As Thailand’s tax laws tighten around foreign-sourced income, many expats are grappling with whether to comply or simply ignore the new regulations. The recent changes, which came into effect on January 1st, 2024, require expats who are Thai tax residents to declare any foreign income remitted into Thailand in the year that it is transferred to Thailand. This shift has caused a stir in the expat community, with some pondering whether it’s worth the risk to bypass the rules entirely.
Several social media posts and expat forums have echoed these concerns, with some even suggesting that ignoring the regulations might be a viable option. An article in Pattaya Mail highlights that many foreign retirees are considering taking this very approach, hoping to avoid the perceived complications and costs of compliance. But is this strategy as straightforward as it seems? Before deciding to overlook these changes, it’s crucial to consider the legal, financial, and even immigration risks involved.
In this article, we’ll explore the consequences of ignoring the new regulations and explain why the new tax changes may not be as bad as some fear. We’ll also offer guidance on how expats can assess their own situations and avoid falling into unnecessary traps, ensuring they stay on the right side of the law without undue worry.
Are the Changes Really Binding?
Many expats have raised concerns, believing the recent changes on foreign-sourced income are not yet law or may not be enforced. It’s important to clarify that while these changes are not formal statutory laws, they have been issued as Departmental Instruction No. Paw 161/2566 by the Thailand Revenue Department (TRD). These guidelines, published in the Royal Gazette on 6th October 2023, took effect on 1st January 2024.
Although Paw 161/2566 does not have the status of law, it serves as extensive guidance for tax officers, outlining the TRD’s approach to handling foreign-sourced income. Foreign nationals who spend 180 days or more in Thailand during a tax year are classified as Thai tax residents. While taxpayers are technically not legally bound by these guidelines, as Thai tax residents, they are obligated to declare any foreign-sourced income remitted into Thailand. Failure to do so may result in increased scrutiny or challenges when dealing with the TRD.
For more comprehensive details about the TRD’s announcements and guidance, you can refer to this article.
Overview of the Recent Tax Changes
Summary of Key Changes
Thailand’s Revenue Department has introduced new departmental guidelines, effective from January 1st, 2024, which directly affect expats who are considered Thai tax residents. Under these changes, foreign-sourced income will now be taxed if it is remitted into Thailand in the year that it is transferred or remitted. This means that any income brought into the country from overseas accounts—whether from pensions, investments, or business earnings—could be classed as assessable income, meaning that they will likely have to file a tax return. Some may be able to claim tax credits when they file, while others may have Thai income tax to pay.
To clarify, only those expats who meet the criteria of being a Thai tax resident are affected. A person is classified as a Thai tax resident if they spend 180 days or more in Thailand during a calendar year. For these individuals, any foreign income that is remitted to Thailand must be declared in the year it is remitted and may be subject to Thai taxes.
Impact on Expats
For many expats, this new rule raises concerns about how their various sources of overseas income might be affected. Common income sources like pensions, investment dividends, or profits from business ventures overseas, earned while they were a Thai tax resident, are now potentially taxable if they are transferred to a Thai account in the year they are transferred to Thailand.
However, the exact impact depends on several factors, including the timing of the remittance, the type of income, and whether the expat can take advantage of any applicable tax treaties or exemptions. It is important for expats to carefully evaluate their personal financial situation and understand which sources of income may now be subject to Thai tax under these new rules.
Legal Obligations for Expats
Tax Residency Definition
To understand your obligations under Thailand’s new tax rules, it’s important to know whether you qualify as a Thai tax resident. An individual is considered a Thai tax resident if they spend at least 180 days in Thailand during a calendar year (1st January – 31st December). This tax residency status applies to both retirees and working expats, meaning that many long-term expats who spend the majority of the year in Thailand are classified as tax residents under these rules.
As a Thai tax resident, you are subject to Thai income tax on income earned in Thailand, as well as any foreign-sourced income remitted into Thailand.
Required Declarations
If you are a Thai tax resident, you are expected to declare various types of income, including:
- Income Earned in Thailand: Any income derived from employment, business, or other activities within Thailand must be declared and taxed accordingly.
- Foreign-Sourced Income: The new regulation specifically targets foreign income brought into Thailand in the year it is transferred to Thailand. This includes pensions, investment income, and business profits, which must be declared when transferred to a Thai account, or withdrawn via an ATM machine during the calendar tax year.
