Thailand’s Revenue Department plans to tax all foreign residents on income earned globally, effective 2025. This move, aligned with OECD goals, aims to widen the tax base and eliminate tax shelters.

Thailand’s Revenue Department is planning legal changes to treat all foreign residents in the country similar to Thai nationals in relation to tax reporting. In effect, from 2025, the plan is to tax foreign residents as defined by Section 41 of the tax code on all income, whether remitted to Thailand or not. The move comes in response to the government’s need to widen its tax base. In addition, it is also part of the OECD-driven campaign to eliminate tax shelters and havens across the world.

Director-general of the Revenue Department, Kulaya Tantitemit, has revealed a plan to tax foreign residents in Thailand on their global income rather than just remittances to Thailand. It is understood that moves are underway to change the law in this respect.    (Source: Ministry of Finance)

Thailand’s Revenue Department is preparing plans to widen the basis for tax reporting relating to foreign residents.

Presently, under Section 41 of the Revenue Code, any foreign resident in the kingdom for over 180 days is required to make an income tax return.

Previously, this was treated casually as a 1985 loophole in the tax code that, in effect, allowed foreigners to avoid tax on income related to Thailand. The interpretation of the law suggested that if income was not earned in the same tax year, then it could not be taxed.

Prime Minister Srettha Thavisin ordered the tax regime for foreigners changed as soon as he took up office last year as Minister of Finance as well as PM

However, within weeks of taking office as Prime Minister and Minister of Finance in 2023, Srettha Thavisin ordered otherwise.

On September 15th, 2023, order P 161/2023 made any income related to Thailand, irrespective of what year it was earned, subject to tax.

Certainly, this caused consternation last year as it impacts not only foreign residents but also Thai overseas investors. Moreover, there are bound to be legal challenges to it. In brief, the order is not a law but a change in interpretation by the Revenue Department since its 1985 inception.

Afterwards, the Thai tax authorities granted some leeway. Nonetheless, at the same time, they prepared the ground for bringing hundreds of thousands of foreigners in Thailand under the shrinking tax net.

Retirement income or pension fund transfers are taxable if they have not been taxed in the country of origin and that country has a tax treaty with Thailand

In addition, it has been confirmed that this does apply to retirement fund income.

In this respect, the key deciding factor is whether the foreign country of origin has a tax treaty with Thailand. If not, such funds are open to taxation as income. If there is a treaty, it must be seen if retirement funds are ring-fenced to be taxed only in the country of origin.

Tax treaty countries with Thailand (see this news report)

Furthermore, if there is a tax treaty, the rule is that the foreigner will not be taxed twice. Nonetheless, tax experts now admit that for decades, Thailand has effectively been a tax haven for retirees or foreigners living on income treated tax-free from abroad.

Revenue Department has set its eyes on all income earned in 2024 and is requiring tax returns from all Section 41  foreign residents by March 31st 2025

The Revenue Department in November 2023 set some reasonable ground rules.

In short, they excluded all income before January 1st, 2024. Thereafter, all income related to Thailand must be reported. In this respect, under order P 162/2023, tax returns by foreign residents for 2024 will be required by the end of March 2025.

A new tax era in Thailand begins as the Revenue Department now shares data with 138 countries within the OECD
Some expatriate foreign residents face a base tax bill of up to ฿71k a year and must file a return by March 2025

Undoubtedly, the Thai government’s plan is to create a new framework for the taxation of foreigners in Thailand.

In July 2023, the Revenue Department was among 138 countries that agreed to a new world taxation framework. The initiative was organised by the OECD, which has led the campaign for fairly sharing the world’s taxation burden. In effect, a campaign to root out tax havens and shelters.

OECD membership for Thailand promises to rein in the carefree days of loose taxation policy and also threatens Thailand’s rampant casual economic sector 

Thailand has applied to become a full member of the Organisation for Economic Co-operation and Development (OECD). In turn, this will also see it moving to rein in the country’s huge informal economy.

The news this week is that Revenue Director-General Kulaya Tantitemit is to take matters further for foreign residents.

The new move aims to tax foreign residents in a similar way to Thai nationals. Essentially, Thailand will become the country where they will be expected to report all their financial affairs.

This will include income and assets abroad as well as funds remitted to Thailand. The proposal accords with the global tax principles being promoted by the OECD and the UN Sustainability goals for a fairer society.

Additionally, the move is in response to potential avoidance behaviour by expats living in the kingdom. For instance, many have banking facilities and credit lines outside Thailand. In particular, wealthier foreigners who may be subject to higher taxes in Thailand, may opt to keep income offshore.

New moves will impact capital flow into Thailand and will at least in the short term continue to do so. Revenue Department pursuing required legal changes

Consequently, the new tax law would have had the effect of limiting or indeed reversing capital inflows to Thailand.

Significantly, there is some evidence of this since the new taxation regime was announced. However, it may be more due to substantial Thai-based or foreign investors moving to reduce their exposure.

Unquestionably, more stringent taxation reporting rules will drive capital offshore. Certainly, it must be accepted that some of this money is ‘hot,’ which would justify Thailand’s new stance to world bodies.

In effect, what the Revenue Department is now proposing is that tax residents here make a full declaration of their income and sources of wealth from 2025.

In brief, this will require legislation or approval from the cabinet to change key regulations. These legal changes are now being looked at by Ms Kulaya’s department.

Thailand needs the money as tax base shrinks

It comes as Thailand’s tax revenues for the first seven months of the 2023-2024 year were down 2.7% on projections. This was due to the government’s initiatives to reduce the cost of living.

At the same time, some of that was also due to the country’s declining tax base. In 2022, Thailand’s tax take to GDP was 13.5%. For comparison, this contrasts with 35.3% for the United Kingdom and 28.3% for the United States.

Indeed, this figure has been projected to fall and is already well below the 1990 to 2022 average of 14.3%.

Certainly, for foreign residents in sunny, carefree Thailand, the skies are due to become a little cloudier in 2025. The tax man, or in this case, tax woman, is knocking at the door.

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Further reading:

Some Expat foreign residents face a base tax bill of up to ฿71k a year. Must file a return by March 2025

New tax era in Thailand begins as Revenue now shares data with 138 countries within the OECD

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

10 year visa a magnet for global citizens setting up in Thailand with zero tax on offshore income

Wealthy foreigners to own small landholdings associated with homes here agreed in principle

New plan for the Thai economy could see an elite foreign visa scheme generate up to 6% of GDP

Economic plan to put the smile back in Thailand’s appeal to western foreigners to live and work

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IMF urges government to loosen nation’s purse strings as finances tighten with the tax take down

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