Foreigners in Thailand must file income tax returns for 2024 by March 2025. The new regime could mean a minimum of ฿71,000 tax for some retired expats. Tax treaties certainly should offer relief, so expats are urged to seek advice and understand the specific treaties related to their country of origin.

Foreigners in Thailand will be expected to file income tax returns for the year 2024 by the end of March 2025. This comes with Thai tax authorities moving to widen the kingdom’s tax base as the country seeks structural economic changes to address its growing aged population. The new taxation regime could mean a minimum of ฿71,000 tax for some retired expats living in Thailand. This is based on the base income level stipulated by the Immigration Bureau. However, if an appropriate tax treaty is in place, it can help the taxpayer. For instance, a provision meaning that pension fund income is only taxed in the country where it is based.

Prime Minister Srettha Thavisin (right) announced the tax change targeting foreign residents in October 2023. It was ordered in September. The latest update from the Revenue Department is that it will begin assessing income from January 1st, 2024. In this respect, returns from expats and foreign residents are due no later than the end of March 2025.

Certainly, the tax will be due unless the remitted income from abroad is already taxed at source and the foreigner’s home country has a tax treaty with the kingdom.

Foreigners are being encouraged to seek tax advice and, in particular, to study the particular tax treaty between their country of origin and Thailand.

Thailand’s Revenue Department is still moving forward with its implementation of broader tax reporting requirements for foreigners resident in the kingdom.

PM Srettha Thavisin, in October 2023, said the taxation change was aimed at reducing inequality and broadening the country’s tax base for future challenges

This comes following the September 15th, 2023 order P 161/2023, which effectively removed a legal loophole. In brief, the legal loophole since 1985 has allowed foreign residents to not pay tax on income remitted to Thailand. 

Previously, before the September order, or reinterpretation, if the foreigner declared the income as not earned in the same year, it was tax-free.

The new regime sets out the government’s stance. In effect, it wishes to subject all foreign residents and potential taxpayers under Section 41 to tax reporting requirements. A taxpayer under Section 41 is a person resident in the kingdom for over 180 days a year.

Following the September order, the Thai tax authorities issued a new edict in November 2023.

Order P162/2023 specified that the new dispensation will apply to all income from the 1st of January 2024. Certainly, this clarity is welcome.

At length, it helps avoid all confusion about past income remitted to Thailand.

Change in the tax law does target expats living in Thailand and extends reporting obligations

Prime Minister Srettha Thavisin introduced the measure last year.

In  October 2023 he said it was necessary to address inequality in Thailand. In addition, the PM, then Minister of Finance, said the move was aimed at broadening the tax base. 

For instance, at the end of 2022, Thailand’s tax revenue as a percentage of GDP was 13.5%. In the meantime from 1990 to 2022, it had previously averaged 14.3%.

Notwithstanding this, the government faces the challenge of a rapidly ageing population and tepid economic growth.

Revenue Department sets a requirement for all foreign residents to submit income tax declarations for  the 2024 year by the end of March 2025 at the latest

Furthermore, the Revenue Department has made it clear that all foreign residents should file a tax assessment form for the 2024 calendar year by the end of March 2025.

In effect, all foreigners are now subject to tax on their income in Thailand from both domestic and external sources.

Undoubtedly, the taxpayer may and should seek tax treaty relief to prevent double taxation.

For instance, if a remittance from a fund or income source in the foreigner’s country of origin is already subject to tax, then no tax should be payable.

However, at this time, all foreigners are advised to study the particular tax treaty between Thailand and their country of origin.

Certainly, they can be very particular or significantly different in places.

In addition, foreigners who live in Thailand from countries with no tax treaty with the kingdom are being warned that they will face tax on remittances in any event.

Certainly, this includes situations where tax is allegedly paid in the country of origin. In short, only a tax treaty can facilitate the principle of no double taxation.

Thailand joins a growing network of OECD countries to ensure global fairness in shouldering tax burdens and in increasingly formalising the Thai economy

Presently, Thailand has tax treaties with 61 foreign countries.

At length, these include Armenia, Australia, Austria, Bahrain, Bangladesh, Belarus, Belgium, Bulgaria, Cambodia, Canada, Chile, China (People’s Republic), Cyprus, Czechia, Denmark, Estonia, Finland, France, Germany, Hong Kong, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, Korea, Kuwait, Laos, Luxembourg, Malaysia, Mauritius, Nepal, Netherlands, New Zealand, Norway, Oman, Pakistan, Philippines, Poland, Romania, Russia, Seychelles, Singapore, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Taiwan, Tajikistan, Turkey (Türkiye), Ukraine, United Arab Emirates, United Kingdom, United States of America, Uzbekistan and Vietnam.

Significantly, Thailand under its new tax treaty obligations is engaging in closer information sharing with other tax authorities.

This is part of a move by the Organisation for Economic Co-operation and Development (OECD) to improve global tax efficiency and fairness.

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The implications of these changes could be enormous. In addition, there may be unintended effects.

Presently, up to 50% of Thailand’s economy is casual or ‘off the book.’ Indeed, this casual approach is what draws many foreigners to live in Thailand.

Thailand as a wonderful tax haven for retirees may continue to be the case provided retirement fund remittances are exempted in relevant tax treaties

In effect, foreign expats, by and large, have lived in a tax-free haven for the last six decades. In short, ever since they began to flock to Thailand. Many will continue to do so if they live on retirement fund remittances covered by a tax treaty exemption. 

This new regime will provoke a reaction from some. It may not be what the Thai government expects.

