Tax Liabilities for Digital Nomads in Thailand

Introduction

Thailand has become a top destination for freelancers, remote workers, and digital nomads. The introduction of the Destination Thailand Visa (DTV) and the LTR visa has made being a digital nomad a legitimate opportunity, after years of being a grey issue due to no real visa being available. 

However, these visas have led to some confusion as to whether digital nomads have any tax obligations or tax liabilities in Thailand.

In this blog post we will explore the tax liabilities faced by digital nomads and the use of a Hong Kong Company with offshore status as a potential tax optimisation strategy offering effective tax planning.

Thailand as a Destination for Digital Nomads

Thailand has become a popular choice for digital nomads due to its affordable cost of living, excellent infrastructure, and lifestyle options. Cities like Bangkok, Chiang Mai, and Phuket offer a wide range of co-working spaces, reliable internet, and a community of business professionals, making it easy for remote workers to live and work efficiently. 

The government has also recognized the growing popularity of Thailand as an option for Digital Nomads and have introduced specific visas such as the Digital Nomad Visa (DTV) and the Long-Term Resident Visa (LTR) to allow remote workers to have an extended stay with the legal right to work as a digital nomad.

What is the Destination Thailand Visa?

The Destination Thailand Visa (DTV) is designed to facilitate digital nomads, remote workers who wish to stay and work in Thailand for an extended period of time.

Holders of a DTV must work for companies or clients that are located in other countries and cannot work for a Thai company or do business in Thailand.

Working for a Thai company or doing business in Thailand would require the individual to obtain the correct visa (Non-Immigrant B visa) and a work permit.

Thailand has a very broad definition of what is considered work and foreigners must be aware of what they can and cannot do in Thailand without a work permit. If a foreigner is caught working without the correct visa and work permit, there is a risk that they will be deported from Thailand and banned from re-entering.

The Destination Thailand Visa offers a range of attractive benefits including:

Extended Duration of Stay and 5 Year Validity

The DTV is valid for 5 years and allows holders to stay in Thailand for up to 180 days per entry. Holders of the DTV can extend their stay for 180 days one time per entry. 

The DTV is also a multiple entry visa allowing holders to come and go from Thailand as per their needs. 

Eligibility for Spouse/Dependents

DTV holders will also be able to bring their spouses and children to Thailand as dependents. Please note, at the moment there is no information as to whether dependents are subject to extra application requirements. We will keep you updated as to any developments.

The LTR for Work From Thailand Professionals

The Long-Term Resident (LTR) visa program was introduced in order to attract high-potential individuals to relocate to Thailand. 

The LTR visa for Work from Thailand Professionals is available to remote workers and digital nomads employed by well-established overseas companies to Thailand. This visa allows skilled professionals and digital nomads to work and live in Thailand without the visa and work permit requirements associated with traditional employment. Please note that holders of the LTR visa for Work From Thailand Professionals can work in Thailand but are not eligible for a Work Permit, unlike the other classes of LTR visas.

The LTR visa offers the holder a package of tax and general incentives that make living and working in Thailand more efficient and sustainable. The main benefits include:

• A 10 year visa that offers the ability to live and work for up to 10 years in the country without renewing your visa.
• Tax exemption for overseas income.
• Eligibility to apply for immigration and work permit services at One Stop Service Center for visa and work permit, saving applicants a lot of time.
• The ability to bring your spouse and children on dependent visas.

For more information about the eligibility requirements etc for the LTR for Work From Thailand professionals, please see our blog post:

Read Also : Work from Thailand with Professional Visa (LTR visa BOI)

Individuals holding an LTR visa in any of the following categories: Wealthy Global Citizen, Wealthy Pensioner, and Work From Thailand Professional, are eligible for an exemption from Thai personal income tax for income repatriated to Thailand. 

This income tax exemption for overseas income repatriated to Thailand is highly beneficial due to the new amendments regarding the accessibility of foreign sourced income coming into force in January 2024. For more detailed information, please see:

Read Also : New Regulations for Taxing Foreign Income in Thailand

What are the Tax Liabilities for Digital Nomads?

Digital Nomads who hold a DTV or LTR visa should be aware that should they stay in Thailand for an extended duration, they may become subject to Thai taxation laws and requirements.

Under Thai law, anyone who stays in Thailand for over 180 days in a calendar year is considered a tax resident by the Thai government. This rule applies regardless of the type of visa held, including the LTR and DTV.

For DTV visa holders, it’s important to note that while the initial visa allows a stay of up to 180 days, the visa can be extended for another 180 days. If this extension is used and the holder stays in Thailand over 180 days, they will trigger tax residency status, making the individual liable to pay Thai taxes on foreign income remitted into Thailand.

Anyone who stays in Thailand for more than 180 days in a calendar year will become a Thai tax resident and have tax liabilities. Once someone becomes a tax resident they must obtain a tax ID from their local Revenue Department Office and pay tax.

This tax will apply to the amount of income transferred by the DTV holder from abroad into Thailand. Such income will be subject to the progressive personal income tax rates from 0 to 35%.

