Tax Liability For Foreigners In Thailand

[tomgeorge]

Here's an instructive example of a Thai tax situation which is probably more common than you might think. Bob is English and is 53 years old. He lives full time in Pattaya on a retirement visa and is a computer systems consultant. Most of his days are spent in his study, at a house on a quiet street. There he consults for a company in Australia. All of this is done over the internet. Other than the fact that he lives in this country, Bob's work has nothing to do with Thailand. His salary is paid by the company into his account in the U.K.

Obviously, Bob could be doing this anywhere in the world. And he will swear to you that he doesn't need to pay taxes on his income because he knows four others who are doing something similar.

Does Bob owe Thai income tax on his income? Yes. According to Section 41 of Thailand's Revenue Code, taxes are due in Thailand on income from ''work or any activity'' done in Thailand. Because Bob does the work in Thailand he owes Thai taxes on it.

But there's something else to keep in mind. In Bob's case, because he is English, we have to take into consideration the treaty for the avoidance of double taxation between Thailand and the U.K. This particular treaty says that only one of the two countries can tax Bob for work he does. Which one? The treaty provides that it's the state in which the taxpayer is resident that gets the taxes. Since Bob's residence, defined as presence for 180 or more days a year, is Thailand, he would have to pay his taxes in Thailand.

There's yet another issue. Bob is in Thailand on a retirement visa. The terms of a retirement visa provide that one may not work, even part time. If he violates this he's exposed to the penalties from Section 75 of the Thai Immigration Act, BE 2522 (1979). In Bob's case this could mean penalties of up to a year in jail and a fine of up to 10,000 baht. Likewise, under Section 36 of the Immigration Act, Jurgen's retirement visa could be revoked.

Of course, it is practically impossible for anyone, including the Thai tax authorities, to know whether Bob is working in Thailand _ he doesn't have a formal place of work in Thailand and isn't paid in the Kingdom. So lots of people do what Bob is doing and nobody complains much. But you should be aware that what he's doing does trigger tax obligations.

How would Bob make his work tax-compliant in Thailand?

Well, he couldn't do it on a retirement visa. He could do it by forming a company. The Thai company would then hire Bob as an employee and he would get a work permit in Thailand. The company would owe Thai corporate tax on what it was paid by the company in the U.K. The local company would pay Bob a salary, and Bob would be responsible to pay Thai income taxes on this.

Obviously, this is expensive, time-consuming and basically a pain. Working under the radar is far easier and saves Bob a lot of money and hassle. The chances of him getting caught, provided he keeps his mouth shut about his work when he's down at the pub having some bevvies, is almost nil. However, the reality is that what he is doing is illegal and there are real penalties if he is caught.

[taxexile]

same as all those with an under the radar income from rented condos.

[good2bhappy]

Bob is English and is 53 years old.

Bob is in Thailand on a retirement visa.

Jurgen's retirement visa could be revoked.

sorry where does jurgen come into it?

[nigelandjan]

People like Bob are gonna fvk it up for the rest of us one day who are happily abiding by the rules of the retirement visa that has been afforded to us by the Country we choose to " retire " in .

What the hell is wrong with people ?

Gets no sympathy from me when he gets caught ,, shouldn't be too difficult when they ask him to explain where his income is coming from and has to explain those ( non pension payments ) going into his account

[taxexile]

going into his account

bob would not be receiving payment into a thai based account.

it would probably be an offshore account away from the attention of the us or eu tax authorities. nothing illegal about that of course.

[Airportwo]

I have had a retirement visa for the past 7 years, to prove I have income I use a letter from the embassy who base the facts on a letter from my employer in another country, this is basically the same scenario although I leave the country, payments going into my accounts are from employer, getting into a very gray area if you think Thailand should be collecting taxes! Hell they can't collect taxes from ±60% of the population.

[nigelandjan]

At the end of the day surely even if you declare yourself as a non dom in your own Country and have an offshore account you will have to pay Thai tax when you bring it in to Thailand ?

[taxexile]

At the end of the day surely even if you declare yourself as a non dom in your own Country and have an offshore account you will have to pay Thai tax when you bring it in to Thailand ?

like an old ladies minge, its a bit of a grey area !

