New Guidance on Personal Income Tax - Does it Matter?

The Revenue Department announced on 15 September 2023 that starting from 1 January 2024 that all income earned overseas and remitted into Thailand by a tax-resident of Thailand will have to be declared as income as part of the individual’s assessable income for the year that the income is brought into Thailand. Income includes earnings from employment abroad, dividends, capital gains, interest, offshore savings, and rental income from overseas assets, among others. This was announced as a directive in Departmental Notification Por 161/2023.

Previously the Revenue Department allowed people to remit earnings from overseas without declaring it as income, providing the remuneration was not earned in that same tax year.

The directive states that all persons who are residing in Thailand for over 180 days within that calendar year are effectively tax residents. This rule will affect retirees and pensioners, as well as digital nomads, people with overseas savings, and people receiving income from overseas properties. It will also affect people who were earning money overseas and chose to delay repatriating funds to avoid paying tax. Double taxation treaties may apply in certain cases and reduce the amount of tax payable. It is also important to note that the directive refers to personal income tax, so cross-border corporate structures may be ignored for now.

The ruling coalition have acknowledged that while this new regulation may be unpopular, it is necessary to help “bridge the income inequality divide”

Although this directive has been published, it may be adjusted prior to coming into effect, and furthermore the directive is a guideline meant to instruct the Revenue Department on how to view overseas earnings, rather than a decree or act of law.

It remains to be seen how this will affect residents who invest in the Thai real estate and purchase thought their offshore investments. If they can’t show the source and tax paid on this investment then this transfer will be deemed to come from offshore income and then taxed in Thailand in one of the higher tax brackets. This puts them on the IRD radar in future years as well.

This could possibly drive down the cost of real estate in Thailand or push people into purchasing through companies, as practiced elsewhere in the world for tax-minimization purposes. Neither possibility will be attractive to a government wanting to bolster tourism and the economy.