New Change and Effects on Thailand Personal Income Tax

By Krit Komkrit – Associate Director & Pataraporn Sirisopikun, Manager – Legal and China Practice

The New Revenue Departmental Order will effectively close the legal loophole that existed and which has until now allowed Thai tax residents[1] to bring in their income to the Kingdom from abroad without being taxed. Those who live in Thai but have assets or businesses overseas should now reconsider their personal income tax plan strategies for next year and beyond. 

On Friday, 15 September 2023, the Revenue Department of Thailand issued Revenue Departmental Order No. Por.161/2566 (2023) regarding the new tax implications on personal income tax under Section 41, Paragraph 2 (the “Order”) of the Thai Revenue Code (the “TRC”). The Order will overrule previous regulations, orders, tax rulings and practices on tax treatment and liabilities on offshore source income derived by a Thailand tax resident. This will have a significant impact on Thai tax residents who have been receiving income from employment, business carried on, or property situated outside of Thailand. 

Prior to this Order, it was widely known that if you are a Thailand tax resident and that you bring in offshore source income from employment, business, or property overseas, e.g., real estate properties, stocks, investments, etc.) in a year later than the year that such income is recognized, such income will not be subject to Thailand personal income tax. As a result, a number of Thai tax residents, e.g., wealthy Thais, expats, and offshore investors, have been utilizing this exemption for their personal income tax planning for years.     

However, the new Order which will apply to offshore source income brought into Thailand from 1 January 2024 onwards, will cause a significant change that overturns the current practice. According to the new Order, if you are Thailand tax resident and you bring in your offshore source income (derived in either the current or previous tax years) into Thailand in any tax year (either in the same tax year or the following years), such income will be subject to Thailand tax under Section 41, Paragraph 2 of the TRC.

Section 41 states that:

“A taxpayer who in the previous tax year derived assessable income under Section 40 from employment, business carried on in Thailand, or a business of an employer residing in Thailand, or from 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 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 a result, this is extremely unfavorable news for those who have received income this year and had planned to bring in their income next year because there will be no options available to them to avoid paying Thailand personal income tax, unless they leave such income overseas or stay in Thailand for less than 180 days (i.e., non-Thai tax residents or they have been granted a Long Term Resident (“LTR”) visa).   

To provide an example, if you are a Thai tax resident and received 1 million USD from employment in Australia in the tax year 2023 and you would like to bring this money into Thailand, based on the present practice, you may wait until the next tax year, i.e., 2024, to remit such money into Thailand in order to be exempted from Thailand personal income tax. However, per the new Order, you will be liable to Thailand tax whenever you bring in such income to Thailand.  

Now, the question arises, what if you have already paid tax on such income in the other country or jurisdiction, must you pay tax in Thailand again for the same income causing you to consequently be taxed twice? 

To eliminate international double taxation of income and property, Thailand has signed the Double Tax Agreements (“DTA”) with 61 countries, e.g., United States of America, Great Britain and Northern Ireland, Germany, Singapore, China, Japan, Australia, etc. Generally, if you have paid income tax in another country that has signed a DTA with Thailand before bringing such income into Thailand in the same tax year that the income has been recognized, the tax paid in the other country can be used as a credit against Thai tax, subject to conditions set in each DTA. It is noted that this credit relief may not be applied if you bring the income into Thailand in a different tax year from the year that the income has been recognized, in other words, you may have to pay tax in both countries. 

Before the Order becomes effective on 1 January 2024, you may now have to start considering the following questions: 

         – Whether you are considered as a Thai tax resident?

         –  Which type of income you have and plan to bring into Thailand?   

         – Whether that country has entered into a DTA with Thailand? 

         –  How can the DTA and tax relief be applied to your case?

In addition, there may be further detailed changes or clarification from the Revenue Department. Therefore, it is highly recommended to reach out to your tax advisors to seek further recommendations, reconsider your tax plan to prepare for this new significant change. 

For further details and clarification, please contact our Tax Team at RSM Taxation Services Thailand

Mark Butters – Executive Director, Business Services Mark.Butters@rsmthailand.com, 

Pardorn Suchiva – Legal Director Pardorn.Suchiva@rsmthailand.com, 

Tossaporn Kiattidamrongkul – Associate Director Tossaporn.Kiattidamrongkul@rsmthailand.com