The Revenue Department of Thailand is looking into whether it is possible to change the Revenue Code to follow the concept of foreign income. People who reside in Thailand for at least 180 days, even if they don’t stay there all the time, may have to pay taxes on money they earn abroad, even if they don’t bring it into the country.
The Revenue Code, which is the main rule that the department uses to collect taxes, says that income taxation is based on two basic ideas:
1. Source Rule: This rule says that people in Thailand are taxed on income that is made within the country’s lines, no matter if it comes from work, activities done within Thailand, activities done by an employer in Thailand, or property located in Thailand.
2. Resident Rule: This rule says that people who live in Thailand for 180 days or more in a tax year (January to December) are taxed on all of their income, whether they got it in Thailand or somewhere else.
There are three key things that the department uses to decide when foreign income is taxable and when it is not. That income is taxed if all three conditions are met:
1. The person must have lived in Thailand for a total of at least 180 days in a current tax year. This makes the person a resident of Thailand and requires them to pay income tax to the country. Thai tax laws don’t say what a short-term residence is.
2. The person must have cash from outside of the country, no matter what country it is.
3. The person must bring that money into Thailand from outside of Thailand. Section 41 of the Revenue Code says that people who live in Thailand and make money from jobs or businesses done abroad or from assets located abroad must pay income tax when they bring that money into Thailand. This means that they have to pay income tax for that year if they bring this money into Thailand.
For people with foreign income who brought it into Thailand in the same year they made it, the personal income tax rules said it would be subject to income tax by the Revenue Department before 2024. This meant that people with foreign income could lower their tax burden.
If the money came into the country after the year it was made, however, there would be no tax to pay. So, if a person made money outside of Thailand in 2020 and brought it back to Thailand in 2021, they would not have to pay any taxes on it.
As of 2024, new rules say that personal income tax must be paid on all income brought into Thailand, no matter what year it was earned. The tax rate goes up over time, from 5% to 35%.
But the department made provisions to lessen the effect on taxpayers.
Before January 1, 2024, the old rules still apply to foreign income. This means that if this kind of money is brought into Thailand after the year it was made, it won’t be taxed.
How much tax do I have to pay if I don’t bring in any foreign income?
At the moment, people who earn money abroad do not have to pay taxes to the Thai government if they keep that money outside of Thailand.
People who live in Thailand for at least 180 days, whether they stay there all the time or not, will have to pay taxes on income they earn abroad, even if they don’t bring it into the country. This is based on the idea of “worldwide income.”
In order to figure out what worked and what didn’t, the department is looking at cases from other countries that tax foreign income, like the US.
It is hard to figure out how to tax people who live in Thailand who have foreign wealth?
If someone makes money in another country, they have to pay taxes on it first. For instance, if someone who lives in Thailand makes money in the UK, Britain has the right to tax that money first.
Unless the person’s home country has a deal with Thailand to avoid double taxation, they will still have to pay taxes to Thailand if their home country follows the worldwide income rule.
A person would only have to pay the 5% difference to Thailand if their salary has already been taxed at 15% abroad and 20% in Thailand. This is because of a double taxation agreement.
If, on the other hand, the person has already paid 30% tax in another country, they would not have to pay any more tax in Thailand because the tax they paid abroad is higher than the tax they have to pay in Thailand.
People cannot get a refund for the gap in taxes between Thailand and another country.
Thailand has 61 agreements with other countries to avoid double taxes.
Can tax authorities check the income information of people who live in other countries?
In line with international tax deals, Thailand put out a royal decree last year about sharing tax information.
Agreements or conventions on the avoidance of double taxation and the prevention of tax fraud, as well as the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, say that the country must share tax information when asked.
Under the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information, Thailand must also do what it says it has to do to automatically share information about financial accounts.
Thailand must share tax information with its treaty partners both when asked and automatically as a member of the Global Forum on Transparency and Exchange of Information for Tax Purposes. This is part of the Organization for Economic Co-operation and Development’s framework for working together on tax information exchange.
Tax rules in 113 countries allow people to share financial information with each other, but they do have some restrictions.
Financial institutions and stock companies send information about investments, like interest and dividends. This information does not include all of the person’s financial information.
Because of this, some financial information, like salaries or wages, will not be shared as part of these deals to exchange information.
Source: Bangkok Post