New Rules - Withholding Tax on Interest - Tax ID

[Pib]

9 hours ago, TerraplaneGuy said:

I looked at that related thread and saw some people said that to stop the withholding tax you need to give Krungsri not only your Tax ID but also a tax return filing receipt, apparently as confirmation that the ID was valid.  Did they insist on that with you?  I have a Tax ID but never filed a return (nothing to declare or refund) so have no receipts.  But I want them to stop withholding tax on my interest.  

I showed my Krungsri branch both my tax ID card which was just a handwritten card given to me by the tax office years ago (nothing fancy like a computer printed and laminated card) and I showed a tax filing receipt from several years earlier which was the last time I filed to get a refund of tax withheld on a fixed saving acct.  The branch only made a copy of the tax filing receipt and not my poor boy's tax card.   

 

And for my Bangkok Bank branch they also just copied my tax receipt....maybe because the tax ID looked like something a 3rd grader would draw. 

 

I don't know if my tax office was simply out of the "real cards" to give a person or that was the norm for that tax office.  I've heard some tax offices don't even issue a tax card now....they just tell you what the number is which supposedly for Thais is usually their ID card number.  

[nahkit]

On 10/18/2019 at 4:19 PM, TerraplaneGuy said:

Maybe I’m missing something but how could you be late filing if you owed no tax?  Surely filing merely to get a refund is not an obligation and not something the failure to do would make one liable for a fine.  Was this just a shake-down for “tea money”? 

I don't believe it was a shake-down as I was given a ticket number and paid at a different desk where they gave me a receipt.

[VBF]

On 10/18/2019 at 10:19 AM, TerraplaneGuy said:

Maybe I’m missing something but how could you be late filing if you owed no tax?  Surely filing merely to get a refund is not an obligation and not something the failure to do would make one liable for a fine.  Was this just a shake-down for “tea money”? 

It's just possible (but I do NOT know), that the Thai Tax authority is copying the UK (HMRC) system. Here, if you''re in what they call "self-assessment", then you are required to submit a tax return whether you owe tax or not, or whether they owe you a refund or not.  Failure to submit attracts a fine and interest on any tax you do owe.

[TerraplaneGuy]

On 10/18/2019 at 7:36 PM, Pib said:

I showed my Krungsri branch both my tax ID card which was just a handwritten card given to me by the tax office years ago (nothing fancy like a computer printed and laminated card) and I showed a tax filing receipt from several years earlier which was the last time I filed to get a refund of tax withheld on a fixed saving acct.  The branch only made a copy of the tax filing receipt and not my poor boy's tax card.   

 

And for my Bangkok Bank branch they also just copied my tax receipt....maybe because the tax ID looked like something a 3rd grader would draw.  ...

For the record I went to Krungsri this week and just gave them my tax ID card since I had no tax filing receipt.  The card is a paper card I got a few years ago, with my name and number typed in, fairly official looking although not laminated.  Krungsri was fine with that card, didn't ask for any tax receipt, and had me fill out the paperwork that is supposed to stop them from withholding tax on my interest.  I'll check next month to see if they in fact stopped.

[Pib]

17 hours ago, TerraplaneGuy said:

For the record I went to Krungsri this week and just gave them my tax ID card since I had no tax filing receipt.  The card is a paper card I got a few years ago, with my name and number typed in, fairly official looking although not laminated.  Krungsri was fine with that card, didn't ask for any tax receipt, and had me fill out the paperwork that is supposed to stop them from withholding tax on my interest.  I'll check next month to see if they in fact stopped.

You should know for sure come the end of "this month" since they pay monthly interest the last few days of each month.....or at least they do for me.  I expect your branch updated your tax status real time while you were setting with them.  They did for me....I even asked for a printout showing my new withholding status.  I doubt they need to send the paperwork upstream to HQ to finalize the stopping of the withholding....they just get the paperwork for filing/backup of the change they already made in the system.   

[Thailand J]

Yesterday I went to Jomtein to get my Thai tax ID. My tax number is the same number on my pink Thai ID card and on my yellow house book, which SCB refused to accept as my tax number without a tax ID card from the revenue office. I tried. My tax ID card is just a piece of paper, with my name in Thai script. I can't use my tax ID for promptpay, not with a retirement extension...so forget about getting refund via promptpay. Tax will still be withheld on the interest in the fixed deposit accounts but won't be on my savings accounts, which are small and can be refunded anyway..

