In an effort to tackle loopholes in overseas income tax, the Thai government has pulled out new rules that it said would permanently close these gaps for good, while also addressing issues of income inequality within the country.
The Thai Ministry of Finance last week implemented a tighter rule on overseas income, which will take effect on January 1st, 2024, onward.
The new rule, aimed to tackle income equality and tax loopholes as stated by PM Srettha Thavisin, will empower authorities to collect taxes from the foreign income of individuals who have resided in Thailand for a minimum of 180 days in the respective assessment year.
According to the new order, residents, who earn taxable income offshore, will be subject to personal income tax, regardless of the tax year they bring such funds into Thailand or the year in which the money is earned, the Revenue Department declared on September 15th.
Previously, residents with foreign income were exempt from personal income tax if they brought the funds into Thailand in a different year from the year the income was earned.
The new rule now essentially close this gap by taxing offshore income whenever it is remitted into the country.
However, it has also caused concern amongst many foreign expats even though the intention of the rules seem mainly targeted at Thais, and dual tax agreements could avert some of the impact for some foreigners. Regardless of the intention, however, the rules could still complicate things for some foreign nationals who stay in Thailand over 180 days a year.
PM Srettha on Monday, September 18th, emphasized the importance of this move, saying “Some people may not be happy that I am digging in to this area, but inequality is a big issue. The principle of tax is that you must pay tax on income you earn no matter how you earn it and not take advantage of various loopholes to try to avoid it.”
Nevertheless, it is important to highlight that if the income from offshore sources is not subject to taxation or falls under categories exempted from Thai personal income tax as per the Revenue Code, residents will not be required to pay personal income tax when they bring that income into Thailand.
As for exactly what this means for foreigners, the new rules have driven intense debate on social media and concern. Many netizens have pointed out that most expats have dual tax agreements with their own home countries so if the income was already taxed in say the UK, it would in theory not be able to be double taxed in Thailand.
There has also been debate on if the term “resident” in the new rules applies to just staying over 180 days or being a Thai national, which most seem to believe that based on current interpretation of the rules this would be the former and not the latter.
There is also no sign of if foreign nationals could be officially exempted or if this means regardless of a dual tax status if a foreign expat would now legally need to do a Thai tax return each year. Foreign expats in some visa statuses, notably work visas, already do this or have their company handle it for them.
The Ministry of Finance has stated that they understand a lot of the growing concern around the new rules and plan to provide further clarification on them in the near future before they take effect.
TPN media has already had many reader messages and e-mails full of concern over the pending rules but many of the questions quite simply cannot be answered with a concrete response until the Thai government provides further clarifications.
We will, however, continue to cover these new rules as they are clarified and expanded upon and urge those interested in the future rules to keep a close eye on TPN Media.