Taxes and expatriation: what are your tax obligations in Thailand and how do you meet them?

What is the legal tax framework for expats in Thailand?

• What is a tax resident in Thailand?

Under Thai law, an expatriate becomes a tax resident if he or she spends at least 180 days a year in Thailand. This residency criterion is crucial, as it determines the type of income that will be taxable. As a tax resident, the expatriate will be subject to tax on income generated in Thailand, but also on income from abroad if repatriated to Thailand.

The principle of taxation in Thailand is based on a system of territoriality: only income generated in Thailand or repatriated from abroad is taxable. Thus, an expatriate who is not a tax resident will only be taxed on his Thai-source income, while a tax resident will potentially be taxed on all his worldwide income if it is repatriated.

• New tax regulations since January 1, 2024

One of the most important tax reforms came into force on January 1, 2024. This reform now requires all income brought back to Thailand by a tax resident to be taxed, even if earned in a previous tax year. This is a major change, as previously income brought back more than a year after acquisition was not taxable.

This new regulation, enshrined in Ordinance no. P.161/2566 of September 15, 2023, amends Articles 40 and 41 of the General Tax Code. Specifically, article 41 requires that income from work carried out abroad or from assets located abroad, if brought back to Thailand, must be included in the calculation of income tax, regardless of the tax year to which it relates. This reform concerns a variety of income, including salaries, fees, dividends and interest. In addition, it strengthens the tax authorities’ oversight of expatriates residing in Thailand for more than 180 days a year, and imposes an increased reporting obligation on them to ensure compliance with the new requirements.

What are the tax rates applicable to expats in Thailand?

Thailand’s tax system is based on a progressive structure for personal income tax. Here are the current tax brackets for tax residents:

• Up to 150,000 THB: Tax exemption
• 150,001 to 300,000 THB: 5% tax exemption
• 300,001 to 500,000 THB: 10% tax exemption
• 500,001 to 750,000 THB: 15% tax exemption
• 750,001 to 1,000,000 THB : 20
• 1,000,001 to 2,000,000 THB: 25
• 2,000,001 to 5,000,000 THB: 30
• Over THB 5,000,001: 35%.

These rates apply to income from Thai sources and, since 2024, to repatriated foreign income. It is important to note that, for certain expatriates with specific visas such as the Long-Term Visa (LTR), there are tax exemptions for foreign income. Indeed, holders of this visa are not subject to taxation on income generated abroad, even if transferred to Thailand, provided they meet the visa’s eligibility criteria. This is a major advantage for high-income expatriates or those with foreign investment income.

Bilateral tax treaties: avoiding double taxation for expats in Thailand

Bilateral tax treaties play an essential role in reducing the tax burden on expatriates, by avoiding double taxation on income earned in several countries. Thailand has signed agreements with over 60 countries, including France, enabling expatriates to avoid being taxed in both their home country and Thailand. These agreements lay down clear rules on the allocation of taxing rights between the signatory states. For example, a French expatriate living in Thailand can benefit from a tax credit on amounts already taxed in France, which reduces the tax payable in Thailand. These agreements also provide for reduced rates or exemptions on certain types of income, such as dividends, interest and pensions, thus facilitating expatriates’ tax management.

• The example of the Franco-Thai treaty

For French expatriates, the bilateral tax treaty signed between France and Thailand in 1974 aims to avoid double taxation. The treaty provides for a number of mechanisms, including tax credits, to prevent a taxpayer’s income from being taxed in both Thailand and France. In the case of retirement pensions, for example, the treaty stipulates that income from previous employment must be taxed in the state of origin (France for a French retiree), even if it is repatriated to Thailand.

However, the application of this convention remains complex, particularly as regards the interpretation of the texts by the tax authorities of each country. For example, discussions are underway to clarify the taxation of repatriated retirement pensions.

What taxes, in addition to income tax, are expatriates subject to in Thailand?

In addition to income tax, expatriates in Thailand may be subject to other taxes.

Among these, Value Added Tax (VAT) is set at 7% for most goods and services. Certain transactions, however, such as exports or services rendered outside Thailand, are exempt from VAT.

Expatriates owning real estate in Thailand must also pay a specific business tax (SBT) of 3.3% on the value of the property, a transfer tax of 2%, and a withholding tax of 1%.

How do you file your tax return as an expatriate in Thailand?

As a tax resident in Thailand, it is essential to declare your taxes before March 31 of each tax year. Late filing can result in substantial penalties, including a fine of THB 2,000 and interest of 15% per month of delay.

To declare taxes, you need a Tax Identification Number (TIN), which can be obtained from local tax offices. Documents required for this procedure include a copy of your Alien Card, work permit, passport and proof of address.

What tax exemptions are available to expats in Thailand?

For certain expatriates, it is possible to benefit from partial or total tax exemption in Thailand. Income generated abroad that is not repatriated to Thailand is not taxable. Thus, an expatriate who leaves his income abroad and does not transfer it to his account in Thailand can avoid taxation.

In addition, expatriates holding certain visas, such as the Long-Term Visa (LTR), benefit from tax exemptions for their foreign income repatriated to Thailand. This type of visa is particularly advantageous for retirees or remote workers.

Conclusion

Thailand’s tax system, while advantageous for many expatriates and their taxes, has its own specific features that need to be understood to avoid any legal or financial difficulties. Since the tax reform of 2024, expatriates living in Thailand have been faced with new obligations, notably concerning the repatriation of their foreign income. However, the double taxation treaty between Thailand and several countries, including France, offers solutions to avoid double taxation.