[William Osborne]

My online SCB smartfunds acc clearly shows a 13 digit tax ID number....althou ive never applied for or given them a tax number...(they have also started withholding 10% on dividends recently)

 

Anyone know if this is my actual tax number or just a routing number for bank ?

[mahjongguy]

Just FYI - there is no tax at all on gains from selling SET-registered stocks. Tax on the dividends, but not on the capital gains.

[khunPer]

10 hours ago, mahjongguy said:

Just FYI - there is no tax at all on gains from selling SET-registered stocks. Tax on the dividends, but not on the capital gains.

Quote

Capital gains
Most types of capital gains are taxable as ordinary income, except for
the following which are exempt from tax:

 

1. Capital gains on the sale of shares in a company listed on the Stock
Exchange of Thailand, provided that the sale is made on the Stock
Exchange of Thailand, and on the sale of investment units in a
mutual fund.
2. Gains on the sale of non-interest bearing debentures, bills or debt
instruments issued by a corporate entity, except in the case where
the bonds or debt instruments were sold for the first time at the
price lower than their redemption price to an individual.
3. Gains on the sale of securities listed on stock exchanges in the
ASEAN member countries and traded through the ASEAN Link,
excluding securities in the form of treasury bills, bonds, bills or
debentures.

 

Capital losses cannot be offset against capital gains. An individual may
elect to bear only withholding tax at a flat rate of 15% on the gains
derived from the sale of bonds, debentures, bills or debt instruments
issued by a company or other juristic entities and to exclude the gains
from assessable income in his/her annual personal income tax return

Source: Thai Tax 2017/2018 Booklet.

[TerraplaneGuy]

As OP can I please ask that we keep comments on topic?  This thread is about the new rules on withholding tax on interest and what documents must be given to banks to avoid it.  Miscellaneous observations on what other income is taxable can go on other threads.  Thanks.

[mahjongguy]

Okay, per your request, in your original post you stated "My understanding is that the tax exemption for our first B20,000 of interest remains in effect".

 

There is no such exemption and never has been. The "20,000 baht rule", which has recently been tightened, applies to withholding, not to the actual tax that will be due. 

 

 

[TerraplaneGuy]

My understanding is that there is a tax exemption for B20,000 of interest on bank accounts, even if the bank does not withhold tax.  I get that from the following sources.

 

First, the Sherrings site that I linked above clearly states that there is such an exemption and that this year's new rules (Notification 346) simply require that taxpayers, to continue to avail themselves of it, must notify the bank of their tax ID and do not instruct the bank to not report their income to Revenue.  Sherrings states "If a taxpayer does not comply with the above rules, the taxpayer loses the right to the 20,000 Baht exemption, and the banks shall withhold 15% tax ..".   So by their account, the exemption is quite independent of the withholding and in fact the two would appear to now be mutually exclusive.  

 

Krungsri Bank states the same thing:  https://www.krungsri.com/bank/en/Other/AboutUs/krungsri-announce/exemption-tax-interest-savings-deposit.html

 

Sherrings cites as its authority for the existing exemption Clause 2(38) of Ministerial Regulation No. 126.  I looked that Regulation up (it goes back to 1966) and it does indeed state that "Interests on deposits of saving type at domestic banks that must be returned upon demand, but only where the income earners receive such interests in aggregate not more than 20,000 baht throughout such tax year" are income under s. 42(17) of the Revenue Code.  Turning to s. 42(17), it provides for various kinds of income to be "exempt for the purpose of income tax calculation" by Ministerial Regulations.  So it appears that Sherrings and Krungsri have it right.  Note these legislative provisions say nothing about withholding.

 

I also note The Revenue Dept. site states the following in their summary of personal income tax rules:

 

 "The following forms of interest income may, at the taxpayer’s selection, be excluded from the computation of PIT provided that a tax of 15 per cent is withheld at source:   ...  2. interest on saving deposits in commercial banks if the aggregate amount of interest received is not more than 20,000 baht during a taxable year"

http://www.rd.go.th/publish/6045.0.html

 

So this also confirms there is a an exemption for B20,000 of interest.  While this summary appears to make that contingent on the bank withholding tax, which contradicts this year's Notification 346, that is not surprising since this summary was last updated in 2014.

