Detailed Guide to Personal Income Tax and Double Tax Agreements in Thailand 2024

Understanding the framework of personal income tax in Thailand is crucial for both residents and non-residents who earn income from sources within and outside of Thailand. Additionally, Double Tax Agreements (DTAs) play a significant role in managing tax liabilities for those involved in international activities. This guide provides an overview of both of these areas, offering essential insights for effective tax planning.

Personal Income Tax in Thailand

Who is it for?
1. Residents: Individuals residing in Thailand for 180 days or more in a calendar year are considered residents. They are taxed on their worldwide income, which includes earnings from both domestic and foreign sources.

2. Non-residents: Those staying in Thailand for less than 180 days are taxed only on income earned within Thailand.

The 180-Day Rule: Tax Residency in Thailand:
Stay Duration Matters: If you’re in Thailand for more than 180 days in a calendar year, you’re a tax resident. Less than 180 days? You’re not considered a tax resident for that year.

Types of Taxable Income
Taxable income in Thailand includes, but is not limited to:

• Employment income
• Business and professional income
• Dividends, interest, and rental income
• Capital gains

Taxation of Foreign Income for Residents
For Thai residents, foreign income is taxable if it is brought into Thailand within the same year it is earned. This rule is consistent, even with changes implemented from 2024 onward.

Offshore Income & Taxation: Understanding Paw 161/2566.
Income Remitted to Thailand: As a tax resident, given the top marginal rate of income tax in Thailand is 35%, the implications are such that offshore income remitted to Thailand will likely be taxed at 35%.

Tax Rates
Thailand employs a progressive tax rate system:

Deductions and Allowances
Several deductions and allowances reduce taxable income:

• Personal and dependent allowances
• Deductions for contributions to retirement funds like the Retirement Mutual Fund (RMF) and Super Savings Fund (SSF)

Gifts:
Certain gifts are exempt from personal income tax under the Thailand Revenue Code. There are specific rules and amounts under which gifts are not subject to personal income tax. For example, gifts received by ascendants and descendants, religious, educational, or public benefit purposes, or a moral obligation or gift made in a ceremony or occasion in tradition or established customs.

Double Tax Agreements (DTAs)

Purpose:
DTAs are treaties between Thailand and other countries designed to avoid double taxation on the same income, which can occur when an individual or entity earns income across national borders. These agreements delineate which country has taxing rights over certain types of income and provide mechanisms like tax credits to prevent double taxation.

Features of DTAs:

• Withholding Taxes: DTAs often reduce the taxes withheld from payments made across borders, such as dividends, interest, and royalties.
• Tax Residency: DTAs provide rules to determine a taxpayer’s country of residence for tax purposes.
• Elimination of Double Taxation: Methods include the exemption method (income taxed in only one country) and the credit method (credits for tax paid in one country against the tax due in another).

Utilizing DTAs:

• Determine tax residency as per DTA definitions.
• Understand specific DTA provisions applicable to their income types.
• Claim appropriate relief to mitigate double taxation.

Countries with Double Tax Agreements (DTA) with Thailand:

Filing Requirements and Penalties

Filing Tax Returns

• PND.90: Annual filing for taxpayers with any class of income.
• PND.91: For taxpayers with only employment income.
• Filing period: January 1 to March 31 of the following year

Penalties for Non-compliance
Non-compliance can lead to fines, surcharges, and even imprisonment, emphasizing the importance of timely and accurate tax filing.

Long-Term Resident (LTR) Visa Benefits:
Section 5 of RD 743 offers tax exemptions on certain offshore incomes (encompassing employment, business, and property income from abroad) received in a previous year and subsequently brought into Thailand, without a time limit on income derivation. These exemptions apply to the following categories of LTRs:

– Wealthy Pensioners;
– Wealthy global citizens; and
– Professionals working from Thailand.

Invest in Thai Companies:
Tax residents can make investments in cash-generating Thai companies that provide a steady flow of income in Thailand. The investment into the company will not be subject to tax but the annual earnings will be subject to Thai personal income tax when distributed to the Tax Resident. Depending upon a shareholder’s structure, other laws and regulations should be taken into account.

Foreign Credit Card Payments:
If the transaction is paid with a foreign credit card (from a non-Thai bank account), the settlement made abroad should not be considered a fund remittance into the country by Thai tax residents.

Need to personalize your tax strategy?
Navigating Thailand’s tax regulations and DTAs is vital for individuals and businesses involved in both local and international financial activities. By understanding and leveraging the available tax rules and treaty benefits, taxpayers can manage their tax liabilities efficiently and legally. Always consider consulting with a tax professional like PKF Nuobello to ensure compliance and optimize tax strategies based on individual circumstances.

Got questions? Need clarifications? Or just want to chat about how to make taxes less taxing? Reach out at: https://www.nuobello.com/pkf-nuobello/ Or Email: [email protected] or
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