Relationship Between the New Thai Tax Law, Retirement Visa Holders, and Long-Term Residency

Income from Business Operations

Incomes received from business operations in Thailand or overseas but brought into Thailand are subject to income tax under the new taxation law at rates ranging from 5% to 35%. 

On the other hand, if you receive income as a business entity, you will be subject to corporate tax at 20%. As a Small-Medium Enterprise (SME), you will be subject to pay 20% according to the tax bracket. 

However, if you receive a loss of revenue from your business venture, you are not subject to pay income tax by submitting a loss report with the Revenue Department for up to 5 years.

Long-Term Residency and the New Tax Law

The new tax law applies to Long-Term-Residency holders who receive income within Thailand or overseas. Nevertheless, there are 4 aspects in this regard:

1. A highly-skilled professional in a specific industry (science, technology, agriculture, and health and wellness) is not subject to the new tax law. Instead, you are subject to pay tax under the Eastern Economic Corridor Act (EECA) under these conditions:
   1. A foreigner working in the EEC is subject to a 17% tax rate.
   2. A foreigner working as a manager or a CEO in either a head office or an international trade company at the EEC is subject to a 15% tax rate.
2. A work-from-Thailand professional (digital nomad) residing in Thailand for 180 days or more is subject to pay income tax under the new tax law, regardless if the sources of income are within Thailand or from overseas.
3. A wealthy global citizen with investments in Thailand up to 500,000 USD or higher and residing at least 180 days is subject to income tax under the new tax law. However, such an individual may receive a reduced tax rate if the investments contribute to the country or public interests such as government bonds, real estate or land, and Foreign Direct Investment (FDI). 
4. A wealthy pensioner residing in Thailand for at least 180 days is subject to a tax rate under the new tax law. Pensions brought from their country of origin may not be subject to the law if the person can prove that they have been taxed prior to being transferred to Thailand. 

Double Tax Agreement Between Thailand and Australia

A Double Tax Agreement between Thailand and Australia classifies pensions as taxable only in 1 country, as defined in Article 18 of this DTA. If an Australian retiree moves into Thailand with pensions brought, the retiree can use it as tax credit against Thailand in paying a reduced tax rate during the Thailand residency.

Tax Evasion and Fraud

Intentions of this new tax law include to exchange information with the contractual parties to the DTA for investigating an unusual financial activity subjected to tax evasion and fraud and to spread awareness with tax players in order to increase tax revenue and fairness in taxation. Hence, the new law intends to enhance tax transparency with the contractual parties.

Encouragement or Discouragement of Residing in Thailand

This new tax law is intended to stimulate Thailand’s economy by bringing investors to invest in this country. In returning a favor for the Thai government, investors are privileged to pay less taxes as a gesture of goodwill by the Thai government in helping the prosperity of Thailand.

Simultaneously, the new law discourages foreigners from staying in Thailand for lesser financial burdens since the income tax rate ranges from 5% to 35%, which are higher than Hong Kong, Malaysia, and Singapore.

Furthermore, the new tax law does not apply to Long Term Residency holders, as their foreign-source incomes are exempt from being subject to income tax. Thus, foreigners may consider tax shopping to reduce their financial burden as much as possible. 

Tax Shopping

There are several options to a friendlier tax law other than Thailand: Hong Kong and Singapore.

With such fierce competition, Thailand may need to consider reducing its tax rate in bringing foreigners into the country, should they persist in imposing their new tax law.  

Hong Kong has imposed a personal income tax into 3 categories: 

1. Employed workers with salaries are subjected to a tax rate from 2% to 17%, or 15% on personal assessable income for lowering tax liability.
2. Businesses  impose a tax rate at 15% on businesses, or 7.5% for unincorporated businesses with the first profit of 2 million HKD.
3. Property tax levies at 15% flat on rental income, after a standard deduction of 20%. 

Singapore has imposed a personal income tax rate from 0% to 22% for residents. Non-residents, on the contrary, are subject to a tax rate from 15% to 22%.

Prescription: Tax Return Filings

For those who have filed a tax return with the Revenue Department, the Department can inspect your record in the previous 5 years to investigate possible tax evasion or fraud.

Alternatively, the Department can inspect your financial activity in the previous 10 years should you have not filed a tax return with the Revenue Department.

Tax Law in Thailand can be complicated and may change often. It’s really important to keep up with these changes because they can greatly affect how you manage your money and what you owe in taxes. It’s a good idea to talk to a tax expert in Thailand who can give you advice that fits your situation and help you follow the most recent rules. Staying updated and getting advice from professionals are important for handling your money matters well, both in your country and in other countries.

If you have any more questions or need more help, feel free to reach out to us.

Category: Thailand Revenue Code