Thailand is moving toward greater tax compliance from the hundreds of thousands of expats living in the kingdom. At the same time, banking facilities at home are being challenged. They are likely to be more expensive as the world acclaims Environmental, Social and Governance values driven by the United Nations 2015 Sustainable Development Goals.

Government agendas and leading firms, including banks, are increasingly dominated by environmental, social, and governance values pushed by bodies such as the United Nations and intergovernmental panels. The trend especially includes the financial industry. This growing impetus has begun to impact Western expats living in Thailand, challenging their lifestyle with the curtailment of trusted bank facilities in their home countries. There is also an increased push towards the global taxation principle targeting those who have sought a better lifestyle abroad and, in many cases, more personal freedom.

Expats face stricter banking and tax rules - Thai Examiner
In Thailand, UK customers of Barclays Bank have been scrambling to make new arrangements before mid-November 2023. From January 1st, there will be the beginning of a new era for taxation in Thailand on income from foreign countries because of a change in a 38-year-old interpretation of the Thai Revenue Code. It also comes with unique difficulties for pensioners seeking to finalise pensions in the UK and other European countries while resident abroad. The changes impact American expats less, with the Social Security Administration paying benefits directly to Thai bank accounts. In contrast, the American income tax system is based on a global earnings principle. Nonetheless, all expats are impacted by corporate moves to pursue ESG-friendly policies to further the 2015 UN Sustainable Development Goals, including climate action.

UK expats in Thailand are increasingly anxious about their financial arrangements.

The situation has come about due to moves by leading UK banks to restrict services to overseas residents and a new push by the Revenue Department in Thailand to widen its tax base, targeting tax residents in the kingdom deriving income from abroad.

The latest challenge to UK pensioners comes with new rules from HM Revenue and Customs tightening the rules on transferring pensions amid turmoil in the pension markets over the value of long-term bonds. 

Under the new rules, pension holders no longer resident in the United Kingdom cannot transfer their pension to another provider.

New rules make it more difficult for non-UK residents to control pension pots or access retirement benefits in addition to new banking restrictions

The new rules also make it more complicated for non-residents in the UK to claim their pensions with the prospect of higher taxes on the final pension pot being raised unless some accommodation is found to allow expats access to managing their funds from abroad just the same as UK tax residents.

UK firms in the financial services market are increasingly restricting access to their services amid a drive for tighter compliance with money laundering regulations, business efficiency and a need to meet vaguely defined but growing Environment and Social Governance ethos driven by top management.

These aims are based on the 2015 United Nations Sustainable Development Goals.

These were 17 goals adopted by the world body in 2015 dealing with climate action, social justice, eradication of hunger and poverty, clean and affordable energy, eradication of inequality, gender equality, sustainable cities and communities, health and wellbeing, responsible consumption, education, clean water and sanitation.

The goals are increasingly at the heart of decisions made in government and big business around the globe.

These decisions need to be more responsive to government mandates, controls and protections despite many of the banks in the United Kingdom being government-owned following rescues during the 2009 banking crisis. 

New banking drive is clearly to eliminate banking services to non-resident nationals while offering new, more expensive ‘international’ banking options

The UK banks have adapted themselves to a trend which is reducing the level and scope of services to citizens living abroad.

The move by UK banks and, by and large, other financial service providers is to eliminate the provision of services to UK nationals no longer living in Britain. 

Initially, this was a response to Brexit.

It has, however, taken on a drive of its own as an increasing number of financial service firms, including major banks, decided that the provision of routine services to UK residents should not be extended to former residents, as has been the case up to now for many decades.

Figures released in 2022 suggest that 560,000 UK citizens had left the country to live long-term abroad, while figures from 2021 showed that at that time, 14.5% of the United Kingdom’s population were born abroad or 9.6 million people.

The latter figure rose for only 5.3 million foreign-born residents in 2004.

Barclays Bank advises UK nationals abroad to open an account in the Isle of Man or Jersey with a £40 monthly charge if the balance is under £100,000

The new business dispensation sends a very unwelcome message to UK expats living abroad and in this increasingly politically polarised world.

In recent months, Barclays Bank, one of the leading financial service providers and banks in the United Kingdom, announced that it was withdrawing the provision of banking facilities to current and savings accounts linked with nationals no longer resident in Britain. 

The bank is offering an alternative service to international customers where they can register with the bank and open accounts with the its branches in the Isle of Man and Jersey to avail of specialised service with a monthly fee of £40 if the balance in the account is below £100,000.

Many Thai-based UK pensioners are currently making alternative arrangements to receive their pensions from the United Kingdom, with the latest restriction on expats coming into effect in mid-November.

Use of residential addresses linked with relatives is discouraged along with the new rules and is not recommended to UK non-resident nationals

Barclays Bank has defended its decision to withdraw such services based on commercial viability, saying that its products and services are specifically tailored to UK residents, with the bank making it clear that maintaining an address at a relative’s or some other arrangement will be viewed as a breach of the agreement with the client going forward.

For some UK residents in Thailand, the changes impact not only the payment of their pensions but also arrangements regarding investments and credit card facilities.

The situation with Barclays Bank’s proposed curtailment of services now aligns it with other UK banks who also insist that its specialist arms should provide services to non-resident individuals. 

