Who is a Tax Resident of Thailand?
The taxation of individual income in Thailand depends on their tax status and the type of income they receive.
Anyone who stays in Thailand for 180 days or more in a tax year is considered a tax resident, according to Section 41 of the Thai Revenue Code. The tax year corresponds with the calendar year.
Non-residents of Thailand must pay tax on income originating from sources within Thailand.
Residents are taxed on:
(i) Income earned or generated in Thailand, regardless of whether it is paid (received) within or outside Thailand; and
(ii) Income earned or generated outside Thailand, if it is remitted to Thailand.
Income from Thailand
Income from Thailand includes but is not limited to, income from sources within the country, such as:
- Wages or other income for work performed in Thailand;
- Income from conducting business in Thailand;
- Income from property in Thailand, including rental payments;
- Interest received in Thailand;
- Dividends from Thai companies, etc.
It’s important to note that such income is subject to taxation in Thailand, regardless of the location of the income payment and the individual’s tax residency status. Even if the income is paid outside of Thailand, it may still be subject to taxation in Thailand. However, tax exemptions may be available under certain double taxation avoidance agreements.
New Rules for Taxation of Foreign Income
Thai tax residents are obligated to pay taxes on income earned within the country and foreign income transferred to Thailand.
Per the second paragraph of Section 41 of the Thai Revenue Code, a Thai tax resident who received taxable foreign income in the previous tax year must pay tax upon the receipt of such income in Thailand.
Until January 1, 2024, a practice established in the mid-1980s was followed: foreign incomes transferred to Thailand in the tax year following their receipt were not subject to income tax. This approach was solidified by Decision No. 2/2528 of February 21, 1985, and Order No. Gor. Kor. 0802/696 of May 1, 1987, issued by the Thai Revenue Department.
Since then, tax authorities and Thai taxpayers adhered to this interpretation, according to which income earned abroad was not taxable if it was transferred to Thailand in the calendar year following the year of its receipt. This approach was widely utilized in tax planning by individuals conducting business or owning assets abroad.
However, on September 15, 2023, the Thai Revenue Department issued Order No. Por. 161/2566, revising the interpretation of the second paragraph of Section 41 of the Thai Revenue Code. The new interpretation states that from January 1, 2024, if you are a Thai tax resident and transfer income earned abroad to Thailand, it will be taxed regardless of the year of its receipt.
This decision has raised questions and criticism, especially regarding whether the new interpretation is consistent with Section 41 of the Revenue Code, which regulates incomes received in the previous tax year. The possibility of taxing income earned in earlier years also raises questions about its compliance with Section 56, which requires declaring income for the previous tax year.
There is also uncertainty regarding the conditions and methods for eliminating double taxation under the agreements Thailand has with other countries. Additional questions about the practical application of the new interpretation exist. It is expected that the Revenue Department will issue further clarifications and make changes to tax documents, such as the tax declaration form.
On November 20, 2023, the Thai Revenue Department issued Order Por. 162/2566, which clarifies that the provisions of Order Por. 161/2566 will not apply to foreign income earned before January 1, 2024. This means Thai tax residents are not required to include in their tax declarations incomes from foreign sources earned before this date, even if these funds are transferred to Thailand after January 1, 2024.
Potential Changes to Overseas Income Taxation in Thailand
The Bangkok Post reported on June 5, 2024, that the Revenue Department is considering revising tax laws to include taxation on foreign income, regardless of whether it’s brought into Thailand. Director-General Kulaya Tantitemit explains the shift to taxing based on residency, not just remitted income. However, there’s uncertainty about the accuracy of the report, and amending the Revenue Code to implement such changes is no simple task.
If implemented, these changes will have a significant effect on all Thai tax residents with foreign-sourced income. In particular, they could potentially impact the tax benefits currently enjoyed by Long-Term Resident (LTR) Visa holders.
Tax Benefits for LTR Visa Holders
Thailand’s Long-Term Resident (LTR) Visa program, launched on September 1, 2022, provides a range of tax and non-tax benefits aimed at attracting high-potential foreigners. These tax benefits are detailed in Royal Decree No. 743 under the Revenue Code.
Foreign-Sourced Income Exemption
LTR Visa holders classified as Wealthy Global Citizens, Wealthy Pensioners, and Work-from-Thailand Professionals are exempt from Thai income tax on income sourced from abroad. This exemption applies to assessable income under Section 40 of the Revenue Code for the previous tax year, including income from employment, business activities conducted overseas, or from assets located abroad that are brought into Thailand.
If the Revenue Code is amended to implement a worldwide income taxation system, as proposed, the Royal Decree governing LTR Visa benefits may require revision to maintain the current foreign-sourced income exemptions for eligible visa holders.
