Pay no Thai tax by transferring your foreign income to Thailand the next calendar year?

[TPDH]

Hi

 

There are lot of posts on this forum and online articles by reputable tax counsels in Thailand such as PwC saying that there's a rather easy way for Thai (tax) residents to pay no tax on your foreign earned income. For example, if you have capital gains and/or if you receive a salary/wage from abroad, you can keep that money in a foreign bank account and then transfer it to your Thai bank account the following calendar year--this would result in that you won't have to pay any taxes on it in Thailand. From what I understand, this also applies to capital gains from for example US stock trading. Since you're a Thai tax resident already and not a tax resident of another country, then this effectively means that you wont have to pay any taxes on this foreign income at all. It also seems to be rather easy to become a Thai tax resident since you'd only have to spend 180 days in Thailand during one calendar year which is easily done on various kinds of easily obtained visas or visa extensions. No other requirements seems to have to be met and I'd assume no work visa or work permit is required either since you're working for a foreign company. 

 

This thread for example, links to a few different sources confirming the same. One being a PwC publication which says: 
https://www.pwc.com/th/en/publications/assets/thai-tax-2017-18-booklet-en.pdf
Page 2: "Residents and non-residents are taxed on their assessable income derived from employment or business carried on in Thailand, regardless of whether such income is paid in or outside Thailand. Residents who derive income from outside Thailand will be subject to tax only where the income is remitted into Thailand in the year in which it is derived"

 

This sounds too good to be true. Millions of people can work fully remote for foreign companies today so this would be a very easy way to pay no taxes on your foreign earned salary/wage and capital gains. If this is true, then I'm surprised that not more people are talking about this including the media who should refer to Thailand as a tax haven. 

 

Can anyone confirm if this is really correct? And what am I missing here? 

 

 

Edited October 10, 2020 by Hansen88a

[tonray]

6 minutes ago, Hansen88a said:

This sounds too good to be true

It is....you either have to pay tax to the US or to Thailand. Stop paying US taxes and your next passport renewal won't go as easily as you might anticipate.

Edited October 10, 2020 by tonray

[FritsSikkink]

"if you receive a salary/wage from abroad" then you are working in Thailand and need a visa to match and a work permit.

[wordchild]

it is true. There have been numerous threads on this subject on TV.

However, if a US citizen, it does not mean that you can escape US taxation.

Also. of course, the income maybe taxed or withheld in the source country.

The concession applies to foreign residents in Thailand and also to resident Thai nationals.

Wealthy Thai families make significant use of this in their tax planning , so I doubt things will change anytime soon. 

Edited October 10, 2020 by wordchild

[Fat is a type of crazy]

Not an expert but just a few comments. The  foreign income remittance rule as you say is such that  if you are a thai tax resident and you bring those funds in to Thailand in the following year there is no tax in Thailand.

I would note though that in the examples you give such as wages and capital gains there may be tax in the other country. 

I can talk about Australia which may or may not be comparable to the countries where you earned income.

I'm not too much help on the wages issue. In the case of wages earned in Australia if you are a non-resident you would have to pay significant withholding tax , which is higher than the resident rate, because there is no tax free threshold. If you earn the Australian wages remotely, and are not a resident,  this is the area you may have a tax benefit.

I note though non-residents do  get taxed on interest, dividends, rent and other Australian income. 

Non residents generally have to pay tax on 'taxable Australian property'. This includes any real estate but does not generally include shares.  For real estate it can be worse because in some circumstances non-residents, even if they were previously residents,   do not get some capital gains concessions available to residents.

So though you may not have to pay tax in Thailand you may have to in the other country. There may be a tax treaty between your country and Thailand. 

 

Edited October 10, 2020 by Fat is a type of crazy

[dimitriv]

1 hour ago, tonray said:

It is....you either have to pay tax to the US or to Thailand. Stop paying US taxes and your next passport renewal won't go as easily as you might anticipate.

 

With a US passport you have to pay tax on your world income. Fortunately this is not the case for people from other countries.

 

Usually you have to pay tax in the country where you stay for more than half a year.

 

[dimitriv]

58 minutes ago, FritsSikkink said:

"if you receive a salary/wage from abroad" then you are working in Thailand and need a visa to match and a work permit.

