Tax on foreign income remitted into Thailand...

[FlyingMoose]

So the information I have been reading says that residents are taxed on foreign income earned outside of Thailand and remitted into Thailand in the same year.

 

What would be the best way to avoid this?  If I use my regular bank account in the US (where my income is paid into), would the funds be considered commingled and any money I spend in Thailand be taxed?  Should I set up a separate account?  But then if I transfer money into it, again it's commingled.  It seems I'd have to set up 2 extra bank accounts in the US, fund one in a year and spend it in the next year, and then vice versa.  But this still may not satisfy the requirements.

 

Note that I'm referring to digital nomad-type income, paid into my account in the US.  I'm specifically NOT asking about taxation by the US government, because I understand the US tax laws and exemptions, so please no comments about Uncle Sam taking my money.  

[Evilbaz]

Why do you think you are a "Resident" of Thailand?

What Visa or Extension are you living on here?

[SantiSuk]

I was investigated by Thai Revenue Regional Tax Investigation Office in Sisaket (Isaan) when I made a claim for a significant refund of tax on Thai bank interest last year. They invited me in to discuss 'my tax refund claim', but on arrival I realised this was not the normal tax office and that they were keen to find out more about my finances.

 

But when it came to foreign source income they asked me if I was working abroad. I said no I'm retired and volunteered that I had pension income and interest/dividend income arising in the UK. I volunteered that I had a good level of net wealth and that I used none of my income to bring to Thailand in the year in which it was earned. They accepted my oral representation without checking any documentation, but they did ask what job and position I had held to have sufficient savings to live off prior year earnings. I'm guessing that if they did not get comfortable on the basis of straight forward discussion and ones apparent openness in discussion then they might ask to see documentary evidence

 

As it happens I do make sure that all my pension income goes into one dedicated account (and is left there until the new year) and that any remittances to Thailand are made out of another account. It's just a convenience though - if you have net assets at they year end that are greater than the sum total of remittances you have made it is clear that you have not needed to rely on current year foreign income to support your life in Thailand. Might be a little more convoluted to demonstrate though if you were asked to provide documentary evidence which is why I adopt the dedicated bank account approach.

 

I do not believe you have to maintain strict isolation of the actual amounts - ie co-mingling should not be a problem but it does make demonstrated documentation more complex. My dividend income is reinvested for instanmce, but I would be able to show that it is still extant and unspent at any tax year end if I had to.

 

Saw another member's reply while posting this. As you probably know you are liable to be subject to Thai taxation if you are resident for tax purposes in a particular year - and "an individual is regarded as tax resident if he/she resides in Thailand at one or more times for an aggregate period of 180 days or more in any tax year"*. Your immigration status (nature of visa) is irrelevant.

 

 

 

* Source - tax booklet of a leading global tax/accounting/consulting firm with a significant presence in Thailand (booklet attached)

PWC tax booklet 2015.pdf

[FlyingMoose]

I am currently not, but I'm evaluating my options.  This is assuming that I will be staying more than 180 in a given year, which is defined as a resident for tax purposes.  So please assume that for the purpose of this question.

[FlyingMoose]

5 minutes ago, SantiSuk said:

I was investigated by Thai Revenue Regional Tax Investigation Office in Sisaket (Isaan) when I made a claim for a significant refund of tax on Thai bank interest last year.

Thanks for your excellent reply.

 

I'm surprised the refund would be that significant.  For example, on $100,000, 2.5% interest, and 15% of that withheld for tax, that would be $375.  For someone with that much money, it seems like it wouldn't be worth the can of worms for such a small amount of money.  However, the way things are going, governments are sharing more and more data, so the Thai tax authorities might might get your tax return from the US tax authorities (or wherever you're from) and it may be a problem.

 

So I think I'l plan on segregated accounts.  I've been thinking of opening an account at an internet bank anyway.

[SantiSuk]

The refund was 45,000 baht, which is worthwhile to a retiree with sufficient time on his hands - being a retired chartered accountant (CPA equivalent) helps too! I don't think they would have bothered asking me in for $375.

