As more Canadians choose to live in Thailand, understanding the tax implications of their new life abroad becomes increasingly important. Thailand is currently Canada’s second-largest overall trading partner in the Association of Southeast Asian Nations (ASEAN) region, and it is estimated that over 17,000 Canadians are now living in Thailand. For these expats, navigating the complexities of Thailand’s tax system and the Canada-Thailand Double Taxation Agreement (DTA) is crucial to ensure that their income is managed efficiently and taxed correctly.
This guide is designed to help Canadian expats understand their tax obligations in Thailand and Canada. It provides practical insights on how to report income, claim tax credits, and stay compliant with both countries’ regulations.
Recent Changes to Thailand’s Tax Regulations
In 2023, Thailand’s Revenue Department introduced significant changes to how foreign-sourced income is taxed, which are critical for expats to understand. These changes were formalised in the Royal Gazette on 6 October 2023 and are effective as of 1 January 2024. Under the new rules, anyone spending 180 days or more in Thailand during a calendar year is considered a Thai tax resident. This status now requires tax residents to pay taxes on any foreign-sourced income that is remitted into Thailand within the same year the income is earned.
Previously, expats could defer Thai taxes by delaying the remittance of foreign income, but this option is no longer available. The changes emphasise the need for careful tax planning, particularly regarding the timing of income remittances.
The Double Taxation Agreement (DTA) between Canada and Thailand remains crucial for Canadian expats. Depending on its specific provisions, the DTA allows individuals to potentially offset their Thai tax liabilities by applying tax credits for taxes already paid in Canada to the CRA.
Understanding Tax Residency in Thailand
In Thailand, tax residency is determined by the time you spend in the country within a calendar year. If you spend 180 days or more in Thailand between 1st January and 31st December, you are considered a Thai tax resident, regardless of whether the days are consecutive.
It’s important to note that tax residency is purely based on the length of your stay in Thailand and is not linked to your visa type, citizenship, or permanent residency status. Whether you hold a retirement visa, marriage visa, business visa, or any other type, you may still be considered a Thai tax resident if you meet the 180-day rule.
Awareness of your tax residency status is crucial, as it determines your obligation to pay taxes on income brought into Thailand. You can read a detailed article on Thailand tax residency here.
Thailand’s Remittance Tax System
Thailand operates on a remittance tax system, which means that only income brought into the country (remitted) is subject to Thai taxation. This system is especially important for expats, as any income earned overseas remains untaxed in Thailand, provided it is not transferred into the country within the same year it is earned.
This can be a valuable opportunity for Canadian expats to manage their income effectively. However, once any foreign income—from pensions, investments, or other sources—is transferred into Thailand, it becomes subject to Thai taxes. It’s important to understand that, under the remittance system, even untaxed pensions abroad may be taxed if brought into Thailand in the year they are received.
Understanding this system allows expats to plan their remittances carefully, potentially reducing their overall tax liability.
Who Needs to File Taxes?
In Thailand, if you are a tax resident (spending 180 days or more in the country), you are required to file a tax return if you remit any foreign-sourced income into Thailand. This applies to various forms of assessable income, such as investment gains, dividends, and rental income.
Remitted Income in Thailand
Thailand’s tax system is based on remitted income, meaning that only income brought into the country from abroad is taxable. Any income earned by Thai tax residents after 1 January 2024 is taxable in the year it is remitted to Thailand.
However, pre-2024 income (such as cash savings or inheritance from previous years) is not taxable, regardless of when it is remitted. Expats can bring these funds into Thailand without needing to declare them for tax purposes if this is their only source of remittance.
Filing Thresholds in Thailand
You are required to file a tax return if the amount of remitted income (excluding Canadian pensions) exceeds:
- THB 120,000 for joint married couples, or
- THB 60,000 for individuals.
Even if taxes have already been paid in another jurisdiction (such as Canada), you are still required to file a Thai tax return if you remit income above these thresholds. You may be able to offset any Thai tax liabilities by claiming tax credits for the taxes paid abroad, depending on the Double Taxation Agreement (DTA).
If you are only remitting non-taxable assets (e.g., cash from pre-2024 tax years or inheritance), you do not need to include this in your tax return, and filing is not required if this is your sole source of remitted funds.
Overview of the Canada-Thailand Double Taxation Agreement (DTA)
The Double Taxation Agreement (DTA) between Canada and Thailand is designed to prevent Canadian expats from being taxed twice on the same income in both countries. This agreement allows expats to avoid the burden of double taxation by enabling them to claim tax credits for taxes already paid in one country when filing in the other.
