New Tax Rules for Foreign Sourced Income

Effective from January 1, 2024 onwards the Thai Government has implemented a new tax law which potentially has direct repercussions on any foreigners who are living in Thailand and derive income from albeit sources both within Thailand and/or from overseas via remittances etc. The intention of these new tax laws seems pretty obvious, it’s about raising tax revenues for the Thai Government however in doing so the Thai authorities wish to streamline and modernize the existing tax system so as to ensure fairness and bring them more into line with their Western counterparts.

Before foreigners start to panic and flee for the hills as soon as they hear the word “taxes” it’s important to explain the nuances of the new tax laws. For starters it’s not (I repeat not) the Thai Government’s intention to target and/or to single out foreigners only, as these new tax laws are applied equally across the board to both Thai nationals and foreigners alike (so there is zero discrimination). And much like any Thai national who derives their income from within the geographical borders of Thailand whether it be by salaries, rental and/or investment income etc., finds themselves (depending upon the relevant tax scale) being subjected to Thai personal income tax. Likewise foreigners who derive any Thai sourced income  deserve no special treatment and are treated no differently irrespective of whether it be the old or new tax law. As an example, foreigners who derive any sort of rental income from their properties in Thailand and earn in excess of 150,001THB per Year (after personal allowances and/or standard deductions) were always expected to make an income declaration at their nearest local revenue department in the relevant tax year. And for those of you with a Thai savings account you’ve always seen any interest income being credited into your account followed soon thereafter with a corresponding debit for any tax on this interest income that you’ve just earned being reflected within your Thai bank books………….so where it pertains to locally sourced income here in Thailand (irrespective of whether it be the old or new tax law) there is nothing nefarious or unusual going on here.

Before we get started, it’s important to note any taxable income under the new tax law is the aggregate (i.e. the sum) of both locally sourced (Thai) income earned during the tax year (which we’ve already covered above) as well as any foreign sourced income which you remit into Thailand within the tax year (which we’ll cover below). Obviously the sum of these two distinct income sources forms the basis of determining your aggregate income earned in the tax year, and by implications your individual Thai personal income tax bracket and personal income taxes owed to the relevant Thai tax/revenue collection authorities.

By now, it should be apparent to most foreigners reading this article that the biggest change under this new tax law system is the inclusion of foreign sourced income into the overall Thai personal income tax calculation which has obvious tax implications for Thai nationals and foreigners alike (depending upon whether or not they’re considered to be Thai tax residents or not).

Now let’s explore the fine minutia of foreign sourced income and it’s direct implications on foreigners (if any) in greater detail since the majority of our clients are foreigners. For starters, where it pertains to foreign sourced income  earned and remitted into Thailand in any tax year we need to ascertain whether or not you (as a foreigner) are viewed as either a Non-Thai tax resident or Thai tax resident by the Thai personal income tax authorities.

if you’re a foreigner who lives in Thailand for less than 180 Days in any tax (calendar) year you’re regarded as having Non-Thai tax resident status by the Thai personal income tax authorities, and as such any foreign sourced income that you earn and choose to remit into Thailand (irrespective of the amount) is not (I repeat not) subject to any Thai personal income tax……….. period end of discussion. However this does not preclude any Thai sourced income (as I’ve already mentioned above) that you may have earned within the tax year which would be subject to Thai personal income tax regardless of your Thai tax residency status. In summary, those of you who fall within this Non-Thai tax resident status category (apart from the notable exception of any Thai sourced income) have zero Thai personal income tax implications under this new tax law.

However, if you’re a foreigner who chooses (it’s always a choice) to live in Thailand for more than 180 Days in any tax (calendar) year will automatically find themselves as being categorized as having Thai tax residency status, and as such, are  liable for any Thai personal income tax (not withstanding any Thai sourced income) on any foreign sourced income which they’ve earned and choose (once again it’s a choice) to remit into Thailand either partly or wholly in any tax year under the new tax law. Now for those of you in this Thai tax residency status category there really is no reason to panic. For starters this new tax law is not being applied retrospectively. Meaning that any of your foreign sourced income that you may have earned prior to January 01, 2024 (remember this date as it’s an important date) that you’ve already chosen to remit or plan to remit either partly or wholly into Thailand at a later date (irrespective of the tax year) apart from any locally sourced (Thai) income (if any) earned  in that tax year is not (I repeat not) subject to any of Thai personal income tax under these new tax laws whatsoever………..so you can take a deep breath and relax.

Granted for those of you who now find yourselves falling within this Thai tax residency status category the changes under this new tax law can’t be viewed as being all good news. However if one were to choose the path of being a proverb-able optimist i.e. the glass being half full as opposed to being half empty, it’s not all bad news. For starters Thailand is a signatory of the “Double Tax Agreement” and since most Western counties are co-signatories one can mitigate the potential downside via the usage of the “tax credit” system. Basically, it’s a given that most (if not all) foreigners have already paid some personal income tax to the relevant tax authorities within the geographical jurisdiction of where these foreign sourced income streams are first generated…….correct? And by implication one can use the personal income taxes which one has already paid in the foreign jurisdiction as a “credit” to offset any potential Thai personal income tax liabilities on any eligible foreign sourced income earned and remitted into Thailand within any given tax year thus eliminating any fears of “double taxation” which are completely unwarranted.

Naturally one can expect the relevant Thai tax authorities to require some documented proof and/or substantive evidence to back any such “tax credit” claim from the applicant which in itself is an entirely different story which tends to deal more with bureaucracy and/or red tape rather than anything else. However it’s important to note that the “tax credit” cannot be used to offset any locally (Thai) sourced income and is only applicable to foreign sourced income earned and remitted into Thailand within any given tax year. Finally any “tax credit” must be either less than or equal to the amount of Thai personal income tax that one would have otherwise had to pay to the Thai tax authorities had one not used a “tax credit” to offset their foreign sourced income earned and remitted into Thailand within any given tax year…….which makes perfect sense.

Finally, in the absolutely worst case scenario (where all else fails) and using the existing Thai personal income tax scale (notwithstanding any locally sourced income) the first 150,000THB of any foreign sourced income earned and remitted into Thailand within any given tax year is subject to zero Thai personal income tax. Whereas, the next 150,000THB of any foreign sourced income earned and remitted into Thailand within any given tax year (again if not already offset by any overs tax credit i.e. from 150,001 to 300,000THB is subject to just 5% personal income tax which is just 7,500THB and so on and so forth (note that the percentage of tax does change depending upon the individual tax bracket). In summary, and after reading this article one must come to the inevitable conclusion that it’s not all bad news and that one does need to maintain one’s perspective here and not needlessly panic for panic sake.