 

I do not mind keeping large cash deposit balances as part of a balanced portfolio approach to asset allocation and yes it is a calculated risk, keeping part of those cash balances in Thailand rather than so-called safer currencies. Of course I have had the last laugh over those financially unwashed, who proseletise leaving every last cent of resources in your 'home' country (and then complain when that home currency drops by 15%+ against the baht, as it did in the case of my home GBP sterling currency this year!). I live in Thailand for the forseeable future so my assets at least need to partially match my liabilities (ie future spend) in currency terms.

 

Yes - making any such tax refund claim is seemingly 'sticking your head over the parapet' and I have already commented elsewhere on ThaiV that making any tax refund claim of any amount more than modest would seemingly be a flag to the Thai tax authorities that maybe some would be best advised not to raise. Personally I prefer to be absolutely open and honest with tax authorities and I've got nothing to hide!

Edited November 2, 2016 by SantiSuk

[FlyingMoose]

Thanks for taking the time to reply.  You sound like you read Bogleheads...

[mfd101]

Are there not also agreements between Thailand & other countries (eg Australia, in my case) to avoid double taxing? I have been working on the assumption since I arrived last year that my sole income, from Oz, being taxed there, is not liable to tax here ... But I may be wrong?

[Liquorice]

Thailand has dual taxation reciprocal agreements with many Countries, which means if you pay tax in the Country where your income comes from, you will not be taxed on it in Thailand.

Interested paid from Thai bank accounts, is regarded as income received in Thailand for tax purposes, but because the tax paid is usually far less than a persons Personal Allowance in Thailand, that tax can be reclaimed.

 

I'm guessing in SantiSuk case the unusual high interest he received set off alarm bells because the interest was higher than the personal allowance, or they suspected money laundering.

I reclaim 4-5,000 baht a year in tax paid on interest without any problems.

I'm from the UK.

[mfd101]

OK, thanks. Reassuring.

[Neocon]

U.S.-Thailand Tax Treaty

https://www.irs.gov/pub/irs-trty/thailand.pdf

 

As a U.S. citizen all my U.S. income is protected from double taxation under this treaty.

 

If still concerned, contacting the U.S. IRS or a trusted tax consultant is the best option.

[FlyingMoose]

4 hours ago, mfd101 said:

Are there not also agreements between Thailand & other countries (eg Australia, in my case) to avoid double taxing? I have been working on the assumption since I arrived last year that my sole income, from Oz, being taxed there, is not liable to tax here ... But I may be wrong?

If living abroad for enough of the year, the US exempts a bit over $100,000 from tax, so my only concern would be taxation by Thailand.

[FlyingMoose]

1 hour ago, Neocon said:

U.S.-Thailand Tax Treaty

https://www.irs.gov/pub/irs-trty/thailand.pdf

 

As a U.S. citizen all my U.S. income is protected from double taxation under this treaty.

 

If still concerned, contacting the U.S. IRS or a trusted tax consultant is the best option.

I'm guessing you don't qualify for the FEIE then...

 

From what I understand, this type of treaty merely allows you to deduct tax paid in Thailand from taxes owed in the US, or vice versa, and wouldn't help if you're already not paying tax in the US.

Edited November 2, 2016 by FlyingMoose

[Wazza1]

With the tax rules you won't be taxed on money you have already paid tax on, for example if you earn $100,000 in the U.S and the U.S tax rate is 30% and the Thai tax rate is 35% and you pay your 30% tax to the U.S you will only pay 5% tax to Thailand because they take into account the tax you had already paid. 

[The manic]

so peoplet who retire here from the UK are supposed to pay tax here in Thailand?  I think the OP was being too clever by half and should have 'let sleeping dogs lie'

[FlyingMoose]

3 hours ago, Wazza1 said:

With the tax rules you won't be taxed on money you have already paid tax on, for example if you earn $100,000 in the U.S and the U.S tax rate is 30% and the Thai tax rate is 35% and you pay your 30% tax to the U.S you will only pay 5% tax to Thailand because they take into account the tax you had already paid. 

So if I earn $100,000 from the US (while living in Thailand), and pay 0% tax (because of the Foreign Earned Income Exemption), how much tax do I need to pay in Thailand?  That was my original question.