 

Here's the legislation links if you're interested: https://www.rd.go.th/publish/fileadmin/user_upload/kormor/eng/MR_126.pdf     
https://www.rd.go.th/publish/37749.0.html#section42
 

[mahjongguy]

Yes, there is this computational rule that applies to bank interest as well as to stock dividends. If your total taxable income puts you into the higher tax brackets, then choosing that method could result in a small savings. Your withheld payments would only be taxed at 15% (or 10% for dividends) rather than 20% or more.

 

I can't read the Thai and the English publications don't clarify the issue, but surely this optional method requires forfeiture of the withheld amounts. No other view of it makes sense. The rule update was intended to increase collections, not to create a new exemption.

 

Anyway, given my simple finances, I think that may be enough about accounting. I let the Thai RD do as they see fit, and in the end I get back what I am due.

[TerraplaneGuy]

1 hour ago, mahjongguy said:

.... but surely this optional method requires forfeiture of the withheld amounts. No other view of it makes sense. The rule update was intended to increase collections, not to create a new exemption.

 

I suspect the idea was to increase collections by encouraging account holders to authorize banks to report all their interest to Revenue.   Apparently some were not doing that and were failing to declare it themselves and pay tax on it.  But they were only ever required to pay on interest over B20,000.  According to the sources I name, that 20K exemption remains if you give your bank your tax ID and authorize it to report your interest.  And in that case there is no forfeiture of a withheld amount because the bank will not withhold anything.

 

The reason I started this thread is that this summer for the first time Krungsri started withholding tax on my interest.  And I guess the new rule did its job by motivating me to give Krungsri my ID number etc. to stop the withholding.   Not that I was evading any tax, but now Revenue can monitor me more easily.  

 

[saengd]

But, the tax free allowance band is 0-150,000.

[TerraplaneGuy]

3 minutes ago, saengd said:

But, the tax free allowance band is 0-150,000.

Yes that’s referring to taxable income.  But your first B20k of interest is not included in taxable income.   It doesn’t even figure into the band.  It is exempt for purposes of tax calculation.  See the legislation above.  

[Beggar]

On 10/23/2019 at 2:34 AM, Thailand J said:

 I can't use my tax ID for promptpay, not with a retirement extension...so forget about getting refund via promptpay. Tax will still be withheld on the interest in the fixed deposit accounts but won't be on my savings accounts, which are small and can be refunded anyway..

I set up Prompt Pay too just to find out that it can only be used by Thais to get the refund. Without Prompt Pay you get a refund that can only be withdrawn at a Krung Thai Bank. Since I don't have an account there Krung Thai put the money on an E-Money Card. It is like a debit card but without account and valid for 5 years. It also does not have Visa or anything like this. But it has a PIN and can be used for shopping or at ATMs. No further documents like Residence Certificate were needed. Got it immediately with the refunded money on the card. 

[JimGant]

On 10/25/2019 at 3:38 PM, TerraplaneGuy said:

But they were only ever required to pay on interest over B20,000.  According to the sources I name, that 20K exemption remains if you give your bank your tax ID and authorize it to report your interest.

The 20k exemption is exemption from withholding, not exemption from the Thai personal income tax. The Thai to English translation was incomplete in excluding the the word "withholding" between tax and exemption. Mahjongguy has already nailed this.

 

You've got to have some limit on where withholding begins, otherwise every rice farmer earning 300 baht on his savings account will be flooding the tax dept with a tax return for a refund. Or not, meaning the gov't is collecting unwarranted taxes. Either way, a bottom line for withholding is required. 

[TerraplaneGuy]

1 hour ago, JimGant said:

The 20k exemption is exemption from withholding, not exemption from the Thai personal income tax. The Thai to English translation was incomplete in excluding the the word "withholding" between tax and exemption. Mahjongguy has already nailed this. 

Do you have a link to what Mahjongguy wrote?  What you say appears to conflict with the sources I quoted above.  

