Update: Thailand Clarifies Tax on Foreign Income

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Looks like Thailand is coming for expat money, but it appears retirement incomes are not taxed, however if you receive rental income from another country and use that income to live in Thailand, it is:


[size=0px]Background to Thailand?s Plan to Levy Tax on Foreign Income[/size]Recently we published ?Tax Alert: Thailand to tax foreign income?, an article about significant new changes introduced by the Thai Revenue Department through Revenue Order 161/2023, that seek to tax Thai tax residents on any foreign-sourced income that they bring into Thailand at any time after 1st January 2024.[/font][/size][size=0px]
[/color][/size]In short, Revenue Order 161/2023 reversed Thailand?s long-held policy of not taxing foreign income (where that income was not brought into Thailand during the year of receipt). The new revenue order declared that foreign income remitted to Thailand would be taxable in Thailand, regardless of when that income was received![/size][/size]However, the revenue order was very short on details, leaving many questions unanswered about exactly how the Thai government would apply and enforce the new rule.[/color][/size]This lack of clarity caused a significant public outcry since the announcement of Thailand?s change of policy, particularly among tax professionals (including ourselves) and among Australian and foreign expats living in Thailand.[/color][/size]In response to that large public outcry, the Thai government has just released another new revenue order that seeks to clarify the operation of these new rules.[/color][/size][size=0px]Update ? Thailand issues New Revenue Order 162/2023[/size]On 20th November 2023, the Thai Revenue department issued Revenue Order 162/2023 (a follow-up and amendment to Revenue Order 161/2023). The new revenue order states that, in relation to the rule outlined in Revenue Order 161, that all foreign income remitted to Thailand would be taxable in Thailand, regardless of when that foreign income was received but this new rule:[/font][/size][size=0px]
[/color][/size]. . . shall not apply to assessable income arising before 1 January 2024.?![/color][/size]What this means is that any foreign income earned prior to 1st January 2024 and remitted to Thailand on or after that date will not be subject to Thai taxation.[/color][/size]Ultimately this is qood news as it means that any savings generated by Australian expats before 1st January 2024 (from income earned outside Thailand) will be quarantined. This means that the income can be brought in any time after 1st January 2024 without any tax issues at all.[/color][/size]This latest development appears to be a direct response to the concerns raised by the expatriate community and financial experts, indicating the government?s readiness to address and streamline the complexities involved in the international taxation landscape.[/color][/size]Although this is good news for Australian expats (as it helps to clarify the operation of the new rules), in our view, significant questions still remain about exactly how these new rules will operate going forward, particularly in relation to co-mingled funds (post 31 Dec 2023 income mixed with clean/exempt pre-1st Jan 2024 funds) and other related questions.[/color][/size][size=0px]Pros and Cons: Evaluating the Impact of the New Ruling[/size]Pros: Revenue Order 162/2023 is a positive development, especially for those who have been living in Thailand as part of the Thai economy since before 2024.[/font][/size][size=0px]
[/color][/size]It eliminates the retroactive tax implications on foreign income of the the new rules and it provides an opening for some potentially effective tax planning for re-2024 income and funds.[/color][/size]This revision is particularly beneficial for those who have accrued long-term savings outside of Thailand, as it means that those savings should not be taxed when brought into Thailand.[/color][/size]Cons: Yet, the situation is not entirely straightforward sadly![/color][/size]The amendment, while providing some answers, fails to address other complexities, particularly relating to the tax treatment of funds sent to Thailand from foreign accounts containing mixed funds (i.e. accounts containing pre and post 1st Jan 2024 income) and the determination of tax rates for various types of income.[/color][/size]These unresolved issues continue to present significant challenges for Australian expats who will need to plan for, and navigate these uncertainties.  Probably should go to the link to overcome the formatting issues:[/color][/size][/color][/size]Update: Thailand Clarifies Tax on Foreign Income - Expat Taxes Australia[/color][/size][/color][/size][size=0px]Delving into the Unresolved Issues[/size]Despite the clarity brought by the new order in relation to pre-2024 foreign income, several crucial questions remain unclear:[/font][/size][size=0px][/color][/size]Mixed Funds Management: One of the most pressing concerns is how will Thai tax authorities differentiate between income earned before 2024 and after, particularly when that post 2024 income has being banked and co-mingled into accounts containing funds earned prior to 2024?
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• [/size]Understanding this distinction will be crucial for Australian expats who may have accumulated funds over several years and who will manage those funds carefully to avoid being taxed unexpectedly by Thailand.[/color]

• [/size]Tax Rates for Foreign Income: There?s ambiguity over whether foreign-sourced income will attract a specific rate of tax in Thailand or whether it will be subject to Thailand?s ordinary tax rates.[/color]

• [/size]This uncertainty makes tax-planning and financial planning more complex for Australian expats who rely on their Australian income (e.g. pensions, non-government superannuation, dividends and other investment income etc) to live off and survive on in Thailand.[/color]

• [/size]Distinguishing ?Clean Funds? from Income: For those with co-mingled funds, it will be critically important to separate and segregate ?clean funds? (e.g. savings generated from income earned prior to 1st January 2024) from the earnings, which may have different tax implications.[/color]

• [/size]What rules will Thailand implement involving recognition of clean funds in mixed fund bank accounts, and will Thailand deem that funds remitted to Thailand are deemed to be from income first, and clean-funds second?[/color]

• [/size]Exchange Rate Variations: The impact of fluctuating AUD/THB exchange rate will potentially add another dimension of complexity, affecting Thailand?s assessment of foreign income for tax purposes. How does Thailand plan to address this?[/color]

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link to article: 

https://www.expattaxes.com.au/update-thailand-clarifies-tax-on-foreign-income/