 

You said "won't be taxed on money you have already paid tax on", and then gave an example based on "will be given credit for the amount of tax already paid", which are completely different things.

Edited November 2, 2016 by FlyingMoose

[FlyingMoose]

2 hours ago, The manic said:

so peoplet who retire here from the UK are supposed to pay tax here in Thailand?  I think the OP was being too clever by half and should have 'let sleeping dogs lie'

If by "too clever" you mean "not wanting to rot in a Thai jail for tax evasion", then yes, I suppose I am.

[chiang mai]

If it helps any I regularly reclaim tax of between 20K and 25K each year and have been doing so for many years, without problem.

[mokwit]

My advice to anyone working here is not to reclaim tax- I had someone in a personnel department tell me I was due a tax refund and told me she would do the paperwork on my behalf - she meant well but when I moved employers a year or so later I was subjected to an absolute barrage of requests for documentation from my previous employers (Plural - not just the last one). I had to make physical visits to previous employers to ask them to furnish these - luckily I was on good terms with them.

 

That said, it may have been a completely separate issue as I increased salary by 3x when I moved so maybe they though there must have been some under-claiming of earnings at past employers - when I moved the next time after that there was no barrage of requests.

[Evilbaz]

7 hours ago, FlyingMoose said:

If by "too clever" you mean "not wanting to rot in a Thai jail for tax evasion", then yes, I suppose I am.

 

So can you give us examples of this for retirees?

 

This furphy re-circulates evey couple of years.

[FlyingMoose]

I won't be a retiree, more of a digital nomad.

[nosatisfaction]

On 11/01/2016 at 10:56 PM, FlyingMoose said:

I am currently not, but I'm evaluating my options.  This is assuming that I will be staying more than 180 in a given year, which is defined as a resident for tax purposes.  So please assume that for the purpose of this question.

Very sorry to disapoint you but only persons with PR or Thai Nationals are considered as resident, all the other ones are extension of Visa or similar.

But then again, after living here for 17Ys I could be very wrong.....

 

[KittenKong]

7 hours ago, nosatisfaction said:

Very sorry to disapoint you but only persons with PR or Thai Nationals are considered as resident, all the other ones are extension of Visa or similar.

But then again, after living here for 17Ys I could be very wrong.....

 

 

You are.

Tax residency is entirely different from physical or juristic residency, though the latter may invoke the former.

[Naam]

8 hours ago, nosatisfaction said:

Very sorry to disapoint you but only persons with PR or Thai Nationals are considered as resident, all the other ones are extension of Visa or similar.

But then again, after living here for 17Ys I could be very wrong.....

 

not could be, you are wrong!

[THAIJAMES]

For a digital nomad, always have your income paid into US or non thai accounts.  Leave the money there for at least one year or have a big enough balance to use previous years income and you will never have to pay thai tax on your foreign generated income.

 

Unless you want a long term visa which requires a work permit, a company and at least 4 employees, you will not be required to declare your overseas income.

 

If you do require a long term visa and are willing to go the company route and hire 4 assistants ,  then you will be better of setting up an overseas company that hires your local thai company.  This cuts out any complications of overseas accounts.

 

You are still liable to US taxes for any income over 100K or so earned anywhere in the world assuming you stay away from US 330 days a year.

 

 

Edited November 4, 2016 by THAIJAMES

[FlyingMoose]

4 minutes ago, THAIJAMES said:

For a digital nomad, always have your income paid into US or non thai accounts.  Leave the money there for at least one year or have a big enough balance to use previous years income and you will never have to pay thai tax on your foreign generated income.

 

Unless you want a long term visa which requires a work permit, a company and at least 4 employees, you will never have to declare your overseas income.

 

If you do require a long term visa and are willing to go the company route and hire 4 assistants.  Then you will be better of setting up an overseas company that hires your local thai company.  This cuts out any complications of overseas accounts.

 

 

That's what I'll do, I'm going to set up a separate account for spending in Thailand than the one I have my income paid into.

 

I would probably consider the Elite visa before setting up a company.

