Taxation of Foreign-Sourced Income in Thailand
Do I need to pay income tax if I bring in money from overseas to purchase a property?
Starting January 1st, 2024, there will be significant changes to the collection of personal income tax on foreign-sourced income in Thailand. The Thai Department of Revenue issued Departmental Instruction No. Paw 161/2566 to provide clarity on the taxation of foreign-sourced income.
Under the new tax treatment, Thai taxpayers who earn assessable income from employment, business or property overseas must pay tax on that income after bringing it to Thailand. Previously, Thai residents paid tax on foreign-source income only if the income was brought to Thailand in the same calendar year. However, this loophole has been eliminated by Instruction No. P 161/2566. Now, any income earned overseas from employment, business or property, regardless of when it enters Thailand, must be declared and taxed in the year the income is earned.
This new rule applies to all taxpayers in Thailand. If a person resides in Thailand for 180 days or more during the tax calendar year, that person is taxed for income from that year. As of January 1, 2024, this income will be subject to tax. Individuals must account for income tax in the 2024 tax calendar year and must submit income tax forms no later than March 2025.
This provision requires a person to pay income tax to the Thai Revenue Department under the following conditions:
– Thai citizens
– Thai residents who filed taxes in the previous tax year
– Foreigners who reside in Thailand for one or more periods with at least 180 days in one tax calendar year
The income that’s subject to tax includes the following:
– Income from employment (wages, salaries, remuneration, etc.) assessable under Section 40 of the Revenue Code
– Income from business operations assessable under Section 40
– Passive or property income (interest, dividends, rental income, goodwill, etc.) based on Article 41 paragraph 2 of the Revenue Code
Thai citizens and foreigners who are permanent residents will be subject to income tax if they earn annual income at the following rates:
The tax rates for foreign-sourced income in Thailand are as follows:
– 0 to 150,000 baht (US$4,177) is exempt from income tax
– More than 150,000 baht (US$4,177) and up to 300,000 baht (US$8,354) are subject to a 5 percent tax rate
– More than 300,000 baht (US$8,354) and up to 500,000 baht (US$13,923) are subject to a 10 percent tax rate
– More than 500,000 baht (US$13,923) and up to 750,000 baht (US$20,884) are subject to a 15 percent tax rate
– More than 750,000 baht (US$20,884) and up to 1 million baht (US$27,846) are subject to a 20 percent tax rate
– More than 1 million baht (US$27,846) and up to 2 million baht (US$55,683) are subject to a 25 percent tax rate
– Over 2 million baht (US$55,683) and up to 5,000,000 baht (US$139,201) are subject to a 30 percent tax rate
– More than 5,000,000 baht (US$139,201) are subject to a 35 percent tax rate
The new tax regulation on foreign income in Thailand is a significant change that will impact many individuals and businesses. It is essential to stay informed about these developments, especially when they can significantly impact financial planning and obligations. Consulting with qualified tax professionals is also crucial to ensure compliance with the latest regulations.
Frequently Asked Questions:
What is the tax rate for income earned from foreign sources in Thailand?
Foreign income sourced in Thailand is subject to different tax rates, which depend on the total income earned annually. The tax rates for foreign income sourced in Thailand are as follows:
– Income up to 150,000 baht (US$4,177) is exempt from income tax.
– Income above 150,000 baht (US$4,177) and up to 300,000 baht (US$8,354) is subject to a 5% tax rate.
– Income above 300,000 baht (US$8,354) and up to 500,000 baht (US$13,923) is subject to a 10% tax rate.
– Income above 500,000 baht (US$13,923) and up to 750,000 baht (US$20,884) is subject to a 15% tax rate.
– Income above 750,000 baht (US$20,884) and up to 1 million baht (US$27,846) is subject to a 20% tax rate.
– Income above 1 million baht (US$27,846) and up to 2 million baht (US$55,683) is subject to a 25% tax rate.
– Income above 2 million baht (US$55,683) and up to 5,000,000 baht (US$139,201) is subject to a 30% tax rate.
– Income above 5,000,000 baht (US$139,201) is subject to a 35% tax rate.
These tax rates are applicable to foreign-sourced income brought into Thailand by Thai tax residents. These changes in the taxation of foreign-sourced income in Thailand will be effective from January 1, 2024.
What is the difference between income sourced from within Thailand and income sourced from outside of Thailand for tax purposes?
Thai-sourced income and foreign-sourced income are two types of income that are taxed differently in Thailand. Thai-sourced income is any income earned from employment or business undertaken in Thailand, regardless of where it was earned.
However, residents of Thailand are also taxed on any income received from abroad that is brought into the country in the same calendar year. This is not applicable if the income was remitted into Thailand over a year previously. On the other hand, foreign-sourced income is income earned from activities mentioned above when those activities take place outside of Thailand.
Only resident taxpayers are liable to pay personal income tax on both sources of income. Non-residents are only taxed on Thai-sourced income. Residents of Thailand are required to pay personal income tax on both their Thai-sourced income and their foreign-sourced income that is brought into Thailand in the same calendar year it is received.
The tax rates for foreign-sourced income in Thailand vary based on the amount of annual income earned. Here are the tax rates for foreign-sourced income in Thailand:
– Income up to 150,000 baht (US$4,177): Exempt from income tax.
– Income over 150,000 baht (US$4,177) but less than or equal to 300,000 baht (US$8,354): 5% tax rate.
– Income over 300,000 baht (US$8,354) but less than or equal to 500,000 baht (US$13,923): 10% tax rate.
– Income over 500,000 baht (US$13,923) but less than or equal to 750,000 baht (US$20,884): 15% tax rate.
– Income over 750,000 baht (US$20,884) but less than or equal to 1 million baht (US$27,846): 20% tax rate.
