reclaim tax on interest

[highlander403]

as a farang who does not live here permanently reclaim tax paid on bank interest.

regards scotty

[skatewash]

The local tax office I visited in Phuket was insistent that I provide evidence of residence in Thailand before they would issue me a Tax ID number and accept my P.N.G. 90 (Personal Income Tax) form to get a refund of tax withheld on interest from fixed saving accounts. So, I believe that without providing such evidence of residence you would be unlikely to be successful. However, I'm no expert so I wouldn't take my saying so as the final word.

I live in a new condo without an official address (yet) and ownership has not yet been transferred to me at the Land Office, so to prove my residence I had to bring my 48-page Purchase and Sales Agreement and receipts for payment made to the owner. They photocopied the whole thing which sort of amused me, until I realized I had to sign each page of the document. Nonetheless, I was ultimately able to file and am awaiting the refund check which I understand will be delivered to my mail address (which is different from my condo, because, as mentioned above I don't have an official address there yet, and hence no mail delivery there).

I wish you luck, but my experience in Phuket would seem to indicate they are pretty serious about seeing evidence of residence in Thailand.

Now that I think about it, I needed to use the PNG 90 form because I had earned over 30,000 THB in interest last year. Depending on the office you go to you might be able to file a K. 10 form (a far simpler form, just for return of tax withheld on interest) instead a full-blown PNG 90 if the interest earned (not tax withheld) was less than 30,000 THB. Under those circumstances they might not insist that you obtain a Tax ID. However, I suspect they would still insist on you proving your residence in Thailand, before they allowed you to file the simpler K. 10 form.

Hope this helps.

Edited March 17, 2015 by skatewash

[Pib]

I've filed for the last three years here in Bangkok. First two years the total interest earned was less than Bt30K so I could file a simple Kor 10 form in a certain section of the tax revenue office...each year I filed the Kor 10 the nice tax office lady said if I eared over Bt30K interest I would need to go to another section in the tax office and file a different form, a Form 90 which happened this year since I had over Bt30K interest earned. The other section all but filed out the 4 page Form 9 for me, although only a small portion of the form was completed/used (maybe 10%) since I was only filing for refund of the interest withheld. I filed on 5 Feb and as of other day the online status of the refund has reached the next to final stage...approved for refund but the refund check not issued/mailed yet. Looking good the refund will occur soon coming real close to the 2 month estimate the tax office gave me when filing. Previous years it took about 6 weeks. Fingers crossed the check will be cut/arrive soon.

I can't really speak to the Thailand address needed as I always included a copy of my Yellow Book which shows my current Thailand address...I've never been asked to prove residence...they see the Yellow Book and they are happy. But since they mail out refund checks I expect (guess) they only mail them to Thailand addresses and of course they only want to mail them to where you really live versus an acquaintance's Thailand address...probably boils down to that tax revenue office's interpretation of the tax law regarding address requirements.

[SantiSuk]

No point in reclaiming tax paid in Thailand on Thai bank interest Scotty - if you are a standard or higher rate taxpayer in the UK. You have to pay UK tax on your foreign bank interest if you are a UK resident for tax purposes (Brit tax residents are taxed on their worldwide income). You can offset the tax deducted in Thailand against your UK tax liability. Result is that if you pay say 200 quid of Thai tax and don't reclaim it from Thai Revenue your UK tax liability is reduced by that 200 quid that you effectively paid in Thailand. If you pay 200 quid of Thai tax and do reclaim it then you don't get the 200 quid reduction in your UK tax liability. Same result either way.

If however you don't pay any tax in the UK it would be worthwhile reclaiming the Thai tax (if that option were available to you - you have to be present in Thailand over 180 days in a tax year to be resident for tax purposes in Thailand and I assume they would not let you register if you were not resident for tax purposes here, whatever the ifs and buts about having proof of a residence or a particular type of visa).

If you do pay taxes in the UK but do not currently file a tax return then it is possible that the mere receipt of foreign interest requires that you complete a UK tax return, which is an unwelcome burden for most people (although in reality the online returns are pretty easy to complete for those with simple income sources). I would phone up HMRC to find out whether you need to complete a return for the first time if this is relevant.

I am sure that the prospect of completing a tax return or having anything to do with HMRC puts a lot of people off and some no doubt 'fly under the radar' (aka cheating on your taxes). Up to the individual taxpayer - personally I prefer to be squeaky clean - makes life simpler in the long run.

PS - has to be done by 31st March I think.

Edited March 18, 2015 by SantiSuk

[skatewash]

No point in reclaiming tax paid in Thailand on Thai bank interest Scotty - if you are a standard or higher rate taxpayer in the UK. You have to pay UK tax on your foreign bank interest if you are a UK resident for tax purposes (Brit tax residents are taxed on their worldwide income). You can offset the tax deducted in Thailand against your UK tax liability. Result is that if you pay say 200 quid of Thai tax and don't reclaim it from Thai Revenue your UK tax liability is reduced by that 200 quid that you effectively paid in Thailand. If you pay 200 quid of Thai tax and do reclaim it then you don't get the 200 quid reduction in your UK tax liability. Same result either way.