[JimGant]

Quote

The refund was 45,000 baht, which is worthwhile to a retiree with sufficient time on his hands - being a retired chartered accountant (CPA equivalent) helps too! I don't think they would have bothered asking me in for $375.

 

Santi, even 'tho Thai interest rates have gone down considerably in the last few years, they're still doubly better than in the US (or the West overall). Thus, I see why you might invest considerably in Thailand, particularly since you live here on the local currency. But, are we talking about a return of about 1.5%? If so, then your 15% withholding of 45,000 baht means 300,000 baht in interest; which means (@1.5% int), a principal of 20 million baht. Is this all in one bank? I ask because of this:

Quote

Thai baht deposits at Bangkok Bank are protected under the Deposit Protection Agency Act – up to a maximum of 15 million baht until 10 August 2018.

 

Are you in more than one bank? Or, do foreign currency accounts (if that's your situation) have better protection under the Deposit Protection Agency Act? Just curious.

[JimGant]

Quote

 I have been working on the assumption since I arrived last year that my sole income, from Oz, being taxed there, is not liable to tax here ... But I may be wrong?

 

Thai tax treaties all read about the same, where home country government pensions, plus social security/state pensions, are solely taxable by the home country. Private pensions (and certain other income), however, aren't similarly treated, and if brought into Thailand in the year earned, are subject to Thailand having first dibs on their taxation (but -- in the case of the US anyway -- such Thai taxes could then be used as a credit against US taxes on the same income). But nobody is stupid enough to claim earnings/pensions brought into Thailand are from the same year.. And, with the fungibility of money, Thai tax authorities would be hard pressed to make the case for same-year money. So, they don't.  Therefore, your OZ earnings aren't (realistically) subject to Thai taxation.

 

Interestingly, for the 15% "withholding at source" for Thai interest earnings, Yanks have to declare this on their income tax returns.But since the Thais withheld this 15% upfront, you could get a one-for-one tax credit under the double taxation provisions. And this is the way it once was -- you didn't have to file for a tax refund with Thai tax authorities, but instead applied for the tax credit on your US taxes. Same amount of money out-of-pocket -- but Thailand gets the revenue, and the US doesn't. And you don't have the hassle (or inquisition, in Santi's case) of facing Thai tax authorities.

 

Fast forward. New tax guidance: If you're able to get a tax refund, thus not really liable for these taxes by a foreign country, you can't file for a tax credit. Don't know about OZ, or other countries -- but if a US citizen having withholding at source in Thailand, you're (not supposed to) take a credit in lieu of filing for a refund.

[Grubster]

On November 2, 2016 at 7:57 AM, SantiSuk said:

The refund was 45,000 baht, which is worthwhile to a retiree with sufficient time on his hands - being a retired chartered accountant (CPA equivalent) helps too! I don't think they would have bothered asking me in for $375.

 

I do not mind keeping large cash deposit balances as part of a balanced portfolio approach to asset allocation and yes it is a calculated risk, keeping part of those cash balances in Thailand rather than so-called safer currencies. Of course I have had the last laugh over those financially unwashed, who proseletise leaving every last cent of resources in your 'home' country (and then complain when that home currency drops by 15%+ against the baht, as it did in the case of my home GBP sterling currency this year!). I live in Thailand for the forseeable future so my assets at least need to partially match my liabilities (ie future spend) in currency terms.

 

Yes - making any such tax refund claim is seemingly 'sticking your head over the parapet' and I have already commented elsewhere on ThaiV that making any tax refund claim of any amount more than modest would seemingly be a flag to the Thai tax authorities that maybe some would be best advised not to raise. Personally I prefer to be absolutely open and honest with tax authorities and I've got nothing to hide!

I am from the US and I have not been laughing about my Brit friends losses in the exchange rate. Many are living off monthly pensions with no option to pile money in Thai banks. I do agree that being open and honest will be the best plan, as hiding your money here or there will make you lose sleep and could prove disastrous.

[nosatisfaction]

On 11/03/2016 at 7:25 PM, Naam said:

not could be, you are wrong!

Thanks for the info