Many expatriates residing in Thailand have raised concerns about Section 41 of the Thai Revenue Code, particularly when it comes to income earned overseas and held in foreign bank accounts. The core worry revolves around whether this foreign income, even if not brought into Thailand, would still be subject to Thai taxation. In response, the Revenue Department has issued new rulings, 161/2566 and 162/2566, which provide clarity on how these incomes will be treated from January 1, 2024, onward. Here's what expats need to know.
What Does Section 41 Say?
Section 41 mandates that individuals who reside in Thailand must report and pay taxes on any income earned abroad, provided the income is brought into the country within the same tax year. However, with the new rulings, the interpretation of this section has been updated to account for a more comprehensive set of factors related to overseas income.
Key Points in the New Revenue Rulings (161/2566 and 162/2566)
1. Residency Requirement. If an individual spends more than 180 days in Thailand in any given tax year, they are considered a tax resident and must report their global income. However, if they spend less than 180 days, any income earned overseas will not fall under Thai tax obligations.
2. The correct interpretation of the new rulings, based on Revenue Department orders 161/2566 and 162/2566, specifically states that:
Income Earned After January 1, 2024: Income earned overseas after this date, once brought into Thailand, must be declared and taxed regardless of the year in which it is transferred. This applies even if the income is brought into Thailand in a future tax year. Essentially, if the income is generated after January 1, 2024, it will be taxable once it is transferred to Thailand, regardless of when the transfer takes place.
Income Earned Before January 1, 2024: For income earned before this date, even if it is brought later into Thailand, it will not be subject to these new rules. This provides a clear distinction between how pre-2024 and post-2024 income is treated under the updated tax regulations.
This distinction is important for expatriates or anyone with overseas income, as it clarifies that the tax obligations on income earned before January 1, 2024, are different from those earned after that date, even if the income is transferred later.
3. Types of Affected Income: The rulings apply to various types of income, including salaries, profits from the sale of foreign assets, royalties, and dividends. Any such income brought into Thailand after January 1, 2024, will be subject to Thai tax laws.
Anyway, for those from countries that have signed Double Taxation Agreements (DTAs) with Thailand, these agreements provide substantial relief by preventing the taxing of income twice. Here's how expats can benefit from these agreements:
1. Prevention of Double Taxation: If taxes have already been paid on foreign income in the country where it was earned, DTAs ensure that this income will not be taxed again in Thailand. This is particularly beneficial for expatriates who split their time and income between two countries.
2. Reduced Tax Rates: For certain types of income, such as interest, dividends, or royalties, DTAs may offer reduced tax rates. This allows those from signatory countries to benefit from more favorable tax treatment compared to non-DTA countries.
3. Tax Credits: In cases where taxes are paid abroad, DTAs often provide tax credits. These credits can be applied to offset tax liabilities in Thailand, minimizing the risk of double taxation and ensuring fair tax treatment for expatriates.
The new revenue rulings, combined with the benefits of Double Taxation Agreements, provide clearer guidance for expatriates who have income streams both in Thailand and abroad. Those who spend more than 180 days in the Kingdom, and who have foreign income, should be particularly aware of the new requirements that came into effect on January 1, 2024. As always, consulting with a tax professional is recommended to ensure full compliance with Thai tax laws.
In the next issue I will talk about using foreign cash cards in Thailand.
Victor Wong (Peerasan Wongsri)
victorlawpattaya@gmail.com
Tel: 062-8795414
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