What They Know: How CRS Enables Thailand’s Tax Authorities to Track Your Finances

Let’s delve into what the CRS means for expats and how it affects your financial privacy and obligations.

Governments worldwide have stepped up their fight against tax evasion by introducing the Common Reporting Standard (CRS). This system encourages open sharing and cooperation among countries and requires banks and financial institutions to send financial account details to tax authorities automatically.

Until recently, this wasn’t a big issue for expats in Thailand. The country hadn’t joined the Automatic Exchange of Information (AEOI) agreement, and its tax rules were generally favourable for expats transferring money from abroad. However, things have changed significantly: Thailand has tightened its tax laws on foreign income, and now financial institutions across the globe routinely report to Thailand’s Revenue Department.

What are Common Reporting Standards (CRS)?

The Common Reporting Standards (CRS) are a worldwide effort led by the OECD to prevent tax evasion by automatically sharing financial account information between countries each year.

Banks and financial institutions are required to report account holder information, including their identity, tax ID number, account balances, and financial activity. Not all accounts are subject to this, as exemptions apply based on the account type or the holder’s residency. Some accounts considered low-risk or below certain value thresholds, like some retirement accounts, are exempt from reporting. These exemptions help focus on accounts more likely to be involved in tax evasion.

For expats living in Thailand, financial institutions both in your home country and Thailand are required to disclose your financial account information to tax authorities. Understanding this process is crucial for managing your tax duties and staying compliant.

History and Development of CRS

The Common Reporting Standard (CRS) emerged from a G20 request for a universal method to combat tax evasion. The OECD officially embraced the CRS in 2014, aiming to facilitate automatic financial information exchanges between countries.

Now, over 100 countries have implemented the CRS, demonstrating a widespread commitment to tax transparency. Reactions vary: many governments and financial entities commend the CRS for enhancing global tax compliance, yet some critics voice concerns about high compliance costs and privacy issues. The rollout of the CRS highlights a global trend towards expanded tax collection efforts and stricter compliance measures.

How CRS Works

Under the CRS, various financial entities like banks, pension funds, and investment platforms are required to provide financial account information to tax authorities.

For expats in Thailand, this translates to their foreign banks disclosing details such as account balances, interest, dividends, and income from selling financial assets. Similarly, Thai financial institutions report on expats’ financial activities to Thailand’s Revenue Department. This information is then shared with the tax authorities in the countries where the expats are considered tax residents.

CRS Reporting in Thailand

CRS Reporting in Thailand involves identifying ‘reportable persons’—those who own or control financial accounts and are residents or tax residents in a participating jurisdiction.

In Thailand, if you’ve lived for 180 days or more, you qualify as a tax resident, making you a ‘reportable person.’ Consequently, your financial details are exchanged automatically.

Accounts Subject to CRS Reporting

• Bank accounts
• Custodial arrangements
• Investment entities and platforms
• Insurance products with investment aspects

Details Automatically Reported

• Name
• Address
• Tax identification number
• Account balance or value
• Financial activity, including withdrawals and deposits

This process ensures that comprehensive financial data is shared under the CRS guidelines.

ATM Withdrawals and Payments

Expats often ask if withdrawing cash in Thailand from an overseas account or paying a third party, like school fees with a foreign credit card, counts as a remittance taxable in Thailand. The answer is yes. Both types of transactions are seen as remittances into Thailand and are taxable. Under the CRS, these transactions are automatically reported to the Revenue Department, making them aware of these financial activities.

Thailand’s Journey with CRS

Thailand pledged to meet global tax reporting norms by joining the Global Forum on Transparency and Exchange of Information for Tax Purposes in 2017. The nation fully embraced the Common Reporting Standard (CRS) by 1 January 2022, and commenced its first automatic exchange of information (AEOI) in 2023. This action marks a major step in Thailand’s efforts to enhance tax transparency and combat tax evasion, aligning with international initiatives spearheaded by the OECD.

The Link Between CRS and New Thailand Tax Regulations

The September 2023 tax update in Thailand aligns with its commitment to the Common Reporting Standard (CRS) and the start of its first automatic information exchange (AEOI) in the same year. This means Thailand’s Revenue Department now has detailed access to foreign income of those considered tax residents—people living in Thailand for over 180 days a year. This change significantly affects wealthy Thais with assets overseas and expatriates bringing income into Thailand from other countries.

CRS and Strategic Considerations for Expat Tax Planning

For expatriates, grasping the full scope of the Common Reporting Standard (CRS) and its impact on tax reporting is essential. Here’s what expats need to consider for effective tax planning:

• Stay Informed: Understand that financial entities like banks and investment firms are required to disclose your account details and activities to tax authorities under the CRS.
• Comply with Tax Laws: Know your tax responsibilities and ensure complete compliance to prevent legal issues.
• Distinguish Taxable Income: Learn which types of overseas income are taxable when you bring money into Thailand.
• Recognize Taxable Remittances: Be aware that transferring funds to Thailand from abroad may incur taxes, and financial transactions, including ATM withdrawals and payments in Thailand, are tracked under the CRS.
• Be Careful with Transactions: To avoid unnecessary taxes, consider paying for international expenses directly from your foreign accounts instead of first transferring money to Thailand.
• Plan Strategically: Enhance your financial and tax outcomes by thoroughly assessing your financial strategy, ensuring adherence to tax laws while minimizing costs.

Understanding these elements can help expats navigate the complexities of tax planning in a CRS-compliant world.

Future Outlook

As global tax transparency and information exchange continue to advance, expats in Thailand must stay prepared for regular updates to tax policies and reporting standards. Being informed is key to successfully managing upcoming changes. Adopting a proactive stance will help ensure you can adjust to new rules and prevent any compliance issues.

The Importance of Taking Action

Dealing with the CRS and recent tax adjustments in Thailand adds a substantial responsibility for expats. Although this may seem burdensome, actively managing your tax affairs is crucial to avoid the strict penalties for non-compliance. We urge you not to delay in getting clarity on these issues. Reach out to us for a consultation to effectively navigate these new rules and protect your financial health in Thailand’s evolving tax environment.