 

Is there a visa/work permit for people living in Thailand but working abroad?  I don't believe so.

 

And is it possible to pay tax if you work illegally abroad (online for example) but live in Thailand?  It means you have to pay tax on something you are not allowed to do.

 

 

[scubascuba3]

I have wondered if those transferring their pension over monthly will eventually be taxed as it's current year

[FritsSikkink]

2 hours ago, dimitriv said:

 

Is there a visa/work permit for people living in Thailand but working abroad?  I don't believe so.

 

And is it possible to pay tax if you work illegally abroad (online for example) but live in Thailand?  It means you have to pay tax on something you are not allowed to do.

 

 

You have to setup a company or work for a company.

[Oldie]

1 hour ago, scubascuba3 said:

I have wondered if those transferring their pension over monthly will eventually be taxed as it's current year

Normally yes. And whenever I go for a tax refund to the revenue department in Jomtien I have to fill in a longer questionnaire about any pension payments. 

[JusticeGB]

The Thai tax code says that if you remit last year's income to Thailand it's not part of this year's taxable income in Thailand so isn't taxed as income for the current tax year in Thailand. 

[OJAS]

6 hours ago, Fat is a type of crazy said:

There may be a tax treaty between your country and Thailand. 

The Double Taxation Agreement between your home country and Thailand is, indeed, the crucial document here:-

 

https://www.rd.go.th/publish/766.0.html

 

[DrTuner]

You need to check the double taxation treaties as well. In quite a few cases income is taxed at the source.

[LivinLOS]

8 hours ago, tonray said:

It is....you either have to pay tax to the US or to Thailand. Stop paying US taxes and your next passport renewal won't go as easily as you might anticipate.

The US is special though.. Most of the rest of the world does allow this.. 

You ARE paying Thai tax, all that Thailand demands.. Thailand considered prior earned income, from a previous year, as savings. 

You can not however work while in Thailand to earn more.. Thats the catch. 

[LivinLOS]

8 hours ago, Hansen88a said:

This sounds too good to be true. Millions of people can work fully remote for foreign companies today so this would be a very easy way to pay no taxes on your foreign earned salary/wage and capital gains. If this is true, then I'm surprised that not more people are talking about this including the media who should refer to Thailand as a tax haven. 

 

You have it partly right.. Income earned in a previous year is savings, and is tax free.. Capital gains, stock market gains, dividends, rental yields, etc are all perfectly valid. 

Where you get it wrong though is the idea you can 'work' from Thailand under this system, and stack it up offshore, to remit the following year. It is acceptable in the cases above of 'returns' but working in the kingdom, for yourself, for a non Thai company, even with no Thai clients or customers, is then illegal. Work of this type still requires a work permit to be legalized, which in turn demands income taxation from day 1, and work of this nature is unlikely to be possible to obtain without the assistance of umbrella companies etc. It is this aspect which closes the circle and the system makes sense from savings and passive income remitted to Thailand in the year after it was paid and active income from efforts and endeavours for profit. 

The law is however virtually unenforced (and almost unenforceable) hence many people incorrectly believe that online work is somehow exempt. It isnt its just not policed. 

Thailand could create a new category of work permit for freelancers, etc etc and demand income taxation, I am often surprised they do not and pass up on this revenue, but they have chosen not to. 

[wordchild]

Thailand is not completely anomalous  in this approach.

If you start from the premise that you are not going to (automatically)  tax your residents (incl citizens)  on their world wide income, then you need to make a distinction between income and capital (savings) when they bring it back into the country. (which , in the end, Thailand wants them to do).

The UK has a similar policy, in its preferential tax treatment of UK resident, "non doms". It is just that , in Thailand, everyone can be taxed as a "non dom"! 

[TPDH]

3 hours ago, LivinLOS said:

You have it partly right.. Income earned in a previous year is savings, and is tax free.. Capital gains, stock market gains, dividends, rental yields, etc are all perfectly valid. 

Where you get it wrong though is the idea you can 'work' from Thailand under this system, and stack it up offshore, to remit the following year. It is acceptable in the cases above of 'returns' but working in the kingdom, for yourself, for a non Thai company, even with no Thai clients or customers, is then illegal. Work of this type still requires a work permit to be legalized, which in turn demands income taxation from day 1, and work of this nature is unlikely to be possible to obtain without the assistance of umbrella companies etc. It is this aspect which closes the circle and the system makes sense from savings and passive income remitted to Thailand in the year after it was paid and active income from efforts and endeavours for profit. 

