Introduction
In Thailand, tax residents are typically subject to personal income tax based on residency, theoretically encompassing their worldwide income. However, due to the Revenue Department’s interpretation of Section 41, paragraph 2 of the Revenue Code, numerous Thai tax residents, whether Thai citizens or foreign individuals have enjoyed exemption from paying personal income tax on income earned abroad.
This exemption has made Thailand an attractive destination for both Thai nationals and foreigners who rely on this tax benefit to safeguard their foreign sources of income from taxation. Nevertheless, significant changes are on the horizon, as the Revenue Department is set to implement new regulations starting on January 1, 2024.
This article will explore these impending changes and their potential implications for taxpayers in Thailand.
Key Points
- Currently, tax residents in Thailand are exempt from personal income tax on overseas income remitted into Thailand the following calendar year.
- From January 2024, The Revenue Department will require tax residents to include overseas income in their annual assessable income, regardless of the year of its origin.
- Tax residents can use Double Tax Treaties, the Long-term residency visa, or keep their income abroad to avoid Thai income tax obligations.
What is the current understanding of the taxation of foreign income remitted to Thailand?
Thailand has traditionally primarily focused on income generated within the country’s borders (territorial income), owing to the Revenue Department‘s strict interpretation of Section 41, paragraph 2 of the Revenue Code. According to this interpretation, a Thai tax resident is only obliged to pay Thai personal income tax on overseas income if two specific conditions are met:
- The tax resident of Thailand earns overseas income within a calendar year.
- The tax resident of Thailand subsequently brings this overseas income into Thailand within the same calendar year, adhering to a same-year remittance rule.
This prevailing interpretation has allowed Thai tax residents, including foreigners residing in Thailand for at least 180 days in any calendar year, to effectively circumvent the obligation of paying Thai personal income tax. For instance, an individual could generate overseas income in 2022 and retain the funds abroad until at least January 1, 2023, before transferring the funds to a Thai bank account, thus remaining exempt from Thai personal income tax liability.
How does the new instruction from the Revenue Department affect the taxation of foreign income remitted to Thailand?
On September 15, 2023, the Director General of Thailand’s Revenue Department issued Departmental Instruction No. Por. 161/2566 carries significant implications for interpreting Section 41, Paragraph 2 of the Revenue Code. This instruction, titled “Payment of Income Tax under Section 41, Paragraph 2 of the Revenue Code,” redefines the tax liability of Thai tax residents who earn income from foreign sources in a given calendar year and repatriate this income to Thailand in any subsequent calendar year.
Under this new interpretation, Thai tax residents are now obligated to include such assessable income when computing their annual assessable income for the calendar year they remit the overseas income into Thailand. In essence, this means that Thai tax residents must fulfill their Thai personal income tax obligations on such overseas income, even if the repatriation occurs in a different calendar year from the one where the overseas income was initially earned.
It is important to note that the effective date of Instruction No. Por. 161/2566 is set for January 1, 2024.
| Year | Current Understanding | New Rules (from Jan 1st 2024) |
| Year 1 | A tax resident* who earns overseas income but does not remit the income to Thailand until the calendar year ends | Same as the previous understanding. |
| Year 2 | The tax resident remits the income earned overseas in the previous year to Thailand. This income is not subject to income tax in Thailand. | The tax resident remits the income earned overseas in the previous year to Thailand. This income will be subject to income tax in Thailand. |
*Tax resident = a person who has stayed in Thailand for at least 180 (does not have to be consecutive) days in the year.
What options are available to tax residents?
With the new amendments coming into force in January 2024, tax residents of Thailand who previously relied upon this exemption for foreign income are now looking for ways to protect their income. Some possible options for tax residents include:
Double Tax Treaties:
When an individual has generated income and fulfilled their tax obligations in the country of income origin, and if a Double Tax Agreement is in place between Thailand and the respective foreign country, the taxpayer can apply the taxes already paid in the foreign country as a tax credit.
Long-term residency visa holders:
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, including overseas income repatriated to Thailand, as per Royal Decree No. 743, as authorized by the Revenue Code.
Keeping the income abroad:
This is the simplest option, as keeping the income earned overseas outside of Thailand would circumvent any income tax obligations in Thailand. However, this may be problematic for tax residents relying on this income.
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