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The new tax on overseas income, simply explained

paying tax in Thailand

Thailand’s Revenue Department has made a significant change in its tax policy, announcing that local residents, including foreigners who live in Thailand, who earn income from overseas sources, will now be subject to personal income tax. This amendment, outlined in Paragraph 2 of Section 41 of the Thai Revenue Code, marks a departure from the previous practice of exempting foreign-sourced income from taxation for nearly four decades.

The move to a wider tax-gathering standard is rooted in international standards for financial information exchange, aiming to enhance tax transparency and fairness. In essence, the Thai government is trying to ensure that whether income is earned within the country or abroad, it is subject to taxation.

The Revenue Department had never actually exempted the collection of personal income tax on offshore income. But the previous rule, in place for 40 years, only required residents to pay taxes on foreign income when it was brought into Thailand during the year it was received.

If the same income was brought into Thailand in the following year, it was exempt from tax. For example, if someone earned overseas income on December 31 and transferred it to Thailand on January 1, just the next day, they were not obligated to pay personal income tax to the Thai Revenue Department.

Of course the loophole was widely abused, as taxpayers could manipulate the timing of bringing income into Thailand. But the revenue department’s was unable to do anything about it due to limited double-tax agreements with many foreign countries. Collecting tax on foreign income would result in double taxation since individuals would need to pay tax to both Thailand and the country where they earned the income, something the double-tax agreements were trying to avoid.

Today, Thailand has 61 double-tax agreements in place, preventing double taxation for individuals or companies operating in multiple countries. Additionally, technological advancements now enable better monitoring of income movements, making tax collection from overseas income more feasible.

The revised tax rule will take effect on January 1, 2024, applying exclusively to tax residents in Thailand. Tourists and short-term workers will be exempt, as will those who have already been taxed in a foreign country with a double tax agreement with Thailand.

Section 41 states…

“An individual Thai citizen or foreigner who lives in Thailand for one or more periods totalling at least 180 days in any tax [calendar] year is, for tax purposes, deemed a resident of Thailand and subject to tax on all assessable income [according to Section 40 which indicates types of income subject to tax derived from sources within the country, whether paid within or outside Thailand, and on assessable income derived from foreign sources to the extent that it is brought into Thailand in a year in which income is received.”

So, ‘resident’ relates to your tenure in Thailand for more than 180 days in a calendar year, and has nothing to do with the visa you are on, except a tourist visa (because foreigners on Tourist visas are deemed unable to work in Thailand during their stay).

The Revenue Department will work out details like the tax credit system for prior double tax agreements during the transition period.

This change is expected to enhance Thailand’s international standing and promote fairness in tax collection, ensuring transparency in tax practices.

The revised system will rely on self-declaration by taxpayers, supported by digital technology and international information exchange systems for verification. It’s also aimed at preventing tax evasion and ensuring that everyone contributes their fair share, whether their income is generated domestically or overseas.

There will be more analysis on this from the Revenue Department as we get closer to the start of next year, when the revised tax will come into effect.


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