The law is however virtually unenforced (and almost unenforceable) hence many people incorrectly believe that online work is somehow exempt. It isnt its just not policed. 

Thailand could create a new category of work permit for freelancers, etc etc and demand income taxation, I am often surprised they do not and pass up on this revenue, but they have chosen not to. 

Thank you! That's very helpful. 

 

If you're a non resident citizen of a European country and you're working fully remote for a US company, to be a legal tax resident of Thailand then you'd have to have a work permit? Is that right? 

 

Are you sure that it wouldn't be possible to obtain a work permit under those circumstances? If it's possible, can't you still avoid the Thai income tax on your salary/wage by doing what we're discussing here and transfer the salary to Thailand the following year? 

 

If you can't get the work permit under these circumstances, then you're saying that this set up is likely illegal? 

 

[maqui]

11 hours ago, Hansen88a said:

Millions of people can work fully remote for foreign companies today so this would be a very easy way to pay no taxes on your foreign earned salary/wage and capital gains.

Even online work for a foreign company requires a work permit in Thailand. 

 

On digital nomads who work as freelancers or for a foreign company:

" The most important criteria that this department (the Work Permit Office) considers when judging if a foreigner works or not, is: does the foreigner use energy, knowledge or effort to produce something? If the anwer is yes, then this could mean work. However, the Work Permit office may not pro-actively investigate or pursue every such case." https://www.chiangmailocator.com/wiki-can-digital-nomads-legally-work-in-thailand-p177

 

Obtaining a work permit for working remotely for a foreign company is probably impossible unless you establish your own Thai company with Thai employees.

If you do online work without a work permit, the question of taxes in Thailand would be moot. You would have to fly under the radar regarding both the permit and the taxes on the income you earn by working without permit. 

If the Tax or Work Permit Offices somehow take an interest in your bank account movements, your fate may depend on the mood of a low-level bureaucrat who was harangued, just before you arrive at his office for a review of your case, by his wife and mother-in-law, like every day of his sad bureaucrat life, because of his disappointing government salary, which is lower than what a manly man, who really takes care of his wife and her mother, can reap in Thailand: Just look at the married Thai Madam Farangs in the Gulf Resort over there, who look down their noses at my daughter, you miserable son-in-law.

And that will seal your case review concerning taxes and work permit.

 

 

 

 

 

[Susco]

12 minutes ago, maqui said:

On digital nomads who work as freelancers or for a foreign company:

" The most important criteria that this department (the Work Permit Office) considers when judging if a foreigner works or not, is: does the foreigner use energy, knowledge or effort to produce something? If the anwer is yes, then this could mean work. However, the Work Permit office may not pro-actively investigate or pursue every such case." https://www.chiangmailocator.com/wiki-can-digital-nomads-legally-work-in-thailand-p177

 

Sorry but I think you are not completely correct.

 

Some digital nomads will not need a work permit, other will need one.

 

One who is working online for a foreign company, not necessarily needs a work permit.

 

https://www.thaiembassy.com/travel/digital-nomads-working-in-thailand.php

 

A digital nomad works on his online shop in a co-working space.

Answer: The digital nomad is allowed to manage his online shop during the duration of his stay in Thailand without a work permit. Even if some of his customers are in Thailand, he is just continuing to do something he was doing before he came to Thailand anyway. However, if his products or market are mainly from Thailand, then YES this is considered to be work and it is a concern

[maqui]

5 minutes ago, Susco said:

 

Sorry but I think you are not completely correct.

 

Some digital nomads will not need a work permit, other will need one.

 

One who is working online for a foreign company, not necessarily needs a work permit.

 

https://www.thaiembassy.com/travel/digital-nomads-working-in-thailand.php

 

A digital nomad works on his online shop in a co-working space.