Self-Assessment System (Same as most countries worldwide)
It’s important to note that Thailand operates under a self-assessment or voluntary compliance system for taxation, where taxpayers are responsible for accurately reporting their own income. Many countries worldwide operate under the same self-assessment, voluntary system, such as the US, UK, Australia, Canada, New Zealand, India and most of the EU. There are only a handful of countries who operate on a different system, including are Denmark, Sweden, Norway, Finland, Portugal, Spain, Belgium, Luxembourg.
If you have a tax obligation, you are expected to comply with the regulations and report your income accurately. While the Thai Revenue Department has mechanisms to audit and verify information, the system traditionally relies on individuals to declare their taxable income honestly. Failing to comply with these obligations could lead to fines, penalties, or even legal consequences, particularly as enforcement efforts intensify in the wake of the new regulations.
The Thailand Revenue Department clearly outlines the duties of tax residents:
Below is the extract
A taxpayer has the following duties: File tax returns and pay proper tax. Register for tax identification number. A taxpayer must also notify the Revenue Department officers of any changes in his particular details Provide relevant documents and accounts as the law requires. This includes receipt, profit and loss statement. Balance sheet, special account, etc. Cooperate and assist the Revenue Department officers and provide additional documents or information when required as well as comply with the summon. Pay tax as assessed by the Revenue Department officers on time. Should a taxpayer fail to pay a complete sum, the assessment officer has the right to seize, attach and sell that asset by auction even without a court decision. Cash raised from the transaction will be used to pay off tax arrears. Non-compliance with tax law. Anyone who does not comply with the law will face civil and criminal action.
Expats must ensure that they declare any relevant income on their annual tax returns and comply with these rules. Failing to declare foreign remittances could result in significant penalties, and it is essential for expats to stay informed about what must be reported.
Is it Really as Bad as You Think?
With all the talk about Thailand’s new tax regulations, many expats are understandably concerned. However, for most, the reality may not be as bad as they fear. Before deciding whether these changes will significantly impact you, let’s break down the key points to consider.
Assessable Remittances, Not Worldwide Income
First and foremost, it’s important to understand that Thailand does not currently tax worldwide income for expats. Instead, only assessable remittances— money you bring into Thailand in the year it is remitted (transferred in or withdrawn from an ATM)—are subject to tax. (Not all money.. just assessable income sources.. if its cash in the bank from pre-2024, this is not assessable income – discussed below) This means that income kept in foreign accounts and not transferred to Thailand is not taxable under the current system.
That said, the Thai Revenue Department (TRD) is actively considering the possibility of taxing worldwide income, a move that could significantly change the landscape for expats in the future. However, these discussions have not been formalised into law, and the focus remains on remittances brought into Thailand.
Non-Assessable Income
Not all types of income are considered taxable under the new rules. For instance, pre-2024 savings in the bank before January 1st, 2024, are not assessable and can be transferred into Thailand at any time. Additionally, some common income sources, like US Social Security payments, or most civil service pensions are also exempt from Thai taxation. So, if your income falls into one of these categories, you may not be affected by the new tax rules at all.
Tax Allowances
Even if you do have taxable income, there are several tax allowances available that can reduce your overall liability. Thailand offers a range of deductions and allowances before any tax is calculated, including personal and dependent allowances.
These allowances help ensure that only the income above certain thresholds is taxed. We’ve provided a detailed breakdown of these allowances here, which can further reduce the burden on expats.
So if you are married, 65 and over and bring in pensions, then you will have at least THB410,000 of allowances, before using the tax brackets.
Tax Brackets
Thailand operates a progressive tax system, meaning you only pay higher tax rates on income above certain thresholds. After deducting off your allowances and deductions, then the first THB150,000 of assessable income is tax-exempt, and the rates increase gradually, with the highest rate of 35% applying only to income over THB5 million. Here’s a quick look at the tax brackets:
So, even if you’re liable to pay tax, it’s important to remember that you are only taxed on your income above each threshold, making the system more manageable than it might initially seem.
Claiming Tax Credits through DTAs
For those who have already paid tax on their foreign income in another country, Thailand has Double Taxation Agreements (DTAs) with many nations, allowing you to claim tax credits. This means that any taxes paid abroad can be offset against your Thai tax liability, helping reduce or even eliminate double taxation.
