The Thai Revenue Department recently issued Order No. 16/2023 (the “Order”), which marks a significant shift in Thai tax policy as it relates to Thai Residents, who derive income from foreign sources or own offshore assets. The Order, which was signed by the Director General of the Thai Revenue Authority, mandates that effective January 1, 2024, individuals living in Thailand must report their earnings from foreign sources and pay tax on those earnings and must also report their overseas assets in the year those earnings are repatriated to Thailand.
The Order relates to the interpretation on Section 41, Paragraph 2 of the Revenue Code which provides that individuals must declare income acquired abroad if their work duties, business activities, or assets are based outside of Thailand, in the tax year in which the income is brought into Thailand.
The previous interpretation under Section 41 Paragraph 2 provided that assessable income derived by a Thai tax resident from employment, business carried on overseas, or from property situated overseas, was subject to Thai personal income tax only if taxable income was brought into Thailand in the same tax year. Thus, Thai tax residents were previously able to park their foreign source income offshore for a year and then repatriate the income without being subject to Thai income tax. The new Order changes all that.
The Order applies to an individual subject to Section 41, Paragraph 3 of the Revenue Code who has assessable income attributable to work duties, business activities or asset located overseas. Paragraph 3 defines a tax resident of Thailand, in relevant part, as an individual who stays in Thailand for a period or periods aggregating 180 days or more in any tax year.
The affected taxpayers are now required to report the assessable income or assets, pursuant to Section 48 of the Revenue Code.
In furtherance of implementing the Order, on September 15, 2023, the Thai Revenue Authority also issued Instruction No. Por 161/2566 (“DI No. 161/2566”) for the benefit of Thai Taxpayers to assist them in determining when they are required to include foreign source income and assets for Thai tax purposes and pay personal income tax in Thailand.
- No. 161/2566 effectively repeals prior rules, regulations, instructions, rulings, or practices that inconsistent with the interpretation under the new Order.
All is not lost, however. A Thai resident is entitled to a foreign tax credit if the assessable income is subject to tax in the source country and the tax paid. This is consistent with provisions contained in Thailand’s Tax Treaties designed to avoid double taxation.