However, a common misconception is that paying taxes in one country automatically exempts you from tax obligations in the other. This is not the case. Under the DTA, expats still need to report income in both Canada and Thailand, even if taxes have already been paid in one of the countries. The DTA helps manage this by allowing tax credits or exemptions to ensure that expats are not taxed twice, but full compliance with the reporting requirements of both countries is essential.
For Canadian expats in Thailand, the DTA plays a vital role in managing tax obligations, particularly for those earning income from multiple sources.
Canadian Pensions and Thai Taxation
Article 18 of the DTA between Canada and Thailand provides specific guidance regarding taxing Canadian pensions for expats living in Thailand. According to this article, Canadian pensions are taxed exclusively in Canada and are not subject to Thai taxation. This applies to all Canadian pensions, including government, private, and retirement savings plan (RRSP) withdrawals.
1. Pensions and other similar remuneration, whether they consist of periodic or non-periodic payments, for past employment, arising in a Contracting State and paid to a resident or the other Contracting State shall be taxable only in the first-mentioned State.
2. For the purpose of paragraph 1 such remuneration for past employment shall be deemed to arise in a Contracting State if the payer is that State itself, a political subdivision, a local authority or a resident of that State. Where, however, the person paying such income, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment, and such income is borne by such permanent establishment, then such income shall be deemed to arise in the Contracting State in which the permanent establishment is situated.
Pensions Are Excluded from Taxable Income in Thailand
If your only source of income is a Canadian pension, you are not required to file a tax return in Thailand, as Canadian pensions are not considered assessable income under Thai tax law. This is an important relief for Canadian expats, ensuring they are only taxed once under Canadian tax regulations.
Filing Requirements for Non-Pension Income
While Canadian pensions are exempt from taxation in Thailand, you may still be required to file a Thai tax return if you have other sources of remitted income, such as investment gains, rental income, or dividends. If you remit any of these types of income into Thailand, you must declare them if they exceed the filing thresholds, even if you are not required to pay taxes on your pension.
Other Canadian Income and Thailand’s Tax Obligations
For Canadian expats living in Thailand, understanding how different types of income—such as capital gains, rental income, and dividends—are taxed in both Canada and Thailand is essential for effective financial planning.
Taxation of Capital Gains, Rental Income, and Dividends
In Canada, capital gains, rental income, and dividends are subject to taxation, and the same rules apply when living abroad. However, when you remit these types of income to Thailand, they become taxable under Thailand’s remittance tax system if transferred into the country within the same year they are earned.
- Capital gains: If you sell investments or property in Canada and remit the proceeds to Thailand in the same year, the gains are considered assessable income and may be taxed in Thailand.
- Rental income: Earnings from rental properties in Canada are taxed there. If you transfer the rental income to Thailand, you may also need to report and pay Thai taxes on the remitted amount.
- Dividends: The Canadian government taxes income from dividends earned in Canada. Once remitted to Thailand, it becomes subject to Thai tax regulations.
Please see our detailed guide here for a full list of all assessable foreign-sourced income types.
Using Tax Credits to Avoid Double Taxation
The Double Taxation Agreement (DTA) between Canada and Thailand allows expats to use tax credits to avoid being taxed twice on the same income. If you have already paid tax on capital gains, rental income, or dividends in Canada, you can offset that amount against your Thai tax liability, reducing or eliminating your tax obligation in Thailand. To claim these credits, you must provide proof (such as tax certificates) showing that taxes have been paid in Canada.
Case Study Example: Selling Property in Canada
Let’s say you sell a property in Canada and make a capital gain. This gain is taxed in Canada, and if you transfer the proceeds to Thailand in the same year, it will also be considered taxable income in Thailand. However, you can use the taxes paid in Canada as a credit to reduce your Thai tax liability. If the taxes paid in Canada are higher than what is owed in Thailand, no further taxes may be due, but you still need to declare the income.
Importance of Keeping Financial Records
It’s essential to maintain detailed financial records to ensure smooth tax filing and claim tax credits under the DTA. These records should indicate your income sources, including the dates when income was earned and remitted, the amount of tax paid in Canada, and any relevant financial transactions. This will help prove your tax liability and avoid discrepancies when filing in both countries.
Watch Our Webinar – The Thailand-Canada DTA Explained
Common Reporting Standards
The Common Reporting Standard (CRS) is a global framework for the automatic exchange of financial information between countries, designed to promote tax transparency and combat tax evasion. Both Canada and Thailand are participants in the CRS, meaning that financial institutions in each country are required to share certain information with their respective tax authorities, who then exchange this data with other participating countries.
