Following the issuance of the Revenue Departmental instruction number Paw. 161/2566 ("DI. Paw. 161") in September 2023, the Revenue Department published on its website this month a Q&A concerning the concept, conditions and clarification of tax treatments on foreign-sourced income under the Revenue Code.
Keywords: Mazars, Thailand, Tax, Foreign Sourced Income, Revenue Department
The Q&A clarified several inquiries about the tax implications of income sourced from abroad, including the following:
Q1: What kind of income shall be taxed upon bringing into Thailand, according to Section 41 and DI. Paw. 161?
A: Foreign-sourced income subject to Thai personal income tax upon bringing into Thailand is an assessable income under Section 40(1) to (8) of the Thai Revenue Code.
Assessable income under Section 40 of the Revenue Code:
2. Independent personal services
3. Goodwill, copyright and other (intangible) rights
4. Interest income, dividends and capital gains
5. Rental from property
6. Professional services
7. Hire of work (i.e., services contracts)
8. Business, commerce, agriculture, industry, transport, etc.
However, if the income is eligible for tax exemption under the general rules, such income from abroad will not be subject to tax under DI. Paw. 161. For example, income regarded as a gift from parents, descendants, or spouses in an amount not over Baht 20 million per annum is exempt from personal income tax.
Q2: In the case where taxpayers invest in foreign bonds and earn interest. If the taxpayers remit capital and interest earned from the investment to Thailand, will they be required to treat capital and interest from the foreign bonds as their assessable income for personal income tax purposes?
A: Taxpayers are required to pay tax only on the value of the interest earned from the bond investments (assessable income under Section 40(4)(a)) if the taxpayers are Thai tax residents who stay in Thailand for not less than 180 days in the year that the interest is earned.
Q3: In the case where a taxpayer resides in Thailand for less than 180 days in a calendar year and in that same year, he receives assessable income from a foreign source. Is he obligated to pay tax on such foreign-sourced income when he brings such income into Thailand?
A: No, he is not obligated to pay Thai tax on such income from abroad. For example, in 2028, Mr. A stays in Thailand for 65 days. That same year, Mr. A derives rental income from his assets in a foreign country and keeps the rental income in his offshore bank account. If Mr. A remits the rental income to Thailand, the income is not subject to Thai tax since Mr. A is not regarded as a Thai tax resident when he earns the income.
Q4: Savings: in the case where an individual has been staying or working abroad for many years and would like to move to Thailand and bring his savings to spend in Thailand. Would he be subject to Thai tax on his savings?
A: No, he is not obligated to pay Thai tax on his savings from abroad if the savings are earned when he is not regarded as a Thai tax resident.
Q5: In case the income from a foreign source has been taxed in that country and, upon bringing into Thailand, will also be subject to Thai tax. Does this cause the taxpayers to pay double tax?
A: Thai tax residents are eligible for foreign tax credits provided by applicable double tax agreements ("DTAs"), subject to conditions stated in each DTA.
The Q&A clarified a couple of key concerns of the taxpayers on the tax treatments on income from foreign sources. However, multiple areas still need more clarity, such as how to differentiate capital from income and what documents are required to prove foreign tax credit. In this regard, the Revenue Department should consider issuing further guidance on how to distinguish income and capital and tax credit utilization.
Source: Revenue Department