It’s important to note that this information is based on preliminary reports, and no official changes have been announced. The situation remains fluid, and we advise monitoring official channels for updates on any potential tax law modifications.
17% Flat Tax Rate for Highly-Skilled Professionals
Professionals working in specified industries within Thailand who hold an LTR Visa qualify for a 17% flat personal income tax rate. To access this benefit:
- The employer must notify the tax authority about the employee’s eligibility.
- Upon notification, the benefit becomes active.
- Employers withhold tax from the employee’s salary at the 17% rate.
- Employees are required to file an annual tax declaration for this income.
Additional Information:
- Income unrelated to the LTR scheme must be declared separately.
- The 17% rate applies only to income earned after notification to the tax authority and excludes income not derived from employment activities.
- Non-compliance with requirements, like timely tax declarations, can lead to the loss of the preferential rate, reverting to the standard progressive tax scale.
Taxable Income Types
In Thailand, assessable income is categorized into eight distinct types:
- Salaries and Wages: This includes income from stock options, house rent allowances, and other fringe benefits.
- Hire of Work, Office of Employment, or Services Rendered: Income earned from providing professional services or employment duties.
- Goodwill, Copyright, Franchise, Patent, and Other Rights: This category also includes annuities and similar income types.
- Investment Returns and Gains: This covers interest, dividends, bonuses for investors, gains from amalgamation, acquisition, or dissolution of a company or partnership, and gains from the transfer of shares, cryptocurrencies, or digital tokens.
- Lease of Property and Contract Breaches: Income derived from property leasing, and breaches of hire-purchase and installment sale contracts.
- Professional Services Income: Earnings from professions like law, medicine, engineering, architecture, accountancy, and fine arts.
- Contract Work with Material Provision: Income from contracts where the contractor provides essential materials (excluding tools).
- Business and Commercial Income: Earnings from business, commerce, industry, and any other income not specified in categories (1) through (7).
Capital gains
In Thailand, capital gains are usually taxed like regular income. However, there are some exceptions where you don’t have to pay tax:
- Stock Exchange of Thailand: If you sell shares listed here, these gains are not taxed.
- Mutual Funds: Selling investment units in mutual funds also comes without tax.
- Specific Financial Instruments: Some financial instruments like non-interest-bearing debentures, if sold, don’t attract tax.
- ASEAN Stock Exchanges: Gains from securities traded on these exchanges are tax-free, except for certain types like treasury bills.
Personal Income Tax Rates in Thailand
Thailand employs a progressive tax rate system, which means that the tax rate increases as the taxable income increases.
| Taxable Income (THB) | Rate | Marginal Tax* (THB) | Cumulative Tax** (THB) |
|---|---|---|---|
| 0 – 150,000 | 0% | 0 | 0 |
| 150,001 – 300,000 | 5% | 7,500 | 7,500 |
| 300,001 – 500,000 | 10% | 20,000 | 27,500 |
| 500,001 – 750,000 | 15% | 37,500 | 65,000 |
| 750,001 – 1,000,000 | 20% | 50,000 | 115,000 |
| 1,000,001 – 2,000,000 | 25% | 250,000 | 365,000 |
| 2,000,001 – 5,000,000 | 30% | 900,000 | 1,265,000 |
| Over 5,000,000 | 35% | — | — |
Notes:
- Marginal Tax: This represents the tax on the additional income earned when moving into a higher tax bracket. For instance, if your income is 300,001 THB, you pay a 5% tax on the income exceeding 150,000 THB (i.e., on the amount from 150,001 to 300,001 THB).
- Cumulative Tax: This is the total tax paid on your entire income. It accumulates as your income increases and you progress through the tax brackets. For example, with an income of 300,001 THB, the cumulative tax includes no tax on the first 150,000 THB and a 5% tax on the next 150,001 THB.
Tax Deductions in Thailand
The table below outlines some tax deductions available to individuals in Thailand.
