The Revenue Department of Thailand has taken a significant step towards enhancing transparency and providing clarity on taxation matters by issuing a comprehensive document addressing frequently asked questions related to the Order of Revenue Department No. Por.161/2566, dated September 15th, 2023. This document seeks to elucidate the intricacies surrounding the payment of income tax under Section 41, Paragraph Two, of the Revenue Code. With a focus on personal income tax for income derived from foreign sources, the document aims to provide taxpayers with a clear and concise understanding of their obligations and entitlements in alignment with the updated regulations. In this update, we will delve into the key points and clarifications offered in this document to help taxpayers navigate their tax responsibilities more effectively.
1. The Department of Revenue’s Order No. 161/2566 dated September 15, 2566, explains the fundamental principles of personal income tax for individuals with income from foreign sources, as per Section 41, Subsection 2, which states that “individuals with income from foreign sources must pay personal income tax if they meet the following conditions:”
✓ They are individuals with income generated from foreign sources while residing in Thailand for 180 days or more in the tax year.
✓ They have brought income from foreign sources into Thailand in the same or subsequent tax years.
In such cases, individuals must pay personal income tax on income from foreign sources in the tax year when the income is brought into Thailand.
Example: In 2023, Mr. A, who resided in Thailand for 200 days, earned rental income from a property located abroad, which was transferred to a bank account overseas. Subsequently, in 2027, Mr. A transferred this income to a bank account in Thailand. Mr. A is required to include this foreign-sourced income when calculating personal income tax for the tax year 2027.
2. The new directive from the Department of Revenue concerns the taxation of “assessable income from foreign sources, regardless of the tax year it was earned, when brought into Thailand, starting from January 1, 2024, onwards.”
3. The term “individual residing in Thailand” for the purpose of this law refers to any individual, regardless of nationality, who accumulates a total of 180 days or more in Thailand within a single tax year. This definition considers the cumulative days spent in Thailand, irrespective of the number of entries and exits within that year.
4. Assessable income from foreign sources subject to tax includes income as defined under Sections 40(1) to 40(8), with exceptions for income exempted by law, such as inheritance or income received from parents, descendants, or spouses, up to a limit of 20 million baht per tax year.
5. In cases where an individual invests in foreign bonds and receives interest income from holding these bonds, and subsequently brings both the principal and interest income back into Thailand, only the interest income portion is subject to tax if the interest income meets the criteria of being earned during the tax year when the individual resides in Thailand for 180 days or more. This rule applies regardless of when the principal and interest income are repatriated.
6. If income is earned in a tax year when the individual was residing in Thailand for at least 180 days but is brought into Thailand in a subsequent tax year, it is still subject to tax. In summary, if foreign-sourced income is earned in a tax year when the individual is a resident in Thailand and is subsequently brought into Thailand, it must be included in the calculation of personal income tax for the tax year when it is brought into Thailand. This requirement necessitates the submission of a tax return by March of the following year.
7. If an individual earns income from foreign sources in one tax year and brings it into Thailand in the same tax year, it is subject to tax. This is because the law previously stated that income from foreign sources brought into Thailand in the same tax year is taxable. This regulation was exploited by individuals to avoid paying tax, which led the Department of Revenue to issue the current directive to close this legal loophole.
8. An individual who has resided and worked abroad for an extended period and subsequently brings their accumulated savings or income from foreign sources into Thailand is not subject to tax. This exemption applies because the income was earned in tax years when the individual was not residing in Thailand for at least 180 days.
9. Double taxation is not applicable to income from foreign sources already taxed in a foreign country with which Thailand has a double taxation agreement. In such cases, individuals can credit the tax paid abroad when calculating their tax liability in Thailand for the year when the income is brought into the country.
10. This Department of Revenue directive is not a legal statute but an explanatory document that clarifies the taxation rules for individuals with income from foreign sources in Thailand. Therefore, taxpayers are required to comply with the guidelines provided in this document as an additional legal provision.