– Income over 1 million baht (US$27,846) but less than or equal to 2 million baht (US$55,683): 25% tax rate.
– Income over 2 million baht (US$55,683) but less than or equal to 5,000,000 baht (US$139,201): 30% tax rate.
– Income over 5,000,000 baht (US$139,201): 35% tax rate.
These tax rates apply to foreign-sourced income brought into Thailand by Thai tax residents since January 1, 2024.
What is the definition of Thai-sourced income in Thailand?
Thai-sourced income in Thailand refers to any income earned from employment or business conducted within Thailand, whether the income is earned inside or outside the country. This includes income from work performed in Thailand, business in Thailand, business of an employer in Thailand, or property located in Thailand. Thai-sourced income is taxed in Thailand on a cash basis in the calendar year that it is received, regardless of the tax residence status of the recipient.
On the other hand, foreign-sourced income is income earned from activities conducted outside of Thailand, such as work performed outside of Thailand, business conducted outside of Thailand, or property situated outside of Thailand. Foreign-sourced income is only taxed in Thailand if the individual is a Thai tax resident and brings such income into Thailand in the same calendar year that they receive it.
An individual is considered a Thai tax resident if they live in Thailand for 180 days or more in a particular calendar year. However, starting from January 1, 2024, foreign-sourced income brought into Thailand by Thai tax residents will be subject to personal income tax, regardless of the tax year the income is received. This change in interpretation of Section 41 of the Revenue Code will significantly impact Thai resident individuals who derive income from employment, business, and assets abroad.
How is income sourced in Thailand and earned from Thai sources taxed in Thailand?
Thai-sourced income refers to any income earned from employment or business carried out within Thailand. This includes income from work performed in Thailand, business in Thailand, business of an employer in Thailand, or property located in Thailand, regardless of whether the income was earned inside or outside the country. Thai-sourced income is taxed in Thailand on a cash basis in the calendar year that it is received. This means that the recipient’s tax residence status does not affect the taxability of Thai-sourced income. Even if a foreigner is not a tax resident of Thailand, they are still required to pay personal income tax on any Thai-sourced income they earn.
Income from Thai-sourced income is taxed at progressive rates ranging from 0% to 35% of the net income, depending on the amount of income earned. For instance, income earned from employment or business in Thailand is subject to tax at progressive rates ranging from 5% to 35%, while rental income from property located in Thailand is subject to tax at a flat rate of 15%.
On the other hand, foreign-sourced income is only taxed in Thailand if the individual is a Thai tax resident and brings such income into Thailand in the same calendar year that they receive it. This implies that if a person is a non-resident of Thailand, they are not required to pay personal income tax on any foreign-sourced income they earn, even if they bring it into Thailand in a later year.
In summary, Thai-sourced income is taxed in Thailand on a cash basis in the calendar year that it is received, regardless of the tax residence status of the recipient. Foreign-sourced income, on the other hand, is only taxed in Thailand if the individual is a Thai tax resident and brings it into Thailand in the same calendar year that they receive it.
What is the tax rate for income earned from foreign sources in Thailand?
The tax rate for foreign-sourced income in Thailand is determined based on the progressive tax rate for individuals, which ranges from 0% to 35% of the net income. Hence, the tax rate for foreign-sourced income is not a fixed rate, but it depends on the total income of the individual, including both Thai-sourced and foreign-sourced income.
Starting from January 1, 2024, Thai taxpayers who earn assessable income from employment, business overseas or property located abroad must pay taxes on that income after bringing it to Thailand. This applies to all taxpayers in Thailand, irrespective of when the income is brought into Thailand.
The following tax rates apply to foreign-sourced income in Thailand:
– Income up to 150,000 baht (US$4,177) is exempt from income tax.
– Income above 150,000 baht (US$4,177) and up to 300,000 baht (US$8,354) are subject to a 5% tax rate.
– Income above 300,000 baht (US$8,354) and up to 500,000 baht (US$13,923) are subject to a 10% tax rate.
– Income above 500,000 baht (US$13,923) and up to 750,000 baht (US$20,884) are subject to a 15% tax rate.
– Income above 750,000 baht (US$20,884) and up to 1 million baht (US$27,846) are subject to a 20% tax rate.
– Income above 1 million baht (US$27,846) and up to 2 million baht (US$55,683) are subject to a 25% tax rate.
– Income above 2 million baht (US$55,683) and up to 5 million baht (US$139,201) are subject to a 30% tax rate.
– Income above 5 million baht (US$139,201) is subject to a 35% tax rate.
Bear in mind that these tax rates apply to the total income of the individual, including both Thai-sourced and foreign-sourced income. Therefore, the tax rate for foreign-sourced income will depend on the total income of the individual and may be subject to a lower or higher tax rate based on the individual’s overall income level.
What is the deadline for filing taxes on income earned from foreign sources in Thailand?
The deadline for filing taxes on income earned from foreign sources in Thailand is March 31 of the following year. However, starting from January 1, 2024, the tax treatment for foreign-sourced income has changed. According to a new department instruction, a Thai tax resident with foreign-sourced income will be taxed in Thailand when such income is remitted into Thailand, regardless of when such income is remitted into Thailand. This means that Thai tax residents with foreign-sourced income will need to report and pay taxes on such income in the year it is remitted into Thailand, rather than the year it is earned.
What is the penalty in Thailand for filing taxes late on income earned from foreign sources?
The penalty for late filing of taxes on foreign-sourced income in Thailand can range from THB 200 to 2,000. If an individual fails to submit their Personal Income Tax Returns (PND 90, 91) by the deadline, they may incur this penalty. It is crucial to ensure timely submission to avoid these penalties, as late filers may face additional charges and surcharges on top of the unpaid tax amount
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