Undoubtedly, most will comply but this group of people are quite often independent thinkers.

Move will significantly impact nearly all foreign residents living in Thailand. Not least, the time and cost of an additional annual reporting requirement

However, it is not clear what impact this measure will have on Thailand.

Certainly, many foreigners based in Thailand maintain bank account facilities and income sources outside the kingdom.

At this time, income earned by the foreign taxpayer outside of Thailand is not subject to tax.

In effect, for some foreign residents, particularly wealthy individuals, there may be an incentive to limit or indeed cancel remittances of income to Thailand to personal bank accounts or facilities.

At the same time, the transfer of funds for property purchases and other investments in Thailand may also be impacted.

In addition, this law simultaneously applies to Thai taxpayers who remit investment funds generated abroad.

Nevertheless, the impact this law will have on average expats in Thailand may in time be significant. Indeed, the obligation to file an income tax assessment form from 2025 could prove a key turning point.

Based on the minimum requirements of a retirement visa, there could be a bill of ฿71,000. However, if it is pension income, there may be no tax payable at all

For example, a foreign resident on a retirement visa. The Immigration Bureau specifies a minimum income of ฿65,000 per month to obtain this visa or a fund of ฿800,000 on deposit.

Based on this level of income or ฿780,000 a year, the average foreign resident could possibly face a tax bill of ฿71,000.

The first ฿150,000 is tax-free. There is 5% on the next ฿150,000 up to ฿300,000. Thereafter, it is 10% on the next ฿200,000. Following this, there is 15% on the next ฿250,000 and then 20% on the last ฿30,000.

Certainly, many foreigners in the kingdom have larger incomes and will consequently pay a progressively higher tax rate.

Different tax treaties for each country provide for different tax treatment and policies. Revenue Department may have to issue clarifications or rules

Nonetheless, in many of the tax treaties signed by Thailand, pension payouts are solely subject to tax in the state of origin. At the same time, this must be studied in respect of each tax treaty between Thailand and foreign countries.

For instance, the treaty with Norway is clear. A pension payout from Norway will not be taxed in Thailand. However, royalty payments paid in Germany can be taxed in Thailand.

In addition, there are different time limits and cut-off points in the treatment of income in the treaties.

Reportedly, there are vast differences in both the nature, scope and details of the treaties. Some agreements simply stipulate the principle of no double taxation, while others clearly deal with retirement funds and remittances. 

Others go deeper into the use of companies by foreign residents and have conditions regarding domicile in Thailand.

Neither is it clear if the Thai Revenue Department will itself introduce broader clarifications on such issues to avoid confusion. This particularly relates to retirement fund remittances.

New regime means that an extra form or reporting requirement must be complied with for foreigners residing in Thailand on an annual basis onward

At the same time, the new regulations impose a duty on foreign expats to report for tax. Therefore, they will require tax advisors to ensure that they report fairly and honestly.

Indeed, the situation may end up being quite similar to annual visa renewal, which applies to most foreigners in Thailand.

A significant majority of foreign residents pay a visa agent or consultant to process the extensive paperwork requirements and negotiate any problems that may arise.

The move by the government is part of its plans to widen its tax base.

In brief, this is linked to Thailand’s ageing demographics. International organisations such as the World Bank and Organisation for Economic Co-operation and Development (OECD) have advised the government to move to formalise more of the economy.

A 2023 European Union report noted that Thai life expectancy had increased from 57.9 years to 79.3 years from 1970 to 2022. At the same time, fertility rates dropped from 5.5 in 1970 to 1.3 in 2020. Consequently, Thailand’s median age increased from 16.4 in 1970 to 23.2 in 1990. After that, in 2020, it was 39.3, and it is projected to be 50.7 by 2050.

During this period, the over-65 population is projected to rise from 3% in 1970 to 31.6% in 2050 according to the United Nations.

Thailand’s planners move to formalise the economy as the kingdom’s elderly population, at the same time, shows signs of being robust and hard-working

In response, the government has been encouraged to formalise the country’s economy. In short, it is thought this will improve the productivity of the country’s older working population. Many are working into and beyond old age.

Indeed, there is emerging evidence that Thailand can beat the challenge posed by its ageing population. Certainly, it will take the right policies but it is projected the situation will ease from 2070.

To support this and the country’s universal healthcare system, the government is moving to widen the tax base. This includes taxing foreign residents, online activities and investment remittances from abroad. In addition, there is a move to increase property taxes and boost taxes on consumption.

In effect, the next concern for Thailand is the projected slow GDP growth for Thailand over the next 20 years. The World Bank has made this call. Nevertheless, it suggests that if the government formalised its economy and improved competition, over time, it could see growth rising again to 4-5%.

Poverty began to fall in Thailand in 2022 but lately, there is concern about capital flight out of the country, something not helped by this provision

Notably, also, the bank saw poverty in Thailand declining from 2022 with Thais adapting to a pickup in foreign tourism. This includes a large cohort of older people adapting to a more modern world without government support.

Nevertheless, the message for foreigners living in Thailand is clear. It is time for all groups to pull their weight.

However, how this message will be received is uncertain. There are already signs of a pullback in remittances and capital transfers to Thailand. In turn, this has coincided with the announcement of this tax change.

Undoubtedly, most economists attribute this to elevated US interest rates and the flight of capital out of Asia.

However, it would be wrong to underestimate the importance of foreign residents in Thailand both on inward investments and the country’s tourism prospects. This has declined in terms of income generated.

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