New tax rules for foreign-sourced income

Victor Wong – Financial Analyst and Tax Expert.

In response to the growing concerns among expatriates, the Thai Revenue Department has issued Orders No. P. 161 and 162/2566, effective from January 2024, to provide clear guidelines on the taxation of foreign-sourced income. Here’s a detailed look at what these new regulations entail and how they impact residents and expatriates in Thailand.

Key Provisions of Order No. P. 161/2566,

  1. Foreign Income Reporting Starting January 1, 2024, all residents in Thailand must report income from abroad when it is brought into the country. This includes income from work, investments, and assets located outside Thailand. However, any income earned before this date can be transferred to Thailand tax-free if done by December 31, 2024.
  2. Residency Condition Under Section 41, Paragraph 3, anyone staying in Thailand for one or more periods totaling at least 180 days in any tax year is considered a resident and must comply with these tax regulations.
  3. Repeal of Conflicting Regulations Any previous regulations that contradict the new order are officially repealed. This move aims to eliminate inconsistencies and ensure a unified approach to foreign income taxation.
  4. Exemption for Pre-2024 Income The amendment explicitly states that income earned before January 1, 2024, is exempt from these new provisions if transferred to Thailand by the end of 2024. This provides a grace period for taxpayers to adjust to the new rules.
  5. Alignment with Prior Guidelines The new orders align with existing guidelines to ensure a smooth transition for both taxpayers and revenue officers. This helps in maintaining consistency and clarity in the application of tax laws.

Impact on Expatriates and Residents
The new tax rules significantly impact expatriates and long-term residents in Thailand, particularly those with foreign-sourced income. Here’s how,

– Expatriates with Taxed Income For expatriates receiving income already taxed in another country, such as pensions, these amounts will not be subject to additional Thai taxes. This is particularly relevant for retirees living in Thailand who receive pensions from their home countries.

– Income from Foreign Work or Assets Income generated from work or assets located abroad must be reported if transferred into Thailand from January 1, 2024, onwards. This includes dividends, interest, rental income, and capital gains from foreign investments.

– Professional Tax Advice Given the complexity of the new regulations, retirees and those with foreign income are strongly advised to seek professional tax advice to ensure compliance and optimize their tax liabilities.

Action Points for Taxpayers
To comply with the new regulations, taxpayers should take the following steps:

  1. File Form 90 Taxpayers must prepare and file the Income Tax Declaration (Form 90) by March 31, 2025. This form will include all relevant income and deductions for the tax year.
  2. Maintain Documentation It is crucial to keep comprehensive records of all income sources, taxes paid abroad, and any transfers into Thailand. Proper documentation will help in accurately reporting income and claiming any applicable deductions or exemptions.

Example: A German Retired Citizen Living in Thailand
Consider a German retiree, Mr. Müller, who has been living in Thailand for several years with a non-immigrant annual visa. He receives a monthly pension from Germany, which is already taxed there. Here’s how the new orders affect him,

  1. Pension Income Mr. Müller’s pension, taxed in Germany, will not be subject to additional Thai taxes due to the Double Tax Agreement (DTA) between Thailand and Germany. He should keep records of his pension statements and tax payments in Germany.
  2. Other Foreign Income If Mr. Müller has other sources of income from investments or assets abroad, he must report this income if brought into Thailand from January 1, 2024. For instance, if he receives interest from a foreign bank account or rental income from a property in Germany, this must be included in his Thai tax declaration.
  3. Pre-2024 Income Any income Mr. Müller earned before January 1, 2024, can be transferred to Thailand without incurring Thai taxes if done by December 31, 2024. He should document these transfers clearly to avoid any future tax issues.
  4. Residency Condition Since Mr. Müller stays in Thailand for more than 180 days a year, he is considered a resident and must comply with these tax regulations.
  5. Filing Requirements Despite his pension being exempt from additional Thai taxes, Mr. Müller must still file Form 90 by March 31, 2025, to report his income and any applicable deductions. Maintaining detailed records of all income sources and transfers will facilitate this process.

Victor Wong
(Peerasan Wongsri)
Financial Analyst and Tax Expert
Tel: 062 879 5414 Email: [email protected]

For additional insights and the original article discussing expat legal concerns in Pattaya, click here: Pattaya lawyer homes in on expat concerns