How the CRS Impacts Canadian Expats in Thailand
For Canadian expats living in Thailand, the CRS ensures that financial information is automatically shared between Canada and Thailand. This includes details of bank accounts, investment income, and other financial holdings. If you have financial assets in Canada while residing in Thailand, or vice versa, the relevant financial institutions will report this information to the tax authorities in each country.
What Information is Shared
Under the CRS, the following types of information are typically exchanged:
- Account balances.
- Income from interest, dividends, or other investments.
- Proceeds from the sale of financial assets.
- Details of payments made to foreign-held accounts.
This information is shared annually between the tax authorities in Canada and Thailand. Expats must ensure that their tax filings are accurate and compliant in both countries, as discrepancies between reported income and the information shared through the CRS could lead to penalties or further investigations.
Why Compliance is Important
The CRS plays a crucial role in ensuring that expats remain compliant with their tax obligations in both Canada and Thailand. Failing to accurately report income or declare financial assets could result in significant penalties and legal implications. Staying informed about your financial reporting responsibilities and ensuring compliance with the CRS will help you avoid any potential tax issues and maintain good standing with both Canadian and Thai tax authorities.
For more details about the information share under CRS read our detailed article here
Filing a Tax Return in Thailand
For Canadian expats living in Thailand, understanding the process of filing taxes and the deadlines involved is essential to stay compliant with Thai tax regulations. This section outlines the key steps involved in filing a Thai tax return and how to claim tax credits to avoid double taxation.
The Process of Filing Taxes in Thailand
The Thai tax year runs from 1 January to 31 December, and expats who are Thai tax residents must file a tax return for any assessable income brought into the country, including foreign-sourced income. There are two main tax forms expats should be aware of:
- PND 90: This form reports personal income from all sources, including foreign income, and must be filed for the entire tax year.
- PND 94: This form is used for reporting mid-year income. It is typically required if you remitted income in the year’s first half.
The deadline for filing paper tax returns is 31 March of the following year, but if you file online, the deadline is extended to 8 April.
Claiming Canadian Tax Credits
Canadian expats can claim tax credits through the Double Taxation Agreement (DTA) between Canada and Thailand to avoid being taxed twice on the same income. To do this, you need to provide proof that taxes have already been paid in Canada on the income you are remitting to Thailand. This proof usually comes from tax certificates from Canadian tax authorities, such as the CRA, (Canada Revenue Agency).
These certificates indicate that taxes have been paid, allowing you to offset your Thai tax liability by the amount of tax already paid in Canada. If the tax you’ve already paid in Canada exceeds your Thai tax obligation, you won’t have to pay additional taxes in Thailand. However, you are still required to declare the income and submit the necessary documentation to claim the tax credit.
Summing Up
Navigating the tax obligations for Canadian expats living in Thailand can be complex, but understanding the key elements—such as tax residency, Thailand’s remittance tax system, and the Double Taxation Agreement (DTA)—is crucial for managing your financial affairs effectively. You can avoid unnecessary tax liabilities by staying informed about recent changes to Thai tax regulations and planning your income remittances carefully.
Whether it’s capital gains, rental income, or dividends, using the DTA to claim tax credits ensures that you aren’t taxed twice on the same income. Maintaining accurate financial records and staying compliant with Thai and Canadian tax authorities is vital.
For Canadian expats, seeking professional guidance and support is essential to managing taxes and ensuring compliance with the ever-evolving regulations in both countries.
Tax Solutions for Canadians in Thailand
To help you navigate your tax obligations in Thailand, we offer a range of tailored solutions:
- Free Consultation: International tax issues can be complex and vary based on individual circumstances. If you’d like to discuss how you may be affected, book a free call with our support team for personalised advice.
- Tax ID Services: If you are required to file taxes in Thailand, the first step is obtaining a Thai Tax Identification Number (TIN). This can be done at your local Revenue Department office, or you can use our online service to aquire a TIN on your behalf for added convenience.
- Tax Filing Assistance: Filing taxes as an expat can be challenging, especially when dealing with foreign income and tax credits. Our tax filing services at Expat Tax Thailand guide you through the process, ensuring compliance with Thai and Canadian tax regulations. Explore our tax filing service here.
- Easy, Secure Online Tax Portal: Our online tax portal offers an easy and secure solution for expats to file their Thai tax returns. It allows you to submit returns and all necessary documentation electronically, making the process quicker and more convenient. This user-friendly platform is designed to simplify tax filing for expats, ensuring all submissions are handled with the highest level of security and confidentiality.
Ready to simplify your tax filing process? Start by booking your free consultation or exploring our online tax portal today. Our team is here to help you every step of the way.