[nigelandjan]

^ Wouldn't know mate ,, thankfully never been there

[Seekingasylum]

The problem with offshore accounts is they are coming under ever more scrutiny by tax authorities. Britain has now signed up to a deal with Liechtenstein, Germany and Switzerland whereby accounts of British residents held there can be examined.In the case of Switzerland, the Swiss will tax account holders on their funds ( between 19% - 34% ) and remit the revenue back to HMRC as a lump sum - they expect to reap over £2 billions. The HMRC have over 500,000 names of British account holders in offshore banks, information which they forced from the UK clearing banks. Interest yielded is yet to be reaped from them in significant amounts but the trend is there with successive amnesties offered to induce folk to cough up - the penalties if they don't are draconian and are the future.

Bob as a British citizen, and one assumes he is domiciled in Britain for tax purposes, has a liability and eventually the way things are going he will have to pay something. Given the schedule agreement in force between Thailand and Britain and taking into account the tax levels here, Bob would do best to work legally and be paid in Thailand, paying Thai tax.

[taxexile]

Interest yielded is yet to be reaped from them

for eu non residents, the interest accrued from offshore accounts has no tax liability in the uk.

thats how it stands at the moment.



...... and since when has germany been an offshore tax haven ?? shurely some mishtake .

[Seekingasylum]

Yesh, indeed. Germany signed up to same deal with the Swiss as the Brits did. My mistake.

Just because Bob lives in Thailand for a significant part of the year does not necessarily mean he is still not domiciled in the UK for tax purposes. Indeed, even those who have elected to expatriate themselves from the UK and observed the travel restrictions it still doesn't mean one is off the hook for a tax liability. That recent case involving the chap In South Africa concluded with him being held to be still liable by virtue of his UK links.

Very difficult to give up that domicile status. That was my point vis a vis Brits holding offshore accounts.

[Thetyim]

The treaty provides that it's the state in which the taxpayer is resident that gets the taxes.

What about WHT on interest earned abroad ?
Are you telling me that it is handed over to the Thai tax collector ?
I would be very interested to hear if this is the case.

[nevets]

It said that Bob has his Australian wages for the consultansy he does over the internet paid in to a bank in England.....to post 4

[Thetyim]

Does Bob owe Thai income tax on his income? Yes. According to Section 41 of Thailand's Revenue Code, taxes are due in Thailand on income from ''work or any activity'' done in Thailand. Because Bob does the work in Thailand he owes Thai taxes on it.

Tax is only liable on the earnings if they enter the Thai banking system in the same tax year.
So money earned in 2010 and sent to Thailand on 1st January 2012 does not become liable for tax.

[Albert Shagnastier]

If a factory worker gets a hundred pounds for losing a finger,

Drivers pay 100bt fines for drunken speeding,

Items are routinely stolen from the police station by the police,

Smashing someone in the head with a plank (so long as you have a good reason -say you're drunk) can be dealt with with a few harsh words and a shot of lau,

Just how much trouble will Bob be in if he gets caught?

In the scheme of the above perhaps he will be awarded a medal instead?

[Fuzzy Bob]

Nice Spam

[Butterfly]

Tax is only liable on the earnings if they enter the Thai banking system in the same tax year.

exactly, if it's paid in the UK, it should be liable to the UK tax system, no matter how long you stay outside the UK

[Thaihome]

As the OP is an advertisement for a help in setting up a Thai company it should be taken with a grain of salt.
Worth noting, the OP did not actually quote Section 41 of the Thai Revenue code. The reason for this is it contains a very big loop hole that is easy to use to avoid the Thai tax liability on derived assessable income

Section 41 A taxpayer who in the previous tax year derived assessable income under Section 40 from an employment or from business carried on in Thailand, or from business of an employer residing in Thailand or from a property situated in Thailand shall pay tax in accordance with the provisions of this Part, whether such income is paid within or outside Thailand.

A resident of Thailand who in the previous tax year derived assessable income under Section 40 from an employment or from business carried on abroad or from a property situated abroad shall, upon bringing such assessable income into Thailand, pay tax in accordance with the provisions of this Part.

