By now you've probably seen the panic online regarding the proposed changes to tax policy on foreign income remittance in Thailand. Many expats are scaring themselves and others with speculation over how the changes will impact life in Thailand.
In light of this, I thought it would be a good idea to separate the truth from the speculation and keep you all properly informed. I will make this a live post and update it as and when new information comes in.
If you want to be kept updated by email, see the last section of this post, as I have enlisted the help of a tax professional.
Understanding the Thai Tax Residency Rule
To understand whether or not this change will affect you, let's first define a resident, or rather, a tax resident in Thailand. In Thai law, a tax resident is defined as an individual who stays in Thailand for a period or periods aggregating 180 days or more in any tax year.
If you fall outside of this rule, you need not worry about this subject matter, as the change won't affect you. If you do fall into this bracket, please read on.
The Current Tax Rule
As it stands, the assessable income received by a Thai tax resident through employment, an overseas business or property located abroad would be subject to Thai personal income tax only if the earnings were repatriated to Thailand within the same tax year.
Sarah lives in Thailand for 180+ days per year, and works as a consultant for an international company based in the United States.
Under the current tax regulations, if Sarah earns $50,000 from her overseas job in January 2024 but chooses not to transfer the funds to Thailand until February 2025 , she won't be required to pay Thai personal income tax on that income for the year 2024. The Thai tax year runs from 1 January to 31 December.
Here are some further examples provided by the revenue department:
- Mr. A is in Thailand every day from January to December 2024 for a total of 366 days. Mr. A is deemed a resident of Thailand in tax year 2024. • Miss K is in Thailand during odd months in 2024 for a total of 184 days.
- Ms. K is deemed a resident of Thailand in tax year 2024. • Mr. C was in Thailand from January to December 2024 for a total of 179 days. Mr. C is not deemed a resident of Thailand in tax year 2024.
- Mrs. D has been in Thailand continuously for a total of 250 days with the first 100 days being in 2024 and the last 150 days being in 2025. Therefore, Mrs. D is not deemed a resident of Thailand in both tax year 2024 and tax year 2025 because Mrs. D was in Thailand for less than 180 days in both tax years.
The Proposed Tax Rule for 2024
However, under the proposed interpretation of the law, starting from January 1, 2024, foreign-sourced income repatriated to Thailand will be liable to Thai individual income tax, regardless of the tax year in which the income was earned.
Using our example above, Sarah will now be required to pay personal income tax on that income.
This amendment of the law, spearheaded by the Thai Ministry of Finance, has sparked animated discussions among expats online, with some contemplating a reevaluation of their decision to stay in Thailand.
Income Received Before 2024
What about income received before 2024 but brought back into Thailand in 2024, will it be subjected to taxation?
The revenue department says:
Foreign-sourced income earned before January 1, 2024, won't need to be declared in Thai tax returns, irrespective of when it’s brought into the country.
That's some good news, at least.
Income Prior to Living/Retiring in Thailand
There has been much speculation on how accumulated income prior to living in Thailand will be assessed. For example, a person lived and worked in a foreign country and later retires to Thailand with his/her overseas earned income. Will such a person have to pay taxes on these earnings?
The revenue department says:
No. This is because the said accumulated earnings came from assessable income that occurred in the tax year in which the person stayed in Thailand for less than 180 days.Example: Mrs. D. is of Thai nationality and has been living in China since 2007. But in 2024, Mrs. D. wants to travel back to live in Thailand permanently, so she brought back her accumulated earnings from working in China. As such, Mrs. D. is not obliged to pay any personal income tax on money brought into Thailand in 2024 because the said accumulated money comes from assessable income that occurred in the tax year in which Mrs. D. was not a resident of Thailand.
Why is Thailand Doing This to Expats?
It is all about raising money, not about targeting expats.
One assumes the legislative changes are aimed at wealthy Thai citizens with foreign income sources. Unfortunately, foreigners with residence permits or long-stay visas have been caught in the cross-fire, so to speak.