Perhaps sound advice if OP is a UK Tax Resident, as seems probable.

However, if the the OP were an American, I contend it would be better to actually get the full refund back from Thailand rather than "hope" to get it back by filing a US tax return.

Using the same figures but assuming the claimant is American rather than from the UK, then it would be better in some circumstances to file a Thai tax form and get the $200 back (or rather the Baht equivalent) from the Thai government. Because US tax law is so devilishly riddled with complications, under some circumstances the filer would be limited (by AMT, for example) from claiming the full $200 back in the current tax year but would instead only be allowed to claim a fraction of that as a credit against current taxes due in the current year and then need to carry forward the remaining tax credit to future years (thereby imposing a bookkeeping burden going forward).

So, get the money back from the Thai government and you have $200 in your pocket, done and dusted. Get the money back from the US government and (potentially) you will end up with $26 in your pocket and the promise of $174 in future tax years. It's actually even worse than that, sometimes the IRS can even require you to carry back some of the foreign tax credit to the previous year, so in that case the taxpayer is forced to amend a previous year's return.

Finally, unlike the UK, the US makes it "easier" on their taxpayers by taxing worldwide income regardless of whether the citizen is a resident of the US or not. A dubious privilege shared by the citizens of only one other country on earth: namely, Eritrea.

Dealing with the Thai tax office even with language difficulties, is preferable in my opinion to dealing with the US Tax Code and the IRS.

[highlander403]

thanks guys for the replies, lots of interesting stuff to think about, a lot of years ago the bank would do it for you,

santisuk that info wolud be appropriate if the gov in uk knew about your foreign accounts

but i guess things have moved on.

scotty

[Pib]

No point in reclaiming tax paid in Thailand on Thai bank interest Scotty - if you are a standard or higher rate taxpayer in the UK. You have to pay UK tax on your foreign bank interest if you are a UK resident for tax purposes (Brit tax residents are taxed on their worldwide income). You can offset the tax deducted in Thailand against your UK tax liability. Result is that if you pay say 200 quid of Thai tax and don't reclaim it from Thai Revenue your UK tax liability is reduced by that 200 quid that you effectively paid in Thailand. If you pay 200 quid of Thai tax and do reclaim it then you don't get the 200 quid reduction in your UK tax liability. Same result either way.

Perhaps sound advice if OP is a UK Tax Resident, as seems probable.

However, if the the OP were an American, I contend it would be better to actually get the full refund back from Thailand rather than "hope" to get it back by filing a US tax return.

Using the same figures but assuming the claimant is American rather than from the UK, then it would be better in some circumstances to file a Thai tax form and get the $200 back (or rather the Baht equivalent) from the Thai government. Because US tax law is so devilishly riddled with complications, under some circumstances the filer would be limited (by AMT, for example) from claiming the full $200 back in the current tax year but would instead only be allowed to claim a fraction of that as a credit against current taxes due in the current year and then need to carry forward the remaining tax credit to future years (thereby imposing a bookkeeping burden going forward).

So, get the money back from the Thai government and you have $200 in your pocket, done and dusted. Get the money back from the US government and (potentially) you will end up with $26 in your pocket and the promise of $174 in future tax years. It's actually even worse than that, sometimes the IRS can even require you to carry back some of the foreign tax credit to the previous year, so in that case the taxpayer is forced to amend a previous year's return.

Finally, unlike the UK, the US makes it "easier" on their taxpayers by taxing worldwide income regardless of whether the citizen is a resident of the US or not. A dubious privilege shared by the citizens of only one other country on earth: namely, Eritrea.

Dealing with the Thai tax office even with language difficulties, is preferable in my opinion to dealing with the US Tax Code and the IRS.

Just to add to above, per U.S. IRA Form 1116 Foreign Income Tax Credit you "cannot" take credit for a foreign tax withheld if you do not exercise your available remedies to reduce the foreign tax paid. Like filing for a tax refund of that foreign tax withheld in Thailand which is usually easy to do. If you file for the refund and the foreign country disapproves the refund request then you can claim the tax withheld credit....that disapproved refund request is then documented proof you attempted to remedy the tax/obtain a refund but was disapproved. Uncle Sam doesn't want to absorb a tax loss just because a person is too lazy to attempt a refund of the foreign tax withheld/file a refund request with that foreign country tax revenue agency. See this thread/post for more info/discussion: Link

Now I don't know if filing a Form 1116 with your U.S. federal tax return ends up in getting a dollar-for-dollar tax credit or just a partial credit, but I do know if I just say reduce the amount of interest earned reported to the IRS by the Thai withholding tax which is 15% I don't come anywhere close in fully recovering that 15% withholding. For example, this year I earned $1018 on a Thai bank fixed saying account and $153 was withheld due to the 15% withholding tax....by reducing the amount of interest earned reported to Uncle Sam from $1018 to $865 to compensate (which is unlawful if not filing for a tax refund from the Thai govt) for that $153 Thai tax withholding it only reduced by U.S. taxes by $22. Maybe it would work out similarly in other countries' tax systems like in the UK. But by filing for the Thai tax refund which is easy and was approved I recovered the entire $153 vs $22 and I didn't have to lie to Uncle Sam/the IRS.