| Type of Deduction | Amount of Deduction |
|---|---|
| Employment Income | 50%, but not exceeding 100,000 THB |
| Rental Income | Standard deduction: 30% or Actual expenses incurred |
| Professional or Business Activity | Standard deduction from 10% to 60%, depending on the activity |
| Personal Deductions | – 60,000 THB per taxpayer – 60,000 THB for non-working spouse – 30,000 THB for the first child and 60,000 THB for the second and subsequent children – 30,000 THB for elderly parent care |
| Medical Expenses related to Pregnancy and Childbirth | Actual expenses incurred, but not exceeding 60,000 THB |
| Life and Health Insurance | – Life insurance: up to 100,000 THB – Health insurance: up to 25,000 THB |
| Mortgage Interest | Actual interest paid up to 100,000 THB |
| Social Security Contributions | Actual amount contributed |
| Contributions to a Provident Fund | Actual amount contributed, but not exceeding 15% of total annual taxable income or 500,000 THB (whichever is less) |
| Investments in Retirement Mutual Fund (RMF) | Actual amount invested, but not exceeding 30% of total annual taxable income or 500,000 THB (whichever is less) |
| Investments in Super Saving Fund (SSF) | Actual amount invested, but not exceeding 30% of total annual taxable income or 200,000 THB (whichever is less) |
| Investments in Thai Funds for Ecology, Social Responsibility, and Corporate Governance (TESG) | Actual amount invested, but not exceeding 30% of total annual taxable income or 100,000 THB (whichever is less) |
| Purchase of Goods or Services in Thailand (from January 1 to February 15) | Actual amount paid, but not exceeding 40,000 THB |
| Donations in Thailand | Actual amount donated, but not exceeding 10% of net income |
It is important to note that most tax deductions have specific conditions for their application.
Tax Calculator
A convenient tax calculator can be found on the UOB Asset Management website.
Taxation of Dividends
Dividends received from a company registered in Thailand are subject to a 10% withholding tax.
For non-residents receiving dividends from a company registered in Thailand, this rate may be reduced under a double taxation avoidance agreement between Thailand and the individual’s country of residence.
A Thai resident receiving dividends from Thai-registered companies can choose between two options:
1) Pay a 10% tax and not include the dividend income in their tax declaration.
2) Include this income in their tax declaration. In this case, the tax amount will depend on the total annual income. The 10% tax paid will be credited against the tax liability (tax credit).
Filing Tax Declarations in Thailand
All individuals with income are required to file a tax return. The deadlines are as follows:
- For Paper Filing: The tax return must be filed no later than March 31 of the following year.
- For Online Filing: The deadline extends to April 8 of the following year.
Exceptions to Filing Requirements:
- Individuals whose income from employment is THB 120,000 or less for single persons, or THB 220,000 or less for married persons.
- For those with other sources of income (with or without employment income), the threshold is THB 60,000 for single persons and THB 120,000 for married persons.
Business Income Filings:
- Individuals engaged in most business activities must file a declaration for their income of the first six months of the year by September 30 and settle the due tax.
Filing Options for Married Individuals:
- Married individuals can choose to file income tax returns either separately or jointly with their spouse.
Taxation of Rental Income
15% for non-residents
Both residents and non-residents earning rental income in Thailand are required to pay income tax. In general, a 15% withholding tax is deducted when paying rental income to a non-resident.
How to Reduce Tax
This tax can be reduced if the foreign property owner has registered the property in their name. To do so, one must obtain a tax identification number (TIN) in Thailand and file a tax declaration. The withheld tax is credited as a tax offset. Filing the declaration allows for a refund of any overpaid taxes. Property owners are entitled to a standard deduction of 30% of the rental income. Alternatively, there is an option to deduct actual incurred expenses that were necessary and reasonable, provided these expenses are documented. When combined with a personal deduction of 60,000 Baht, this can significantly reduce the tax burden for non-residents. Tax refunds are not automatic and must be requested. Taxation follows a progressive scale.
Benefits of Declaring Rental Income: Example Calculation
Scenario:
- A foreigner rents out an apartment for 40,000 Baht per month.
Calculation Breakdown:
- Annual Rental Income
- Monthly rent: 40,000 Baht
- Annual income: 40,000 Baht x 12 = 480,000 Baht
- Withholding Tax (15%)
- Tax amount: 480,000 Baht x 15% = 72,000 Baht
- Standard Deduction (30%)
- Deduction amount: 480,000 Baht x 30% = 144,000 Baht
- Personal Deduction
- Deduction amount: 60,000 Baht
- Taxable Income Calculation
- Income after deductions: 480,000 Baht – (144,000 Baht + 60,000 Baht) = 276,000 Baht
- Applying Tax Rates
- First 150,000 Baht: 0% tax = 0 Baht
- Remaining 126,000 Baht (276,000 – 150,000): 5% tax = 6,300 Baht
- Total Tax Payable
- Calculated tax: 6,300 Baht
Result:
- Final Tax Liability: 6,300 Baht
- Withheld Tax: 72,000 Baht
- Excess Tax to be Refunded: 72,000 Baht – 6,300 Baht = 65,700 Baht
- Effective Tax Rate: Approximately 1.31%
If you have any questions about taxes in Thailand, please feel free to email me or use the form below.
Photo by Amol Tyagi / Unsplash