Ease foreigner’s tax burden in Thailand

A tourist enjoys the view of the Hong islands from the infinity pool of a resort on Koh Yao Yai island in the Andaman Sea on November 23, 2020. (Photo by Mladen ANTONOV / AFP)

Ease foreigner’s tax burden in Thailand

Bangkok Post Editorial

The recent proposal to amend Thailand’s foreign income tax regulations has sparked significant debate among expatriates and international investors. This move has raised numerous concerns that urgently need to be addressed.

Thailand’s new foreign income tax regulations, effective Jan 1, 2024, aim to expand the tax base and tackle tax avoidance by requiring tax on foreign income regardless of when it is brought into the country.

Under the previous system, Thai tax residents, individuals who reside in Thailand for more than 180 days per year, could delay transferring foreign income into Thailand to avoid taxation. Starting this year, the Revenue Department mandates that all foreign income is subject to Thai tax, irrespective of its remittance period.

More recently, the Revenue Department has floated a further plan to collect tax from the foreign income of Thai tax residents even if the income is not brought into Thailand. Kulaya Tantitemit, the department’s director-general, claimed the proposed tax system is based on the widely recognised principle of taxing worldwide income.

While the intent behind these changes is to combat tax avoidance and establish a fairer tax system, as well as broaden the tax base in light of the country’s prolonged and increasing budget deficits, there are significant and challenging issues that require careful consideration.

These potential tax changes come at a time when Thailand is promoting pensions and long-term residence (LTR) visas to attract wealthy foreigners, retirees and digital nomads. The sudden imposition of taxes on their foreign income, without clear communication or transition plans for stakeholders, risks undermining these efforts.

Retirees and remote workers, who often depend on their foreign income, could face significant financial strain under the new tax obligations. For these individuals, the abrupt change disrupts financial planning and stability, potentially making Thailand a less attractive place to live.

On a broader scale, Thailand’s reputation as a welcoming destination for foreign professionals and businesses is at stake. If the tax environment becomes perceived as overly burdensome or unpredictable, it could deter potential investors and skilled workers from considering Thailand as their base.

Additionally, the risk of double taxation looms large. Thailand has 61 double taxation agreements (DTAs) aimed at preventing such issues, but the process of claiming foreign tax credits can be cumbersome and inconsistent. For those receiving income from countries without a DTA with Thailand, the fear of being taxed twice is a pressing concern that needs urgent attention.

To address these valid concerns and enable a smooth transition to the new tax regime, the Revenue Department must prioritise clear and effective communication. Detailed guidance on the application of the new rules, coupled with regular engagement sessions with stakeholders, is essential to dispel confusion and provide practical insights.

Implementing transitional measures could ease the financial and administrative pressures on affected individuals. Phasing in the new rules or granting exemptions for specific types of income, such as pensions, could provide much-needed relief.

Expanding Thailand’s network of DTAs and simplifying the process for claiming foreign tax credits would strengthen the mechanisms for double taxation relief.

Source: https://www.bangkokpost.com/opinion/opinion/2816415/ease-foreign-tax-burden