So, I'll just continue to file with my local Thai tax revenue office for full refund of bank interest withheld (done it 3 years now...it was easy...tax office practically fills out the paperwork for you), get that full refund in 6 to 8 weeks, and not have to get creative on my U.S. tax return hoping the IRS don't catch-on to that creativity at some point.

Edited March 18, 2015 by Pib

[skatewash]

Now I don't know if filing a Form 1116 with your U.S. federal tax return ends up in getting a dollar-for-dollar tax credit or just a partial credit, but I do know if I just say reduce the amount of interest earned reported to the IRS by the Thai withholding tax which is 15% I don't come anywhere close in fully recovering that 15% withholding. For example, this year I earned $1018 on a Thai bank fixed saying account and $153 was withheld due to the 15% withholding tax....by reducing the amount of interest earned reported to Uncle Sam from $1018 to $865 to compensate (which is unlawful if not filing for a tax refund from the Thai govt) for that $153 Thai tax withholding it only reduced by U.S. taxes by $22. Maybe it would work out similarly in other countries' tax systems like in the UK. But by filing for the Thai tax refund which is easy and was approved I recovered the entire $153 vs $22 and I didn't have to lie to Uncle Sam/the IRS.

I'm no US tax expert, just a guy who has always done his own returns, but I believe the taxpayer can choose between getting a foreign tax deduction or a foreign tax credit (only if, as you stated, the taxpayer has attempted to get reimbursed from the foreign taxing authority and been unsuccessful).

I believe you're better off going with the credit because my understanding is it then would be dollar-for-dollar (although subject to something called the Foreign Tax Credit AMT, geez I wish I were making this stuff up, it gives byzantine a bad name). So you don't lose any dollars, so to speak, but you may have to defer (carry forward) the credit to future (and sometimes past) tax years, before you are made whole. In other words, the credit comes right off your tax due, not a deduction against taxable income.

If you take the deduction instead then I think your complaint about getting only a partial reduction is justified. The deduction is deducted from your taxable income, not from your tax. In that case you are not going to be made whole.

I don't want to make it sound like getting the refund from the Thai tax office is as easy as falling of a log, it's not, but I'm thinking 98% of the work required is doing it the first year (getting your tax-id, finding the tax office, explaining what you want to do, navigating through the forms, etc.) and that subsequent years will be a whole lot easier. In fact, I think it may even be possible to file the PNG 90 online. Not sure about that, will investigate it next year unless someone knows now.

[Pib]

Yea, as far as I know you can file online but that's way above me as I don't fully understand the Thai tax laws/forms/returns or that much Thai. And that is suppose to speed up the refund process quite a bit based on posts I read. I prefer just to go to the tax office and let them file out most of the form for me, I give them all the attachments they want, answer any questions they have, I then sign it, they then sign/date it, I get a tax filing receipt, and then I go home and wait at the mailbox for the refund check. The first year in filing is no doubt the most stressful in finding your local tax office, wondering what questions they may ask, what forms/copies they may want, and probably just thinking if I file an interest refund request does that put me on the hook forever-after with the Thai Tax Man---yeap, you thoughts can run wild on you.

So far (knock on wood...my head) filing for a interest refund at my local Bangkok tax revenue office has been easy...done if for three years now....so far, they been very helpful...and I have got my full refund in about 6 to 8 weeks. Well, to tell you the truth I haven't got this year's refund yet (my 3d year), but the online status says it's been approved for refund...next step to cut the refund check....if the check arrives on/about 5 Apr then my tax office estimate of 2 months for a refund will be on-target since I filed on 5 Feb.

Speaking of online filing...I E-filed my U.S. federal tax return on 10 Mar and got the direct deposit refund on 17 Mar---only 7 days---fast! And on 10 Mar I also electronically filed my FBAR with the U.S. Treasury dept....got an acceptance email within minutes ...and next day I got an acknowledgment email the FBAR has been accepted with control/filing number...once again---fast! The new FBAR filing method, PDF form, and webpage that started last year makes filing a FBAR pretty painless (except for filling-out the PDF form which ain't hard at all). Yeap, Uncle Sam was doing some fast processing this year. Done with my U.S. taxes and FBAR for another year.

Edited March 18, 2015 by Pib

[Pib]

Got my Thai withholding tax refund check today in the mail...I filed on 5 Feb at a Bangkok revenue office....received in the mail today/24 Mar. That works out to 6 weeks and 5 days from filing to check in-hand. Give or take a few days, this year's refund took the approx same amount of time as the two previous years.