In a significant development aimed at bolstering tax collection in Thailand, the Revenue Department issued Order No. Por.161/2023, dated 15th September 2023. This order, which came into effect on the 1st of January 2024, introduces important amendments to the taxation of foreign income, specifically targeting individuals with assessable income from work duties or activities abroad or from assets located abroad, as per Section 41, paragraph 2 of the Revenue Code.
Background
Prior to the issuance of this order, Thailand’s taxation of foreign income was subject to certain conditions. The law stipulated that foreign income had to be included in the calculation of personal income tax 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.
Notably, this legal framework had a significant loophole. If a person deferred bringing foreign income into Thailand to the following year, they were exempt from personal income tax, as it did not satisfy both conditions simultaneously. Consequently, the existing law provided an incentive for individuals to delay the repatriation of foreign income, resulting in reduced tax revenue for the country.
Key Provisions of Revenue Department Order No. Por.161/2023
The new Revenue Department order has been implemented to address this issue and fortify tax collection on foreign income. Here are the key provisions of the order:
1. Inclusion of Foreign Income: Individuals who are residents of Thailand and stay in the country for 180 days or more in any tax year, and who possess assessable income from work duties or activities conducted abroad or from assets located abroad, must include that assessable income in the calculation of income tax in the tax year when such income is brought into Thailand.
2. Cancellation of Contradictory Rules: All rules, regulations, orders, written responses to consultations, or any practices that are inconsistent with or contrary to the provisions of this order are hereby canceled.
3. Effective Date: This order became effective for assessable income brought into Thailand from the 1st of January 2024 onwards.
Closing the Loophole
The amendment introduced by Revenue Department Order No. Por.161/2023 effectively closes the previous loophole in the tax law. Now, individuals cannot evade personal income tax by deferring the repatriation of foreign income to a subsequent tax year. This ensures a fair and consistent taxation of foreign income and aligns with Thailand’s commitment to enhancing tax compliance and revenue collection.
The Revenue Department’s proactive measure to tighten tax collection on foreign income, as reflected in Order No. Por.161/2023, represents a crucial step in strengthening Thailand’s taxation system. It eliminates opportunities for tax avoidance and ensures a more equitable distribution of tax obligations among residents with foreign income. Individuals affected by this order should seek professional guidance to ensure compliance with the new tax regulations.
For further clarification or assistance regarding the implications of this order on your tax situation, please do not hesitate to contact at [email protected] for expert legal advice and guidance.
Disclaimer: This legal update is for informational purposes only and should not be construed as legal advice. Please consult with a qualified attorney for guidance specific to your situation.
Updated on 20 September 2023
News No. Por.Chor.Sor. 34/2566 | Press Conference Date: 18th September 2023
Subject: The Revenue Department improves the method for collecting personal income tax for cases involving income from sources outside the country, effective from 1st January 2024 onwards.
In a recent press conference held on 18th September 2023, Mr. Winit Wisetsuvarnabhumi, Deputy Director-General of the Revenue Department, announced significant reforms in the method for collecting personal income tax in Thailand, particularly concerning individuals with income derived from foreign sources. These changes are set to take effect from 1st January 2024.
The catalyst for these revisions lies in the profound transformation of global trade and investment patterns driven by technological advancements. Thailand, recognizing the need for alignment with international tax standards, has joined the Global Forum on Transparency and Exchange of Information for Tax Purposes. Additionally, the country has become a signatory to both the Multilateral Agreement on Providing Assistance in Tax Administration (MAC) and the Multilateral Agreement between Authorities on the Automated Exchange of Financial Data (MCAA CRS). These international commitments underscore the importance of enhancing tax collection practices to ensure fairness among individuals with income generated within and outside the country’s borders.
The central tenet of this reform is the amendment of the method for collecting personal income tax as stipulated in the Revenue Department’s Order No. Por. 161/2566, dated September 15, 2023. Specifically, this amendment focuses on individuals who possess assessable income arising from employment, business activities conducted abroad, or properties situated outside Thailand. Under the revised framework, these individuals will be subject to personal income tax obligations in Thailand only when their assessable income is brought into the country. However, if an income earner has already paid taxes in their country of income origin, provided there is a Double Tax Agreement in place between Thailand and that country, the income earner can utilize the taxes paid in the country of origin as a tax credit, following the provisions outlined in the respective Double Tax Agreement.
A spokesperson for the Revenue Department emphasized that these modifications in personal income tax collection methods align with Thailand’s objectives as a member of international tax forums and its commitment to multilateral agreements. The overarching aim is to bolster fairness in tax collection between individuals with income originating domestically and those with income derived from overseas sources. These reforms are also anticipated to elevate transparency levels in tax practices. The Revenue Department intends to engage in consultations with various stakeholders to further refine the procedures for collecting personal income tax pertaining to foreign income sources.
The forthcoming changes signify Thailand’s dedication to maintaining tax compliance in an evolving global landscape and ensuring that its tax collection practices remain equitable and in harmony with international standards.