Read more:

Tax IDs in Thailand: A Guide for Expats and Businesses

Taxable Income in Thailand

As of 2024, Thailand’s Tax Code has undergone significant updates. As per the new regulations the foreign sourced income of Thai tax residents that is remitted to Thailand is now subject to income tax according to Thai Personal Income Tax Rates.

Please note this is only applicable to income earned and remitted to Thailand after the 1st of January 2024. Holders of the LTR visa (except the LTR for highly skilled professionals) are exempt from this regulation. Furthermore, any protections offered by Double Tax Agreements will also apply.

These new regulations have a direct effect for DTV visa holders who become tax residents as since they cannot work for Thai companies or do business in Thailand, all their income would be considered foreign sourced. Therefore, any foreign sourced income remitted into Thailand by a tax resident would be liable for Thai tax (subject to the provisions of any relevant Double Tax Agreements or eligible exemptions).

The current Personal Income Tax rates in Thailand are as follows:

Net income (THB)	Personal Income Tax rate (%)
0 to 150,000	Exempt
150,001 to 300,000	5
300,001 to 500,000	10
500,001 to 750,000	15
750,001 to 1,000,000	20
1,000,001 to 2,000,000	25
2,000,001 to 5,000,000	30
> 5,000,001	35

Thailand’s Territorial Tax Policy

Thailand operates a territorial tax system, where only income earned or remitted (subject to exemptions such as eligible LTR categories or DTAs) in Thailand is subject to Thai tax. Therefore, any income generated by a digital nomad while working in Thailand under a DTV that has not been remitted to Thailand is not taxable in Thailand.

For DTV holders staying less than 180 days, the current rule states that only foreign sourced income brought into Thailand is taxable. 

Read Also : How to Issue a Tax Invoice/Receipt in Thailand

Do Double Taxation Agreements Apply?

Double Taxation Agreements (DTAs) play a significant role in managing tax obligations for DTV visa holders. These agreements aim to eliminate the risk of double taxation when an individual operates in more than one country. Thailand has DTAs with numerous countries, including Australia, China, France, Germany, Hong Kong, Japan, the United Kingdom, the United States, and Singapore.

For DTV visa holders, these agreements can provide tax credits or exemptions. If an individual has paid taxes in their home country and that country has a DTA with Thailand, they may be exempted from paying taxes on the same income in Thailand.

If tax has been paid in their home country and further tax is owed in Thailand, a tax credit can be obtained. This tax credit will essentially deduct the tax already paid in the home country from the outstanding tax owed in Thailand. This prevents income from being taxed twice.

For more information about DTAs please see here:

Read Also : Double Tax Agreements in Thailand

Hong Kong Companies for DTV Applicants

One of the key eligibility requirements for the DTV is that the applicant’s employer must be outside of Thailand. This also covers freelance work, making the DTV an even more attractive option. While freelance work has many advantages, many applicants would prefer the security that is offered by an actual company, whether for liability issues or tax reasons.

One option for freelance workers who wish to have a company is opening a company in Hong Kong. Opening a company in Hong Kong would allow the applicant to apply for the DTV using this company as their employer, while also enjoying the protections offered by a Limited Company. 

Using a Hong Kong company allows clients of the company to be invoiced and paid via this entity in Hong Kong, ensuring compliance with the DTVs application requirements. 

Tax Optimisation 

Hong Kong is known for its low corporate income tax (CIT) rates which are among the lowest in the world. The current CIT rates are capped at a maximum of 16.5%, with the first HKD 2 million (approximately 257,000 USD/9 million THB)) subject to a rate of 8.25%. 

There are also no capital gains taxes, withholding taxes on dividends and interest, or indirect taxes such as VAT or GST in Hong Kong.

Hong Kong offers an appealing benefit for offshore companies: the ability to claim a tax exemption on profits generated outside the territory by qualifying for offshore status.

Offshore status applies to companies that operate exclusively outside Hong Kong and derive all their income from foreign sources. With offshore status, eligible companies are exempt from Hong Kong’s profits tax on earnings generated abroad, making it an attractive option for businesses with international operations.

However, obtaining and maintaining offshore status can be complex and requires thorough documentation and strict compliance with relevant regulations. Companies must ensure they do not engage in activities that could be interpreted as conducting business within Hong Kong, as this could establish a permanent presence and jeopardize their offshore status.

For DTV holders who establish a Hong Kong company, there’s an additional tax advantage when operating from Thailand. Under Thai tax regulations, individuals are only taxed on income that is remitted into Thailand within the same tax year it was earned. This means that DTV holders can strategically manage their tax exposure by remitting only the funds needed to support their lifestyle in Thailand, while keeping the remainder in Hong Kong. The remitted amount would be subject to Thai personal income tax, while unremitted foreign-sourced income would not be taxed in Thailand.

Disclaimer

This information is provided for general educational purposes only and should not be construed as legal, tax, or financial advice. The establishment of offshore companies and international tax planning involves complex legal and tax considerations, including permanent establishment risks and substance requirements, which must be evaluated on a case-by-case basis.