Thailand’s foreign income tax changes now in force

Historically, if a person was a tax resident of Thailand and they received income from offshore, they could avoid paying Thai tax on such income by receiving the income offshore and deferring any remittance into Thailand until the new year.

To address the disparity in the taxation of income from sources outside the country compared with income earned within the country, the Thai Revenue Department issued instructions to revise the tax treatment of foreign income remitted into the country by individual taxpayers, effective from January 1 2024.

Revenue Department instructions No. Paw 161 and Paw 162 state that a tax resident of Thailand who derives assessable income from an employment or business carried on abroad, or from a property situated abroad, shall be required to include such income in their personal income tax return for the payment of tax in the year that the income is brought into Thailand.

The instructions were issued by the Revenue Department as guidelines to revenue officers when conducting tax audits or advising taxpayers on the taxation of foreign income under the Revenue Code. The law remains unchanged. Prior to the Revenue Department issuing these two instructions, the law had been interpreted as limiting the taxation of foreign income to income that is derived and remitted into Thailand in the same tax year.

Foreign income earned in 2023 or prior years that is brought into Thailand after December 31 2023 will not be subject to tax.

It will be important for taxpayers remitting funds from offshore into Thailand to consider how they determine if the funds are taxable or not.

The Revenue Department has issued a Q&A on the taxation of foreign income to help taxpayers to understand the implications of the changes. Similar to other countries with remittance rules, the Revenue Department will likely need to clarify further what constitutes a remittance.

The Revenue Department has announced that it will commence discussions with stakeholders on improving the methods for collecting personal income tax on income from sources outside the country. In this regard, Thailand has implemented the Common Reporting Standard, an internationally agreed standard for the automatic exchange of financial account information between jurisdictions for tax purposes, to better combat tax evasion and ensure tax compliance.

Thailand has double tax agreements with over 60 jurisdictions, which can modify the tax treatment under the Revenue Code; e.g., by granting taxing rights to the other country only or allowing a credit for tax paid in the other country against the tax payable in Thailand. The credit will be granted if the foreign tax is paid in accordance with the provisions of the double tax agreement and will in general be limited to the Thai tax payable on the income.

Interestingly, the Revenue Code does not contain provisions to grant personal income taxpayers a unilateral foreign tax credit in the case where the income is from a country that does not have a double tax agreement with Thailand.

Approximately a year before the Revenue Department announced the changes to foreign income taxation, Thailand launched a long-term resident visa (LTR visa) programme to enhance the country’s attractiveness as a regional hub for living and doing business for ‘high-potential’ foreigners.

One of the benefits granted to an LTR visa holder is an exemption from income tax on foreign income brought into Thailand, pursuant to Royal Decree No. 743 issued under the Revenue Code. The exemption applies to income from an employment or from business carried on abroad, or from a property situated abroad, that has been brought into Thailand.

There are three categories of LTR visa holders eligible for the exemption:

• Wealthy global citizens;

• Wealthy pensioners; and

• Work-from-Thailand professionals.

Foreign nationals holding an LTR visa in one of these categories are not affected by the change of the Revenue Department’s interpretation of the law.