Why It’s Important to Get a Personalised Assessment
Before considering whether to ignore the new regulations, it’s essential to understand how they specifically affect you. Many expats may find their actual tax liability is less significant than they initially feared. By getting a personalised assessment through our Expat Tax Thailand support line, you can discover how the new rules impact you, potentially easing concerns and helping you avoid unnecessary stress and penalties. It’s always worth finding out before making any decisions.
Risks of Ignoring the Tax Regulations
Choosing to ignore Thailand’s new tax guidelines comes with significant financial and practical risks. Expats who fail to comply may face serious consequences that can be avoided by adhering to the rules.
Penalties and Fines
One of the immediate risks of non-compliance is the potential for increased scrutiny from the Revenue Department. The TRD has the authority to scrutinise undeclared or underreported income, including foreign-sourced income remitted into Thailand. Although the guidelines are not binding law, failing to follow them could lead to:
- Greater likelihood of audits or investigations by tax authorities
- Assessment of Back taxes on undeclared foreign-sourced income remitted into Thailand.
- Interest on unpaid taxes, which can accumulate over time, significantly increasing the overall amount owed. These interest penalties are charged at 1.5% per month, compounded on all outstanding tax and penalties owed.
These penalties can quickly accumulate, making the cost of non-compliance far greater than the cost of complying with the regulations from the start.
Legal Consequences
Beyond financial penalties, wilfully ignoring the new tax regulations can lead to more severe legal consequences. The Thai Revenue Department is increasing its enforcement efforts, particularly in light of global moves toward financial transparency. Expats who deliberately evade their tax obligations may face:
- Investigations or audits by the Thai authorities could lead to significant fines.
- Legal Challenges if undeclared income leads to significant back taxes or other irregularities
- Visa complications in the future as tax compliance becomes more scrutinised during visa or residency renewal processes
These legal risks are significant and given the availability of mechanisms like Double Taxation Agreements, which can reduce tax liability when properly reported, non-compliance is simply not worth the risk.
Long-Term Risks to Residency and Visas
In addition to financial and legal penalties, non-compliance with Thailand’s new tax regulations could seriously affect your long-term residency or visa status. For expats who have made Thailand their home, staying compliant with tax obligations is becoming increasingly important for maintaining residency or securing visa renewals.
Visa and Residency Scrutiny
Tax compliance is now under greater scrutiny as part of the visa and residency renewal process. Non-compliance with tax regulations—especially repeated non-compliance or significant unpaid tax bills—could jeopardise your ability to renew your visa or residency permit. Thai immigration authorities may look more closely at an applicant’s tax status when considering visa extensions, work permits, or long-term residency applications. For retirees, business owners, or long-term expats, staying tax compliant is critical to maintaining your status in Thailand.
Immigration Consequences
While there have been discussions and reports of potential visa complications tied to unresolved tax issues, it is important to note that this is not yet a formal, widespread requirement. However, expats who ignore tax regulations and accrue significant debts with the Thai Revenue Department may face delays or rejections in visa or permit renewals. Immigration authorities are increasingly coordinating with tax authorities, which means unresolved tax problems could, in the future, lead to denied visa extensions or other immigration-related issues.
Given Thailand’s move toward formalising its economy and enforcing stricter tax compliance, unresolved tax obligations could become a greater factor in immigration decisions down the line. As such, staying tax-compliant may help avoid potential risks to visa status in the future.
Risk of Travel Restrictions
In the past, expats with significant unpaid taxes faced the risk of not being able to leave Thailand without first obtaining tax clearance from the authorities. While this requirement is less common today, the Thai Revenue Department still has the power to prevent individuals with tax debts from exiting the country. This potential risk further underscores the importance of staying tax compliant, especially for those who frequently travel or plan to leave the country.
Failure to comply with Thailand’s tax laws could lead to being forced out of the country or, in some cases, being unable to leave until tax obligations are resolved.
Ignorance vs. Willful Non-Compliance
Is Ignorance a Defence?
Some expats might wonder if claiming ignorance of the new tax regulations is a valid defence. While ignorance of the law may seem like a reasonable explanation, it is not typically accepted as a legal defence in most jurisdictions, including Thailand. The recent tax changes have received significant attention in the media, and the Thai Revenue Department has made efforts to clarify the new regulations. Therefore, expats are expected to know their obligations, and claiming ignorance is unlikely to prevent fines or penalties.