Answer: The digital nomad is allowed to manage his online shop during the duration of his stay in Thailand without a work permit. Even if some of his customers are in Thailand, he is just continuing to do something he was doing before he came to Thailand anyway. However, if his products or market are mainly from Thailand, then YES this is considered to be work and it is a concern

To me, this sounds like the case of a true nomad: someone who does not stay for a year or longer on a non-O visa but someone whose main purpose for staying in Thailand is tourism for his transient duration of stay. But I concede that the "answer" above can be interpreted differently.

Since it is open to interpretation by a Thai government bureaucrat, I would still hesitate to confidently walk into a Thai tax office without a work permit and request a Thai tax ID in order to prove to a US or European tax office that I´m a tax resident of Thailand. 

Example: If a Swiss citizen resides in Thailand but earns income from a Swiss company, the Swiss tax office would ask for his Thai tax ID to prove in which other country he pays his income tax. Without it, he would owe taxes in Switzerland because the Swiss tax office could not identify the applicable double taxation agreement. 

There may be Western countries where the tax office does not care whether or not you have an official Thai tax iD; and/or exempts your local income stream if you just present some other paper that shows your foreign country of residence. 

[dimitriv]

37 minutes ago, Susco said:

 

Sorry but I think you are not completely correct.

 

Some digital nomads will not need a work permit, other will need one.

 

One who is working online for a foreign company, not necessarily needs a work permit.

 

https://www.thaiembassy.com/travel/digital-nomads-working-in-thailand.php

 

A digital nomad works on his online shop in a co-working space.

Answer: The digital nomad is allowed to manage his online shop during the duration of his stay in Thailand without a work permit. Even if some of his customers are in Thailand, he is just continuing to do something he was doing before he came to Thailand anyway. However, if his products or market are mainly from Thailand, then YES this is considered to be work and it is a concern

 

The catch is in the footer of this website: " This is NOT the official website of the Thai Embassy."

 

 

[maqui]

1 minute ago, dimitriv said:

 

The catch is in the footer of this website: " This is NOT the official website of the Thai Embassy."

 

 

Correct. It just shows interpretation of work permit statutes by a law firm in Bangkok.

"Real" Thai embassies couldn't care less because foreigners don´t apply apply for work permits with any embassy.

The law firm´s summary just mirrors what the other sources I'm aware of are stating: There is not a single, definite list of activities that require a permit. In many case, it's up to the local Work Permit offices to interpret them. Here, a dive into "broad" and "narrow" interpretations, and an interview with a Chiang Mai Work Permit Office.

https://www.chiangmailocator.com/wiki-all-you-need-to-know-about-how-foreigners-can-legally-work-in-thailand-p131

https://www.chiangmailocator.com/wiki-can-digital-nomads-legally-work-in-thailand-p177

 

The murkier the law, the more pitfalls. 

"Boston civil-liberties lawyer Harvey Silverglate calls his new book "Three Felonies a Day," referring to the number of crimes he estimates the average American now unwittingly commits because of vague laws."

[ballpoint]

50 minutes ago, maqui said:

Since it is open to interpretation by a Thai government bureaucrat, I would still hesitate to confidently walk into a Thai tax office without a work permit and request a Thai tax ID in order to prove to a US or European tax office that I´m a tax resident of Thailand. 

I had a Thai tax number when I was working here, which was held by the company I worked for.  When I retired and changed to a retirement extension, done without leaving the country, I went to the local tax office the following year and showed that I satisfied the tax residency requirement of staying more than 180 days in country, and that interest was paid into my local bank account - thus having a (very small, but perfectly legal) income here.  They then gave me the official yellow slip with my tax number on it - the same number I had when working and paying income tax.  I'm pretty sure that I could have applied for, and been issued with, a number, even if I hadn't already been working here previously, simply based on the interest payments and time spent in the country.

[onebir]

6 hours ago, LivinLOS said:

but working in the kingdom, for yourself, for a non Thai company, even with no Thai clients or customers, is then illegal.

From what I've read here, the test is whether or not the activity involves or uses Thai resources. I can't remember the exact phrasing, but many forms of "digital nomad" work wouldn't appear to fall foul of this. (Edit see #22 above)

Edited October 10, 2020 by onebir

[maqui]

19 minutes ago, onebir said:

From what I've read here, the test is whether or not the activity involves or uses Thai resources. I can't remember the exact phrasing, but many forms of "digital nomad" work wouldn't appear to fall foul of this. (Edit see #22 above)

This is from a 2018 interview with the Chiang Mai Work Permit Office. The official states that digital nomads who do online work without a permit during a stay of more than a few weeks would breach the Work Permit law.

