2024 Thai Tax Rules: Expats Bringing Money into Thailand
As the Thai tax landscape undergoes a transformation that impacts how money flows into Thailand, the Director General of the Revenue Department announced a game-changer on September 15, 2023. Let's break down the key points of the newly introduced Revenue Departmental Order No. Por. 161/2566, commonly known as the "New Order”.
Individuals seeking to optimize their financial strategies may consider alternative routes. One such avenue involves operating under a foreign company in a tax-free or low-tax jurisdiction, presenting a potential workaround to the implications of the new tax regulations. Let's delve into the details.
Key Takeaways
Effective from January 1 2024, Thai tax resident individuals (anyone who has lived in the country for more than 180 days) will be liable to pay personal income tax which is on a sliding scale of 20-35% depending on the gross income total.
The New Order shakes hands with income earned outside Thailand, whether it's from working abroad, passive income, dividends or profits from owning property overseas. It’s ALL TAXABLE.
Under the old tax rules in Thailand, residents were only taxed on foreign funds if they brought them into the country in the same year they earned them. This rule was cleverly used by wealthy individuals and businesses to manage their tax liabilities.
However, with the introduction of the New Order, things have changed. Now, regardless of whether you bring the money back in the same year or a later year, you'll be subject to Thai personal income tax.
Plainly speaking, anything you've heard before that doesn't align with the New Order, forget about it. The New Order wipes the slate clean by tossing out any conflicting rules or practices.
No Tax on Some Earnings: The good news? If the money you're bringing back isn't taxable (like selling offshore stuff without making a profit) and certain foreign pensions, you catch a break. No Thai personal income tax for you. Income that's already dancing in the tax-free zone according to the Revenue Code, such as insurance profits, keeps its VIP pass. You won't be taxed when bringing in these earnings.
Potential Considerations: By strategically leveraging foreign companies in tax-free or low-tax regions, individuals can potentially navigate the impact of this regulation.
The Foreign Company Approach
Operating under a foreign company can offer a legal workaround. Here's how:
Establishing a Presence - Set up a foreign company in a jurisdiction known for its tax-friendly environment. Many countries or states offer low or zero corporate income tax rates, providing an advantageous platform for businesses.
Income Channeling - Direct your offshore-sourced income through the foreign company. By doing so, you may avoid the direct application of Thai personal income tax, this specific approach takes meticulous planning to adhere to all laws and regulations.
Legal Compliance - Ensure strict adherence to the legal and tax regulations of both the foreign jurisdiction and Thailand. Seeking professional advice in both areas is crucial to maintaining compliance and avoiding unintended consequences.
Considerations and Risks
While the foreign company strategy may seem like an attractive workaround, it's essential to weigh the potential risks and considerations:
Professional Guidance - Engage with tax and legal professionals well-versed in both Thai and foreign regulations. Their expertise can help you navigate the complexities and mitigate risks.
The New Order emphasizes the need for tax-conscious expats to understand the implications of bringing offshore earnings into Thailand. Our easy-to-read breakdown of the key points of the New Order clarified that, yes, taxes are now due on foreign income, but exemptions exist for certain types of non-taxable income and those covered by existing Revenue Code provisions.
Delving deeper, we explored a potential legal workaround for the tax implications: operating under a foreign company in a tax-friendly jurisdiction. By establishing a corporate presence in a region with low or zero corporate income tax rates, individuals can channel offshore-sourced income through the foreign entity, potentially avoiding direct application of Thai personal income tax.
However, as enticing as this strategy may seem, it comes with its own set of considerations and risks. Striking the right balance between legal compliance in both the foreign jurisdiction and Thailand is crucial.
What are your goals?
If you would like guidance on the Thai tax changes for expats or how to legally minimize your tax contact our expert team at How Do I Business today.
In essence, while the New Order changes the game, it also invites strategic thinking. Expatriates can explore legal workarounds to optimize their financial strategies, but careful consideration, meticulous planning, and professional advice remain paramount. As the tax landscape evolves, staying informed and adaptive will be key to successfully navigating the shifting currents of Thai taxation.
