The most significant to expats part of the article says "If the individual's resident country follows the worldwide income rule, the individual still has to pay taxes to Thailand, resulting in double taxation,
unless the foreign country has a double taxation agreement with Thailand."
For most of us expats, our countries
do have this agreement. Folks, is that enough reassurance yet?
For a list of the countries that have a double tax agreement with Thailand, see:
https://www.rd.go.th/english/766.html
Here's the latest:
______________
Navigating new foreign income rules
EXPLAINER: The Revenue Department is studying adoption of the principle of worldwide income
by Wichit Chantanusornsiri
June 27, 2024
New conditions, effective from 2024, were amended to state regardless of the year the income is brought into Thailand, it is subject to personal income tax.
Benjamin Franklin famously said in reference to the US Constitution 235 years ago that only two things are certain in this world: death and taxes.
The Revenue Department is studying the feasibility of amending the Revenue Code to align with the principle of worldwide income.
The proposed amendment may require individuals who reside in Thailand for at least 180 days, whether continuously or not, to pay taxes on income earned abroad, even if the income is not brought into the country.
Q: What criteria does the Revenue Department use to tax foreign income?
According to the Revenue Code, which is the primary law governing tax collection by the department, it relies on two fundamental principles for income taxation:
1. Source Rule: Under this principle, Thailand taxes individuals on income generated within its borders, irrespective of whether it arises from employment, activities conducted within Thailand, employer activities in Thailand, or property located in Thailand.
2. Resident Rule: Under this principle, Thailand taxes individuals who reside in Thailand for 180 days or more in any tax year (January to December) on their income, whether earned domestically or internationally.
Q: Is all foreign income subject to taxation?
Not all foreign income is taxable, as the department sets conditions using three main criteria. If all three criteria are met, then that income is taxable:
1. The individual must reside in Thailand for an aggregate period of at least 180 days within any given tax year. This establishes the individual as a resident subject to pay income tax to Thailand. Short-term residence is not defined under Thai tax regulations.
2. The individual must have income from abroad, regardless of the country.
3. The individual must bring such foreign income into Thailand. If they bring this income into Thailand in any year, they must pay income tax for that year, in accordance with Section 41 of the Revenue Code, which stipulates that individuals residing in Thailand and earning income from employment or business conducted abroad, or from assets located abroad, must pay income tax when bringing it into Thailand.
Before 2024, individuals with foreign income could reduce their tax burden as the personal income tax conditions for such foreign income specified if it was brought into Thailand in the same year it was earned, it would be subject to income tax by the Revenue Department.
However, if the income was brought into the country after the year it was earned, there would be no tax liability. For example, if an individual earned income from abroad in 2020 and brought it into Thailand in 2021, there would be no tax liability.
New conditions, effective from 2024, were amended to state regardless of the year the income is brought into Thailand, it is subject to personal income tax. The tax rate is progressive, ranging from 5% to 35%.
However, the department provided exceptions to mitigate the impact on taxpayers.
For foreign income earned before Jan 1, 2024, the old conditions still apply. This means if such income is brought into Thailand after the year it was earned, there will be no tax liability on that income.
Q: If foreign income is not brought into the country, is there any tax liability?
If individuals keep income earned abroad out of Thailand, currently there is no tax liability to the local authorities.
The proposed amendment follows the principle of worldwide income, requiring individuals who reside in Thailand for at least 180 days, whether continuously or not, to pay taxes on income earned abroad, even if the income is not brought into the country.
The department is studying examples from other countries that impose taxes on foreign income, such as the US, to evaluate their success and identify challenges they encountered.
Taxing the foreign income of individuals residing in Thailand is complex because of the nature of tax collection.
When income is earned in a foreign country, it must first be taxed in that country. For example, if someone residing in Thailand earns income in the UK, Britain has first priority to collect tax on that income.
If the individual's resident country follows the worldwide income rule, the individual still has to pay taxes to Thailand, resulting in double taxation,
unless the foreign country has a double taxation agreement with Thailand.
For instance, if the income is subject to a 20% tax rate in Thailand, but has already been taxed at 15% abroad, a double taxation agreement means the individual would only need to pay the 5% difference to Thailand.
Conversely, if the individual has already paid 30% tax in a foreign country, there would be no additional tax liability in Thailand, as the tax burden paid abroad is higher than the one required in Thailand.
Individuals cannot claim a refund for the tax difference between Thailand and a foreign country.
Thailand has 61 double taxation agreements with various countries.
Q: Can the income data of individuals in foreign countries be checked to assess taxes?
Thailand issued a royal decree last year on the exchange of information for tax purposes, aligning with international tax agreements.
The country must comply with obligations to exchange tax information upon request, according to agreements or conventions on the avoidance of double taxation and the prevention of tax evasion, as well as the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.
Thailand must also comply with obligations to automatically exchange financial account information under the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information.
As a member of the Global Forum on Transparency and Exchange of Information for Tax Purposes, which is a cooperation framework of the Organisation for Economic Co-operation and Development on tax information exchange, Thailand is required to conduct both on-request and automatic exchanges of tax information with its treaty partners.
However, the laws on the exchange of financial information for tax purposes, which are made available in 113 countries, have certain limitations.
The information received from financial institutions and securities companies pertains specifically to investment-related matters, such as interest and dividends, and does not encompass all the financial information of the individual.
Therefore, some financial information, such as salaries or wages, will not be provided under these reciprocal information exchange agreements.
https://www.bangkokpost.com/business/ge ... come-rules
