The Thai Revenue Department is in the process of drafting a law to impose taxes on income earned by individuals residing in Thailand from foreign sources.
According to Kulaya Tantitemit, the department’s director-general, this draft aligns with the international principle of taxing worldwide income based on residence. This principle dictates that individuals must pay taxes to their country of residence on income earned globally.
The proposed legislation will require an amendment to Section 41 of the Revenue Code, which states that individuals residing in Thailand for 180 days or more will be liable to pay personal income tax on their foreign income, independent of whether that income is brought into Thailand.
Ms. Kulaya emphasized that the amendment will focus solely on personal income tax and will not apply to corporate income tax or income generated from mutual funds overseas, with the exception of private funds.
If enacted, the new law will follow a significant change in Thailand’s tax treatment of foreign income that came into effect this year. The current law mandates that individuals residing in Thailand for over 180 days annually are taxable on income earned both domestically and internationally, provided it is brought into Thailand.
Under previous regulations, individuals who met the 180-day residency requirement only paid personal income tax on foreign income if it was transferred into Thailand during the same year it was earned. However, starting January 1, 2024, taxes will now be applicable to foreign income irrespective of when it is brought into the country. For instance, if an individual sold shares in a foreign company in 2020, realized a capital gain, and deposited the funds in an overseas account, they must report that income when it is brought into Thailand in 2024.
Concerns have been raised by expatriates regarding the tax obligations on pension income from prior employment when this income is transferred into Thailand. If this income is taxed in the individual’s home country and that country is among the 61 jurisdictions that have double taxation agreements with Thailand, there should theoretically be no issues. However, there are ongoing debates regarding the interpretation of the law.
Ms. Kulaya noted that effectively taxing foreign income will rely on international cooperation and the exchange of information. Thailand is a member of the tax information exchange group led by the Organisation for Economic Co-operation and Development (OECD).
Section 41 indicates that individuals receiving assessable income, as defined in Section 40 of the previous tax year from work or business conducted in Thailand, or from assets in Thailand, are required to pay taxes under this provision, regardless of whether the income is paid in Thailand or abroad.
Individuals in Thailand with assessable income from foreign duties or assets must pay taxes on that income when it is brought into the country.
In addition, Ms. Kulaya revealed that the department is drafting legislation to establish a minimum corporate tax rate in line with international agreements led by the OECD. This global minimum tax (GMT) principle aims to ensure that large multinational corporations pay a minimum tax rate of 15% globally in the countries where they operate. If a corporation pays less than 15% in any country, it will be required to pay additional taxes to make up the difference in the country where its parent corporation is based. This agreement applies only to multinational companies with global revenues exceeding €750 million (approximately $870 million) per year.
In the first 11 months of the fiscal year 2024, the Revenue Department collected 1.963 trillion baht, exceeding its target by 0.4% or 8.44 billion baht. This strong performance was attributed to government initiatives to boost consumption, including the easy e-Receipt program, which helped increase value-added tax collections from domestic consumption.
Ms. Kulaya anticipates that by the end of the fiscal year on September 30, the department will meet its goal of 2.28 trillion baht. For fiscal year 2025, starting October 1, the Ministry of Finance has set the department a collection target of 2.372 trillion baht.
