Before the issuance of Orders No. Por.161/2566 and No. Por.162/2566, Thailand’s approach to taxing foreign-sourced income was conditional. According to the law, foreign income had to be included in the personal income tax calculation if two criteria were met:
1. The individual resided in Thailand for 180 days or more in any given tax year.
2. The foreign income was brought into Thailand within the same tax year.
This framework had a significant loophole: if individuals delayed bringing their foreign income into Thailand until the following tax year, they could avoid taxation. This led to reduced tax revenue as it incentivized the deferral of repatriation of foreign income.
New Orders and Their Implications
✓ Order No. Por.161/2566 introduces a critical shift in the interpretation of Section 41 Paragraph 2 of the Thai Revenue Code. Effective from January 1, 2024, foreign-sourced income brought into Thailand will be subject to personal income tax regardless of when it was earned. This change ensures that any assessable income derived from employment, business activities, or property overseas by a Thai resident will be taxed in the year it is brought into Thailand, closing the previous loophole.
✓ Order No. Por.162/2566, issued on November 20, 2023, provides further clarification. It states that the new interpretation should not apply to foreign-sourced income earned before January 1, 2024. This means that income derived prior to this date will be subject to the previous rule: it will only be taxed if brought into Thailand within the same tax year it was earned. This order aims to ease the transition for taxpayers planning the remittance of previously earned foreign income.
Residency and Taxation
Under these orders, individuals who reside in Thailand for 180 days or more in a tax year are considered residents and are liable for personal income tax on their foreign-sourced income brought into Thailand. This applies even if the income is brought into the country in a subsequent tax year. This clarification eliminates any ambiguity about the timing of repatriation and ensures consistent tax treatment.
Assessable Income and Tax Filing
Thai taxpayers must file a Personal Income Tax return and make payments to the Revenue Department by the last day of March following the relevant fiscal year. Assessable income includes various types of earnings under Sections 40(1) to 40(8) of the Thai Revenue Code, such as wages, salaries, dividends, interest, and income from property leases and professional services. There are exemptions, such as inheritance and income from close family members up to 20 million baht per tax year. The system is progressive, and any withholding tax paid can be credited against the tax liability at the end of the year.
Non-Residents and Tax Obligations
Non-residents are subject to personal income tax only on income generated within Thailand. Both residents and non-residents need to apply for a personal income tax ID. Non-residents’ tax obligations are more limited, focusing on Thai-sourced income, whereas residents face broader tax responsibilities, including foreign-sourced income brought into Thailand.
Double Taxation Agreements and Tax Credits
Thailand has double taxation agreements (DTAs) with various countries, allowing taxpayers to credit the tax paid in the source country against their Thai tax liabilities. This provision helps prevent double taxation and encourages compliance by ensuring that foreign income isn’t taxed twice, once in the country of origin and once in Thailand.
Exemptions for Long-Term Foreign Residents
Holders of Long-Term Resident (LTR) visas, such as Wealthy Global Citizens, Wealthy Pensioners, and Work-From-Thailand Professionals, are exempt from Thai personal income tax on foreign-sourced income brought into Thailand. This exemption aims to attract high-net-worth individuals and skilled professionals to reside in Thailand.
Impact and Compliance
The new orders are expected to impact individuals with substantial foreign-sourced income, particularly those involved in international business or investment activities. Accurate documentation and careful planning are crucial for compliance and optimizing tax obligations. Taxpayers are advised to consult with tax professionals to navigate these changes effectively.
In summary, Orders No. Por.161/2566 and No. Por.162/2566 represent a significant shift in the taxation of foreign-sourced income in Thailand. These changes aim to close existing loopholes, ensure fair taxation, and increase tax revenue while providing certain exemptions to attract long-term foreign residents. Taxpayers should stay informed and seek professional advice to comply with the new regulations and optimize their tax planning strategies.