The incoming Pheu Thai government faces the challenge of securing substantial funding for its welfare initiatives such as the ambitious $16 billion (560 billion Thai baht) wallet scheme aimed at providing 10,000 Baht to every Thai above the age of 16.
As Prime Minister Srettha Thavisin explained quite bluntly:
You should pay tax on income you earn, no matter how you earn it.
Unravelling the Implications for Expatriates
Expatriates who previously delayed repatriating their foreign income to Thailand to manage their tax liability in a specific tax year will find that this strategy is no longer effective.
Expatriates with investments abroad, such as rental properties or foreign dividends, will see a change in how their income is taxed, and would need to factor in potential income tax on this foreign-sourced income, which could affect the overall return on investment.
In addition, let's say you transfer 5 million Baht (earned in the previous year) into Thailand to buy a condo. Under the current law that money would not be subject to taxation. However, under the new law it apparently would.
What About Double Taxation?
A double tax treaty, also known as a tax treaty or a bilateral tax treaty, is an international agreement between two countries designed to address and mitigate the issue of double taxation for individuals and businesses with economic activities or income sources in both countries. The main purposes of double tax treaties are:
- Avoidance of Double Taxation: Double taxation occurs when a taxpayer is liable to pay taxes on the same income or capital in both their home country (where they are a resident) and in a foreign country (where the income or capital is generated). Double tax treaties provide mechanisms to prevent or reduce this double taxation.
- Prevention of Tax Evasion: These treaties also aim to prevent tax evasion by requiring the exchange of information between the two countries, which helps tax authorities in each country verify income and enforce tax laws.
Thailand has double-tax treaties with 61 countries.
The revenue department has stated:
If you are deemed a a tax resident of Thailand (staying in Thailand for 180 days or more), the tax paid abroad can be credited against the tax paid in Thailand in the tax year that assessable income was brought into Thailand according to the provisions of the Double Tax Treaty to which Thailand is a contracting party.
The double tax position depends on each country's DTA agreement with Thailand and how specific assets are treated. Each DTA is a separate International Treaty, with different provisions, so it is advisable to check the precise terms that apply in your situation.
Note: Regardless of the tax treaty, you may still have to declare the income in Thailand as part of your tax return, and, as stated by the revenue department, you will be credited for the tax already paid.
How Will The System Work?
At this point, we don't know exactly how the system will work. However, contrary to online rumor, tax will not be deducted automatically from funds deposited in a Thai bank or elsewhere.
Tax experts in Thailand are of the consensus opinion that this will be a self-registration system, where expatriates subject to taxation and staying in Thailand for more than 180 days will register online with the revenue authority to obtain a TIN (Tax Identification Number).
This self-registration process is to be “complemented” by the enhanced traceability of foreign transactions made possible by technological advancements. For those with significant funds, employing the services of a tax lawyer might be the best option.
This all leaves me with one burning question: How will this be enforced?
I mean, for decades, expats have been bringing money into Thailand during the same year it was earned, and no one has ever battered an eyelid.
Why? Because the last thing you want to do is scare off expats, and potential expats, by scrutinizing where their money has come from and trying to get them to pay tax.
Retirees and others move to Thailand for an easy, cheaper life, one free of the tax man constantly breathing down your neck trying to squeeze every last cent out of you.
But this “hands off” approach has been at the tax office's discretion. If they wanted to, they could request that all remittences are declared, which it seems is now the plan – except it is now with the amendment that all income, regardless of the year it was earned, will be subject to tax.
Want to Stay Informed?
The evolving narrative surrounding this policy alteration is likely to bring more clarity in the coming months.
If you want to remain updated on this situation with accurate information, you can click here to register for updates.
By doing so, you'll get regular updates directly from my IFA, who maintains strong ties with leading tax advisors and is monitoring the situation very closely. Additionally, the registration form allows you to pose any questions you might have.
I hope this has helped clarify the current situation for you. If you have any questions or comments, please feel free to drop them below.