In another interview, I read that the Work Permit Offices even regard the use of electricity to power your notebook as the "use of Thai resources for the purpose of work." You may pay for the kilowatts, but using Thai resoures for the purpose of earning money in Thailand requires a work permit.

As the official states below, they just chose not to pursue it much - back in 2018. 

 

" If a Digital Nomad comes here to work only for a short period of time (a few weeks), that is not a main concern for this Department. But if a Digital Nomad come to stay in Thailand long-term with the main purpose of working, then a work permit is needed. He/she exerts energy and resources in Thailand for the purpose of work. "

Using these criteria, aren't most Digital Nomads in Chiang Mai effectively working here illegally?

" Yes, in a strict sense. After consulting our Public Prosecutor, his opinion is that all such foreigners need a work permit and lacking this, are working illegally in the Kingdom.
Until now, they have been left alone because they are not a main concern to our office (yet), however if problems occur or the law is adjusted this may change in the future.
As of now, Thai law does not have specific sections that cater for relatively new developments such as foreign online workers. "

How do you know that a Digital Nomad comes to Thailand mainly for work? This could be just a tourist enjoying the sun and the food, meanwhile playing with his laptop.
" Indeed, it is hard to check what is the true purpose of a foreigner coming to Thailand. Foreigners working on a laptop as such are not a main concern to this office, but if there are problems, we may go to check it. "

[david555]

12 hours ago, scubascuba3 said:

I have wondered if those transferring their pension over monthly will eventually be taxed as it's current year

Exactly my thoughts too....

[LivinLOS]

39 minutes ago, onebir said:

From what I've read here, the test is whether or not the activity involves or uses Thai resources. I can't remember the exact phrasing, but many forms of "digital nomad" work wouldn't appear to fall foul of this. (Edit see #22 above)

That is often reported, but has no basis in law.. It may have some basis in enforcement. 

 

The law is very clear.. Enforcement isnt.. Also as per the Upton Sinclair quote "It is difficult to get a man to understand something when his salary depends upon his not understanding it."

[maqui]

1 hour ago, ballpoint said:

that interest was paid into my local bank account - thus having a (very small, but perfectly legal) income here.  They then gave me the official yellow slip with my tax number on it - the same number I had when working and paying income tax.  I'm pretty sure that I could have applied for, and been issued with, a number, even if I hadn't already been working here previously, simply based on the interest payments and time spent in the country.

Agreed. For the purpose of getting a Thai tax ID, show the tax office some interest income or capital gain which you earned abroad while you were in TH and remitted into TH during the same year. The tax office won't reject the income tax you offer them.

 

But the Work Permit Office doesn't care about tax liabilities. All those news articles state that, most of the time, Work Permit Offices don't care much about digital nomads if they do their online work out of public view. But, say, if a local official has a bad day and a vengeful ex-teerak informs on you, the official can choose to throw the book at you.

"Three Felonies a Day," referring to the number of crimes he estimates the average American now unwittingly commits because of vague laws."

[LivinLOS]

5 minutes ago, david555 said:

Exactly my thoughts too....

That is explicitly included in the revenue code. Most peoples understanding of what a DTA actually means is not what they in fact do. 

 

There are some situations where a government pension is unavoidably taxed at source, US government employees is one example I have been shown etc... However the vast majority of pensions globally are merely differed taxation, and expats refer to all manner of income producing investments as 'pensions', in that situation it is up to the recipient to prove tax residency in Thailand and claim back or stop any deductions in the source country. 

Currently Thailand makes zero effort to claim this, despite non Thais walking into immigration offices signing paperwork claiming 65k of taxable income a month, year after year, as residents. I have long argued that one day that will change. 

Edited October 10, 2020 by LivinLOS

[geworthomd]

14 hours ago, FritsSikkink said:

"if you receive a salary/wage from abroad" then you are working in Thailand and need a visa to match and a work permit.

America taxes anyone subject to their jurisdiction on worldwide income. To set up a foreign bank account one must provide a passport. That foreign bank must report to USA whatever the agency or that bank can never do business in America. “Death and Taxes...”