Any person staying in Thailand for a period or periods aggregating 180 days or more in any tax year shall be deemed a resident of Thailand.

As long as you don’t bring the income in until 2 years after you have earned it, it is not taxable in Thailand.

Then, just to be sure you don’t owe Thai tax, you take the money and invest in an income paying mutual fund and then the income is again exempt from Thai Tax.

Section 42 The assessable income of the following categories shall be exempt for the purpose of income tax calculation:

23) Income from sale of investment units in a mutual fund.

(24) Income of a mutual fund.

You then use the income from the mutual fund to show required income for the retirement visa.

The problem does remain that in general, everybody owes tax on their income somewhere and it is getting harder and harder to slip between the cracks with countries that do not require a declaration of worldwide income such as US citizens have always had to do.
TH

[Spin]

The Thai labour department generally don't give a shit about foreigners working quietly over the internet from the privacy of thier own homes. You are not seen to be threatening a Thai persons income, hence they don't care.

On the other hand if you are working in in an open office shop front environment selling plane tickets or something like that with no work permit then you will come under scrutiny at some point in time.

The above is not based on personal opinion, it's the result of a meeting with the head of a labour department in Roi-et regarding my work trading the stock exchange via the internet.

All this talk of needing a company and having to pay tax here........ total poop.

[Albert Shagnastier]

The Thai labour department generally don't give a shit about foreigners working quietly over the internet from the privacy of thier own homes. You are not seen to be threatening a Thai persons income, hence they don't care.

On the other hand if you are working in in an open office shop front environment selling plane tickets or something like that with no work permit then you will come under scrutiny at some point in time.

The above is not based on personal opinion, it's the result of a meeting with the head of a labour department in Roi-et regarding my work trading the stock exchange via the internet.

All this talk of needing a company and having to pay tax here........ total poop.

Exactly. Thais respect hard work - as they mostly work very hard themselves. The concept of someone earning money via the internet from people in another country AND THEN SPENDING THAT THERE MONEY IN THEIR SHOPS AND ECONOMY IN GENERAL being a BAD thing would be laughable to most Thais - and rightly so.

[BugginOut]

There's absolutely no communication between the two tax authorities in question without significant reason and a court order. It would take transparent cooperation between the UK and Thailand to share banking information between the citizen/resident respectively. Without that, the left hand doesn't know what the right is doing, and that's truly what you have. If you occasionally took a trip you could say the work was done within one of several other countries' borders. Are the two contemplative tax authorities going to both inquire a third country's tax authority to figure out liabilities of a "suspected" financial trail? Subpoena private account information of a foreign bank? That leads to how much revenue from some dosh? Besides, if you don't spend 180 consecutive days in Thailand, and spend 30 days in say Bali or Cebu or both, to whom are you then liable to pay taxes? There are always ways of obfuscation. It'll just drive everybody deeper into the fun-park of creative tax evasion.

Any loophole experts out there?

[nigelandjan]

You on a retirement visa Spin ?

[larvidchr]

Surely every western expat know that they have tax responsibilities/duty of declaration on income somewhere, there is no grey areas on this only people who cheat, you can always argue about thinking taxes is to high, but not argue about the liability.

Westerners either pay their tax in the country where they hold a passport, in the country they reside or in the country where the money is earned, different tax agreements between countries are in play here, for-instance you pay in your home-country and they then allow you to deduct documented tax paid in your country of residence, and it is your duty to familiarize yourself with those rules and then follow the law as intended.

I know that this is probably not popular but I am going to say it anyway, cheating from paying tax is weak and lousy behavior (a crime too by the way), you make others who probably can ill afford to do so pay more than they should, taxdodgers should think about it next time they take their passport out from the drawer intent on using it, be a Man pay your fvucking part - or flush it in the toilet.

Have a nice day all

[William]

"...cheating from paying tax is weak and lousy behavior (a crime too by the way), you make others who probably can ill afford to do so pay more than they should, taxdodgers should think about it next time they take their passport out from the drawer intent on using it, be a Man pay your fvucking part - or flush it in the toilet."

couldn't agree more [but wonders how Osborne ever became Chancellor!]



BBC News - Millionaire tax avoiders 'shock' chancellor