Overview of Thailand’s Tax Situation
The Revenue Department of the Thai Ministry of Finance is responsible for Thailand’s taxes, and foreigners living and working in the kingdom must be prepared to file taxes both in Thailand and in their home countries. Thailand’s tax system has many similarities to the American system, but you should familiarize yourself in advance with the basics before you begin working or earning income in Thailand.
Thai Taxes vs. American taxes
For Americans living in Thailand, the most important fact is to be aware that you are required to pay taxes in the country. It will be your responsibility to file in both countries by the required deadlines and to take advantage of any available exemptions.
Americans residing abroad on the April 15 tax deadline must file by June 15. In Thailand, the tax year extends from Jan. 1 to Dec. 31, and taxes are due by March 31. You should also note that both Thailand’s tax rates and the way different classes of income are taxed can be very different than in the United States. Be sure to classify your earnings appropriately for each country and familiarize yourself with the classes of “assessable income” in Thailand.
The most important element in Thailand’s tax system for foreigners is the personal income tax (PIT). If you live in Thailand and earn income, your income is subject to the PIT. Your employer may arrange a tax ID number for you, or you may have to request it yourself from the Revenue Department. The part of your income that is taxable in Thailand will also depend on your residency status. Those foreigners who live only half of the year (180 days) or less in Thailand must only pay taxes on income earned in Thailand. Those who reside for more than 180 days in the country will be liable for taxes on all income earned, worldwide.
Filing Taxes in Thailand
The main hurdle with respect to taxes in Thailand for expats is the fact that all tax returns must be in the Thai language. If you do not understand Thai, it may be necessary to find a Thai-speaking accountant to assist you. Payments are due at the date of filing (typically March 31). For some business owners, it may be necessary to file every six months; most employees will only be expected to file yearly.
It is possible to file electronically on the Revenue Department’s web page. Unfortunately, the system is still only available in Thai.
Those expecting a tax refund in Thailand will receive their cheques within 15 days after filing. There is an online system to track the progress of your refund, but it too is only available in the Thai language at present.
Types of Taxes
General Income tax
Thailand’s income tax is known as the personal income tax (PIT) and is the basic tax in Thailand that foreigners will have to pay. A number of income sources may be included in this assessment. Most expats making more than 150,000 baht can assume that their earnings will be taxed; those making less are exempt from the PIT.
Above this level, the rates are as follows:
150,00-500,000: 10 percent
500,000-1 million: 20 percent
1 million-4 million: 30 percent
Above 4 million: 37 percent
Goods and services in Thailand are subject to a sales tax (or Value Added Tax, VAT) of seven percent on all purchases. You will typically find the VAT added to your bill in restaurants or stores, although some businesses may either ignore the tax or factor it into the purchase price. The VAT is separate from any “service charges” or “taxes” you may have to pay in establishments catering to foreigners and tourists.
Real Estate Taxes
Expats interest in the purchase of homes or property in Thailand is subject to several taxes. These include:
A business tax of 3.3 percent, either of the property’s appraised value or its registered sale value
A transfer fee of two percent of the property’s value
A stamp duty of 0.5 percent for those who do not have to pay the business tax
Finally, a withholding tax of one percent either of the property’s appraised value or its registered sale value
If you stand to inherit in Thailand, there is a tax that varies based on your relationship to the decedent. Ascendants and descendants pay five percent on the value of the inheritance, while others pay a full 10 percent.
Capital Gains and Corporate Taxes
Thailand’s capital gains tax currently stands at zero. Capital gains made outside the country go untaxed, while those within Thailand are simply considered as regular income. On the other hand, capital gains earned on the Thai stock market provide an exemption.
For those doing business in the kingdom, Thailand’s corporate tax rate is now 20 percent of net profits. However, there are a number of complexities, depending on the type of business, its size, and its legal standing in Thailand. A small company with profits under 3 million baht, for example, pays only 15 percent.
Exemptions and Avoiding Double Taxation
For Americans in Thailand, there are a number of deductions and exemptions you can use while in the country. These are somewhat complex, and you may benefit from the assistance of a tax specialist.
The most important exemption for Americans is the Foreign Earned Income Exclusion. This may reduce your US tax bill to zero if your income is entirely earned in Thailand. Thailand also offers a basic personal allowance and a variety of exemptions related to family status, which may also lower your tax burden.
Unfortunately, Thailand and the United States are not among those countries which have entered into a so-called Totalization Agreement to regulate the tax relationship between the two nations. For the expat taxpayer, this means that it may be necessary to pay social security taxes in both countries.
Income Taxes For Retirees In Thailand
The Thai embassy has the following clear statement about expat retirees and taxes in Thailand:
“Only income earned inside Thailand shall be subjected to tax during retirement. Therefore, you will not be obliged to pay any taxes for any income you have earned from overseas. Also, personal income taxes are not required for retirees in Thailand. Note that you can’t work in Thailand while on a retirement visa.
You would need to apply for a work permit. Once you stopped working you would have to leave Thailand and return with a 90-day OA visa and start the process again of extending the retirement visa for 1 year.“