receive summaries from banks or other financial institutions, although they might be available - I've just never asked. Totaling it up at year's end is pretty easy, since I use personal financial software to track various accounts anyway.