New Horizons: Adapting to the New Thailand Expat Tax Regulations

‘New Horizons: Adapting to the New Thailand Expat Tax Regulations’, provides an in-depth analysis of the significant changes in Thailand’s tax policy affecting expatriates. Starting January 1, 2024, Thailand will impose taxes on all overseas income remitted by expats who reside in the country for over 180 days a year. The article clarifies the position on income earned before 2024, outlines the types of taxable income for expats and discusses available exemptions and allowances. It emphasises the increased financial and administrative responsibilities for expats, necessitating a shift in their financial and tax planning strategies. The article aims to assist expatriates in understanding and adapting to these new tax regulations in Thailand.

Life in the ‘Land of Smiles’ is about to change for the half-million expats in Thailand. A new tax regulation will now tax all overseas income remitted to Thailand, marking a significant shift in the financial responsibilities of expats.

On 15th September 2023, Thailand’s Revenue Department announced a change to its tax regulations that directly impact the expatriate community. Consequently, effective 1st January 2024, the new tax framework redefines the fiscal responsibilities of all Thai tax residents, including foreign nationals who reside here for 180 days or more in any tax year. This change represents the most significant shift in Thailand’s tax policy affecting expatriates.

Thailand’s expatriate community contributes significantly to the local economy through various industries, professional services and pure spending power. Many will now be asked to pay an expat tax on all overseas income that they bring into the country.

These adjustments mark a decisive move by the Thai government to align with global tax practices, aiming to optimise domestic revenue without alienating the international talent and investment instrumental to the nation’s growth. The objective is multifaceted: to ensure a fair tax system, enhance fiscal transparency and foster economic development by strategically reinvesting in the country’s infrastructure and social programs.

If you’re an expat in Thailand, here’s what you need to know about these pivotal changes.

Expat Tax in Thailand

Firstly, the Revenue Department of Thailand oversees personal taxation in Thailand. It operates a comprehensive tax system addressing various forms of personal taxation ranging from income to inheritance.

Tax Residency

Importantly, in common with many tax regimes worldwide, tax residency in Thailand is defined by presence rather than citizenship. Individuals residing in the country for an aggregated period of 180 days or more within a tax year are considered tax residents. This status is pivotal because it delineates the scope of an individual’s tax liabilities, particularly regarding global income.

The Thailand Tax Year, Compliance and Deadlines

In Thailand, the tax year mirrors the calendar year, ending on 31st December. Timely filing of tax returns is critical. Those choosing to file returns electronically must complete them by 31st March. If you file a paper return, you must file by 30th April. Failure to meet the filing deadlines is subject to a penalty, typically calculated as a percentage of the tax due.

Understanding Thailand’s New Tax Rule on Overseas Income

On 15th September 2023, Thailand’s Revenue Department issued its Order No. Por 161/2023 under Section 41, paragraph 2 of the Revenue Code. The Order was related to the payment of personal income tax on overseas income and will come into effect on 1st January 2024.

Until 31st December 2023, expatriates living in Thailand as tax residents were required to pay personal income tax on foreign-sourced income. This tax applied only if that income was transferred to Thailand within the same year it was earned. Nevertheless, any income earned in prior years and brought into Thailand is not subject to taxation.

From 1st January 2024, this changes so that all foreign source income brought into Thailand, regardless of when it was generated, is subject to taxation by Thai tax residents.

Important Thailand Expat Tax Update on the Overseas Income Tax Rule

Revenue Department Clarification Issued on November 20, 2023

In a significant update to the tax regulations impacting expatriates in Thailand, the Revenue Department issued Order No. P.162/2023 on November 20, 2023. This order provides vital clarification to the changes announced on September 15, 2023. According to this new directive, the requirement to pay tax on all foreign-sourced income brought into Thailand, irrespective of when it was earned, will not apply to income earned before January 1, 2024.

As a result, this means that any overseas income generated by Thai tax residents prior to 2024 will not be subject to the new tax regulations, even if this income is remitted to Thailand after January 1, 2024. This clarification offers a significant reprieve to the expatriate community, who had been facing potential retrospective tax liabilities under the initial changes. It ensures a more gradual transition into the new tax system, allowing expatriates additional time to adjust their financial planning and strategies in line with these developments.

You can read a detailed post on the Revenue Department update here. 