Tax authorities generally expect individuals to take responsibility for understanding and complying with the laws in the country where they reside. The recent publicity surrounding these tax changes weakens the argument of not knowing the rules. The best action is to seek professional advice if you are unsure about your obligations to avoid unintentional non-compliance.
Deliberate Evasion Risks
Knowingly ignoring tax regulations presents even greater risks. Deliberate tax evasion, where an individual intentionally avoids paying taxes by not declaring income or hiding assets, can escalate the consequences significantly. Thai authorities can impose substantial financial penalties, including fines up to 100% of the unpaid tax, interest penalties of 1.5% per month on outstanding amounts, and even back taxes for undeclared income.
In severe tax evasion cases, particularly where large amounts are involved, expats may face legal challenges, including investigations, audits, and potential criminal charges. These risks extend beyond financial consequences and can lead to court proceedings or, in extreme cases, imprisonment.
Choosing to ignore tax obligations deliberately is not worth the risk, especially considering the available mechanisms, such as Double Taxation Agreements (DTAs), which can reduce tax liabilities when properly utilised.
The Alternative: Embracing Compliance
Steps to Ensure Compliance
Ensuring compliance with Thailand’s tax regulations may seem daunting at first, but with the right approach, it can be straightforward. Here are practical steps expats can take to stay compliant:
- Seek professional advice: Navigating tax rules in a foreign country can be complex. Consulting with a tax professional familiar with Thai regulations can help you understand your obligations and ensure you’re filing correctly. To simplify this process, you can book a free call with our support team here and get personalised guidance on your situation.
- File your tax return on time: Meeting the annual tax deadlines is crucial to avoid fines and penalties. Make sure you know when your return is due and submit it promptly.
- Properly declare all income: This includes both Thai-earned income and any foreign-sourced income remitted into Thailand. Being thorough and transparent helps prevent potential issues with underreporting.
Benefits of Compliance
Staying compliant with Thai tax regulations offers peace of mind and prevents unnecessary legal or immigration complications. By filing accurately and on time, expats can:
- Avoid financial penalties and interest charges that accumulate on unpaid taxes.
- Ensure smooth visa renewals, as tax compliance may become more closely tied to immigration status.
- Protect their long-term residency or work permit applications by demonstrating good standing with Thai authorities.
Another key benefit is simply peace of mind. Problems with tax authorities often cause significant personal stress, which can affect both mental and physical health. By staying compliant, you avoid the anxiety and worry often accompanying tax-related issues, allowing you to focus on other important aspects of your life.
How We Can Help
At Expat Tax Thailand, we’re committed to helping expats stay informed and easily manage their tax affairs. Our goal is to make the process as simple as possible so you can meet your filing obligations without stress.
To support expats, we offer an easy-to-use online tax portal that simplifies the entire process. Through this portal, you can:
- Securely share your financial information.
- File your taxes with confidence, knowing everything is handled professionally.
- Stay compliant with Thailand’s tax laws, avoiding the risks and penalties of non-compliance.
By filing accurately and on time, expats can avoid tax problems. To make this as simple as possible, we offer three tiers of filing services designed to meet different expat needs:
- Essential Tax Filing for straightforward filings.
- Assisted Tax Filing for those needing support with calculating capital gains, navigating DTAs and claiming tax credits.
- Expert Tax Services for comprehensive tax planning and reporting.
For more information on how we can help you stay compliant and reduce stress, click here compare our filing services, explore your options and get started.
A Final Word
In light of the recent changes in tax regulations, expats in Thailand face important decisions about how to handle their tax affairs. Ignoring the rules is simply not worth the risks. Non-compliance can lead to serious financial, legal, and even immigration consequences, but compliance doesn’t have to be daunting. With the right guidance, many expats may find their actual tax liabilities are lower than expected, and the peace of mind that comes with staying compliant is invaluable.
At Expat Tax Thailand, we’re here to help you navigate these complexities. Whether you’re concerned about tax liabilities or just want to ensure you’re meeting your obligations, our team is ready to assist. If you have any questions or concerns, feel free to reach out. Our support team is standing by and always ready to help.