Lloyds Bank, for instance, no longer provides standard services to non-UK residents but does provide a banking service to expats and prospective expats through its Lloyds Bank International unit.

Lloyds Bank offer an international current account

The International Current Account requires an annual income of £50,000 but offers a worldwide Internet banking facility.

The news of restrictive practices linked with pensions and bank account facilities is not limited to the United Kingdom, with similar provisions also being made recently in the Netherlands and other European countries.

It is a concerted move by banking institutions and government regulatory authorities worldwide to deal with the growing number of pensioners and adults deciding to live the expat lifestyle.

As governments and officials see it, the UN goals do not favour the expat lifestyle that relies on cheaper air travel, generally promoting additional consumption and a more individualistic, less compliant focus, often leading to lower costs and taxation.

The trend is coming as Thailand is negotiating more bilateral tax treaties.

The change in the revenue interpretation of its tax code announced on the 15th of September will also mean greater accountability and oversight powers for Thai tax collection authorities.

From all January 1st, all income crossing into Thailand from a foreign country or being paid to a Thai resident or a foreigner resident in Thailand will be automatically subject to tax unless the tax resident or foreigner can show that tax has already been paid in respect of the income in the country of origin.

Tax regime in Thailand from January 2024 means more accountability for expats with income from abroad due to a change from the 1985 interpretation

The previous directive, issued in 1985, designated that any income earned in a foreign country in another tax year is not taxable in Thailand and offered a vast loophole for many to avoid tax accountability in the country.

The change in tax interpretation in Thailand in a directive issued on September 15th, 16/2023, is widely expected to be challenged in the courts on the basis that it is only a revised interpretation of an existing provision of the Thai tax code, which has been accepted for 35 years. 

Calls for clarification of new Tax regime, which appears to target expat foreign income sources

The change in the tax code interpretation was clarified by the Director General of the Revenue Department on the 19th of September after days of clamour, with officials also announcing that a focus group had been established to deal with issues that may arise between now and the 1st of January 2024.

Thailand remains a favourite country for retirees or middle-aged people seeking a second life abroad, and these challenges are not insurmountable

In recent decades, Thailand has become a trendy country for the middle-aged and pensioners, particularly men, seeking to retire because of its warm and sunny climate and lower cost of living. 

Thailand, along with countries like Ecuador, Panama, Costa Rica, the Philippines, the Dominican Republic, Mexico and Belize, has become a popular retirement location for Western retirees from Europe, the United States, Australia and New Zealand.

Not only are foreigners retiring to Thailand, but many are experiencing a second life, often establishing new relationships or even secondary incomes. 

The endeavours often include fledgling small business interests, challenging the old order, driven by increased mobility offered by lower airfares in the last few decades and the internet.

Sense of personal freedom living abroad

Many availing of a new lifestyle are also looking for more or a sense of personal freedom, which comes from living abroad but is challenged by the recent move towards global compliance and accountability.

Under Thailand’s retirement visa regime, which is available to foreigners over 50 years of age with ฿800,000 on deposit or an income of ฿65,000 per month, there is an explicit requirement that the holder will not be working or engaged in commercial activity. 

At the same time, foreigners are also restricted from various commercial activities in Thailand under the Business Act.

Foreign retirees must negotiate these existing restrictions carefully and respectfully if seeking to pursue interests in Thailand.

They now face new challenges regarding greater tax accountability and restrictions imposed on them from their home countries. 

Foreign retirees in Thailand are also constrained by other requirements of the kingdom’s immigration laws, whose enforcement by the Immigration Bureau can vary from province to province regarding specific details or minutiae.

The current changes in banking originate from the top of large financial institutions in Western countries. 

Expats can get organised on an even stronger footing in a country where personal taxation is still remarkably low. Attention to detail is now required

Expat retirees can get properly organised and even end up on a firmer footing by ensuring compliance with all the requirements both in the country of origin and in Thailand, where personal income tax is still notably low. 

However, what is clear is that the free-for-all of the last few decades is coming to an end, and what is required is careful attention to detail. 

There have already been problems with foreign retirees needing help to avail of increased benefits associated with their pensions, which the government in the United Kingdom has frozen for retirees living abroad.

UK authorities have, point-blank, refused to entertain representations made by residents from outside the jurisdiction in the same way as the country’s Home Office enforces demanding visa requirements for Thai women or wives of UK partners going in the opposite direction to live in the United Kingdom.

United States social security benefits can be paid into Thai bank accounts, but US citizens must file annual tax returns on a global income principle

In the United States, the situation is different because American citizens are still required to file annual tax returns based on a global income principle.

At the same time, before coming to Thailand, most US retirees will have registered with the US Social Security Administration or, in some instances, by doing this online from Thailand.

The United States operates a facility where American Social Security benefits for American citizens can be paid by direct deposit into the retiree’s foreign bank account in other countries, including Thailand, through arrangements with large US banking institutions.

The US Social Security Administration also sends retirees a questionnaire at regular intervals to be completed and returned to US authorities. 

Failure to do so can see benefits disabled until the questionnaire requirement is fulfilled. Such questionnaires are sent every one to two years to establish if the recipient of US benefits is still entitled to do so.

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