Tax on Overseas Income

With this in mind, expats will be liable for tax on income from various sources. Section 40 of the Chapter 3 of the Thai Revenue Code, which classifies assessable income into the following categories:

• Income from Employment: This includes salary, wage, bonus, pension, house rent allowance, the value of rent-free residence provided by an employer, and any other benefit derived from employment.
• Income from Work Performance:This encompasses fees, commissions, subsidies, gratuities, bonuses and other benefits derived from a post or performance of work.
• Fees and Annuities:Income from goodwill, copyrights or any other rights, annuities and annual payments derived from wills, juristic acts, or court decisions.
• Income from Financial Instruments: This includes interest on bonds, deposits, debentures, loans, dividends, and gains from financial institutions or companies.
• Other Financial Gains:These include bonuses to shareholders, changes in capital holdings of a company, and gains from the amalgamation, acquisition, or dissolution of a company or partnership.
• Income from Property and Contracts:Rent from property, gains from the breach of hire-purchase or instalment sale contracts.
• Income from Liberal Professions:This covers professions like law, medicine, engineering, architecture, accounting, and fine arts.
• Other Business Income: Income from contracts where materials are provided and income from business, commerce, agriculture, industry, transport, or other activities not specified above​.

Overseas Funds Exempt from Expat Tax in Thailand

• Income earned before Thai tax residency: Income accumulated before becoming a Thai tax resident is not assessable.
• Inheritance:Inherited income remitted into Thailand is exempt
• Life Insurance:Sums received under life insurance policies are not assessable as income.
• Losses: Disposed investments or overseas assets that have sustained a loss.

Income Tax Rates in Thailand

In common with many countries, income tax rates in Thailand are progressive. The current tiers announced in April 2023 are presented in the table below.

Personal Tax Allowances in Thailand

There are several standard deductions and allowances that a taxpayer in Thailand may claim against assessable income, including:

• Personal Allowances:THB 60,000 each for self-care and for a dependent spouse
• Child Allowance:THB 30,000 for each child. THB 60,000 Baht for children born in or after 2018 who are the second or further children.
• Deductions for Expenses: These vary depending on income category
• Life and Health Insurance Premiums: Up to THB100,000 on policy issues by Thailand-based insurance companies.
• Charitable Donations:Donations to specified institutions and causes are deductible and subject to limits based on net income.
• Mortgage Interest:On interests incurred on the purchase or construction of residential buildings in Thailand
• Over 65’s Increased Exemption: Extra 40,000 assessable income exemption (increasing the allowance to 190,000THB)
• Retirement and Long-Term Savings:Applicable to approved Thailand-based savings and retirement funds.
• Social Security Fund Contributions:
• Baby delivery and Prenatal Care: Up to THB60,000

Tax Changes: Assessing the Impact on Thailand’s Expats

Both financially and administratively, the impact of the recent tax changes on expatriates in Thailand is likely to be significant.

• Financial Impact: Increased tax liabilities for those with foreign income, investments, and savings are present. These are likely to affect levels of disposable income and savings. Thailand’s government has made no secret that they are looking to increase the country’s tax base and adding tens of thousands of higher-income foreigners is a means of achieving that goal.
• Administrative Burden:The additional reporting and compliance requirements will increase the administrative workload for most expatriates.
• Investment Decisions:The new tax regime could affect how expatriates invest and organise their finances in Thailand and abroad.
• Increased Stress:Many expats choose to live in Thailand for affordability and a relaxed lifestyle. This change will make life more stressful for some and may lead them to reconsider their options. Much chatter on social media and internet forums suggests this is true for many expats.
• Stay or Go?:The changes might influence some expatriates to reconsider their decision to live or retire in Thailand, especially those on fixed incomes like pensions.

Managing the Change: Adapting to Thailand’s Expat Tax

In summary, for expats committed to staying in Thailand, it’s crucial to adapt your financial strategies to smoothly navigate these significant tax changes.

Stay Informed and Proactive

Understanding the changes and how they affect your specific situation is essential. Follow updates and clarifications from the Revenue Department by signing up for our tax alerts here. Staying ahead means you won’t be caught off-guard by any additional modifications.

Financial Planning & Consultation

In light of these changes, review your financial planning and tax planning. Each expat’s financial situation is unique. Whether you’re a retiree, a digital nomad, or running a business, tailored advice can help align your financial planning with the new tax requirements. It might be necessary to restructure or adjust your current financial arrangements. Seek advice on strategies to minimise your future tax liabilities within the bounds of the new regulations.

Compliance and Documentation

Prepare for compliance in advance. Ensure all your financial records and documentation are in Order and maintain accurate records of income, remittance and any tax paid in other jurisdictions. Maintaining meticulous records ensures compliance and positions you to take full advantage of applicable tax benefits or deductions.

Apply for a Tax Identification Number (TIN)

A Tax Identification Number (TIN) is your unique identifier in the Thai tax system, essential for all tax-related transactions and filings. You must apply if you reside in Thailand for more than 180 days a year and do not have a Thailand Tax Identification Number.

Understand the Filing Requirements:

Be clear about when and how to file taxes under the new system. Filing deadlines are 31st March for e-filing and 30th April for paper returns. For help in filing your return, get in touch here.

Expat Tax: We’re Here to Help

In conclusion, navigating these tax changes can be complex, but you’re not alone. Our team is ready to guide you through every step, ensuring a smooth transition to the new system. Reach out for personalised assistance and peace of mind.