[JimGant]

2 hours ago, TerraplaneGuy said:

Do you have a link to what Mahjongguy wrote?  What you say appears to conflict with the sources I quoted above.  

Posts 41 and 43. Indeed, the wording gets tricky. But the bottom line is that one's bank interest is not tax exempt. You either include it on your PIT form, and pay at your marginal rate; or don't include it on your PIT form, and pay the flat 15% withholding rate (maybe this is where the "tax exempt" terminology arises -- i.e., tax exempt on your PIT filing, but not tax exempt with the 15% withholding at source). Anyway, for us Yanks, just take the 15% withholding as a tax credit on your US tax filing. Yes, you're not supposed to, if you can reclaim this withholding. But to do so you need a Tax ID -- and there are enough reports on this forum to document that getting such an ID is difficult. Those are the reports you share with the IRS, when you get that letter audit -- chance of which is almost nil with today's IRS audit resources. Anyway, you end up paying the same amount in taxes -- just less to the US and more to Thailand -- so they can fix that pot hole you caused last rainy season. Fair is fair. Oh, as a retired CPA, this is a no brainer grey area, particularly since you didn't enrich yourself with tax avoidance.

[TerraplaneGuy]

4 hours ago, JimGant said:

... the bottom line is that one's bank interest is not tax exempt. ...

Can you tell us what your authority is for saying there is no exemption from income tax? Mahjongguy says that too but also gives no authority. Whereas the authorities I cited above state clearly that there is such an exemption, for the first B20,000.  I suggest you look at the Sherrings link I gave: https://sherrings.com/interest-income-personal-tax-thailand.html 

You can see they clearly distinguish between 3 kinds of interest income:   1. exempt from income tax; 2. not exempt from income tax and there has been no deduction (i. e. withholding); and 3. not exempt and tax has been withheld at 15%.  So the first category is what I'm talking about, and I believe it's the first B20K, which is backed up lower down the page where they talk about the new rules for savings account interest.  And they refer to the legislation that I linked above, and that also states there is a B20K exemption (with no mention of withholding).  So if you you think this is all wrong, I'd just like to know your authority for that.

[JimGant]

I stand corrected. The following from the Thai revenue code for exemptions from assessable income:

Quote

The following interest: (a) Interest from Government savings lotteries, or interest on demand deposit with the Government Savings Bank; (b) Interest on savings deposit with a cooperative; (c) Interest on savings deposit with a bank in Thailand which is repayable on demand; only in the case where the total amount of interest received by any taxpayer does not exceed 10,000 Baht throughout tax year, in accordance with the rules, procedures and conditions as prescribed by the Director- General.

That was several years old, and the 10000 baht was subsequently updated to 20000 baht:

Quote

“(38) Interests on deposits of saving type at domestic banks that must be returned
upon demand, but only where the income earners receive such interests in aggregate not
more than 20,000 baht throughout such tax year, subject to the rules, procedures and
conditions prescribed by the Director-General.”

Kind of a strange setup -- no tax incentive to earn more than 20000 bt in interest, since if you cross 20000, the whole amount now gets taxed. Would seem smarter to just have a 20000 exemption on all interest earned from savings accounts. Probably from the same office putting out guidance on OA visas and insurance.

[TerraplaneGuy]

15 minutes ago, JimGant said:

...

Kind of a strange setup -- no tax incentive to earn more than 20000 bt in interest, since if you cross 20000, the whole amount now gets taxed. Would seem smarter to just have a 20000 exemption on all interest earned from savings accounts. Probably from the same office putting out guidance on OA visas and insurance.

I see how you conclude that but I suspect that's not what they mean.  I think they mean that if you receive more than B20,000, the amount in excess of B20,000 is taxable, not the whole amount starting from the first baht.  A literal reading could indeed suggest your interpretation but as you indicate it just doesn't make sense.  Not only would there be no incentive to earn over 20K, there would be a strong incentive NOT to.  If you're at say 19K already you'd pull your money out of interest-bearing accounts to avoid the "claw-back" that will descend if you cross over 20K. That can't have been the intention.  It's not the way tax exemptions work, and I think it's just imprecise drafting, which is certainly not unusual in Thai statutes (and I'm assuming that we're looking at an accurate translation of the Thai which may not be the case).