25/11/2023 – Update: The Thai Revenue Department has recently issued a follow-up revenue order 162/2023 that clarifies the operation of these new rules. It’s recommended that you continue to read this article first, and after take a look at our latest article which details the changes that have occurred with the issue of Revenue Order 162/2023 – the linke to that new article is listed below for you:
Thailand to tax foreign income! Significant changes in Thai tax law are on the horizon for Australian expats residing in Thailand, and they require your immediate attention. On 15th September 2023, the Thai Revenue Department issued Revenue Order 161/2023, which fundamentally reverses Thailand’s approach to taxing foreign income remitted to Thailand, an outcome that will impact potentially every Australian expat and every other foreign expat who resides in Thailand.
Coupled with Thailand’s recent adoption and implementation of the Common Reporting Standard (CRS), a global financial reporting standard (implemented by 115 countries around the globe including both Thailand and Australia), these changes have serious implications for your taxes, your tax obligations and for managing your finances.
Historically, Thailand has been one of the most popular destinations for Australian expats to live, work and also to retire.
Beyond Thailand’s friendly disposition, idyllic beaches, relaxed lifestyle and (compared to Australia) it’s comparatively low-cost living, Thailand’s territorial taxation system with tax rates lower than Australia has made Thailand and attractive destination for Australians to live.
From a financial perspective, one of the most attractive advantages of Thailand historically, has been that tax residents of Thailand (those who are physically present in Thailand for more than 180 days in a calendar year) are only subject to Thai tax on their foreign income if they remit that foreign income to Thailand in the same tax year in which it is earned.
Most expats therefore would simply leave their foreign income offshore until after 31st December each year, therefore effectively rendering their foreign income as being exempt from Thai taxation. Thus, for most Australians with Australian assets, Australian superannuation and other Australian income, Thailand’s tax regime has traditionally been considered to be very attractive for Australians seeking to relocate there.
However, Thailand’s attractiveness as a destination for Australian expats may all be about to change with a significant development aimed at bolstering tax collection in Thailand occurring last week.
What is Revenue Order 161/2023?
Issued on 15th September 2023, Revenue Order 161/2023 mandates that from 1st January 2024, any and all foreign income, from all sources (whether from employment, business, pension, or from overseas assets) will be taxable in Thailand when it’s brought into Thailand regardless of when it was brought into Thailand.
This is a stark departure and a seismic shift from the previous rule, which allowed you to bring foreign income into Thailand tax-free if it was remitted to Thailand in a different calendar year from when it was earned.
- Effective Date: 1st January 2024
- What’s new? All foreign income remitted to Thailand after 1 January 2024 will be taxable in Thailand at Thai tax rates, and will therefore be required to be included in your Thai tax return.
- Revocation of Previous Rules: All practices that are inconsistent with the new ruling are to be rendered ineffective and are therefore null and void.
Implications for Aussie Expats:
If you’ve been playing it smart and keeping your foreign earnings offshore, only bringing them into Thailand when you felt like it (the year after you earned the income), you need to understand that those days are numbered.
If you’re an Australian expat living in Thailand, this new revenue order, along with Thailand’s recent implementation of the Common Reporting Standard (more about that below), it means that you will need to be a lot more strategic about how and when you bring your funds into Thailand, if at all!
The Common Reporting Standard (CRS)
In addition to the new revenue order, Thailand has also adopted and implemented the Common Reporting Standard (CRS) in 2023. The CRS is a global financial information and reporting standard for the automatic exchange of tax and financial information on a global level.
Under the CRS, every bank, financial institution, and other similar organisations in Australia and approximately 114 other countries are now legally obligated to report to the Thai Revenue Department all information about accounts held in Australia by Thai tax residents.
What is the CRS?
In a nutshell, the CRS is a global financial reporting system where countries share financial data about each other’s residents.
It is an information standard that facilitates the automatic exchange of financial account information between tax authorities globally and it was developed by the Organisation for Economic Co-operation and Development (OECD) to assist countries to combat tax evasion.
The information that your Australian banks and financial institutions will share and exchange with the Thai Revenue Department, via the CSR, includes all account details, balances, details of all income deposited including, interest, dividends, and sales proceeds from financial assets.
To learn more about the CSR, take a look at an article that we wrote when this was implemented by Australia in 2018 – Introduction to the Common Reporting Standard – Aussie Expats Beware!.
What Information is Exchanged?
The CRS requires financial institutions to collect and report information such as account balances, interest, dividends, and other income generated from financial assets.
So, under the CSR, if you’ve got a bank account or investments back in Australia, your Australian bank and financial institutions share with the Thai Revenue Department, all details about your Australian bank accounts and other accounts including all of your account details (name, address, account numbers etc), all balances, details of all income deposited including, salaries/wages, pensions, interest, dividends, and proceeds from the sale of assets, categorised and classified in to different categories of income that your bank recognises.
All of this will be handed to the Thai Revenue Department on a silver-platter!
Implications for Australian Expats who are Thai Tax Residents
The main implication of Thailand’s implementation of the CRS for Australian expats living in Thailand is that if you are a tax resident of Thailand, you can no longer assume and should no longer assume, that your Australian income, your Australian bank accounts and your other Australian financial accounts will go unnoticed by the Thai tax authorities.
This has significant implications for Australian expats (who are Thai tax residents) as many will be unaware of this development.
- Increased Transparency: Your financial assets, including those in Australia, are now more visible to Thai tax authorities.
- Global Tax Compliance: You must ensure tax compliance not just in Thailand but also in Australia, where your financial information will be reported.
Why Should You Care?
With Thailand joining the CRS, it means they’ll have a lot more info about where you’re stashing your cash. If you thought you could keep your finances under the radar, think again.
The main implication? Because every Australian bank, financial institution, and various other organisations in Australia will now be legally obligated to report to the Thai Revenue Department about accounts held by Thai tax residents, this, and the introduction of Revenue Order 161/2023, will undoubtedly catch may Australian expats off guard, as many are likely to be issued with hefty Thai tax bills unexpectedly next year from 1st January 2024.
Recommendations for Aussie Expats
- Timing is Everything: If you’ve got foreign income from before January 1, 2023, think about bringing it into Thailand before the end of 2023. Any dosh earned after January 1, 2023, and brought in early will be up for grabs by the Thai tax authorities.
- Explore Tax Optimisation: With the changing landscape, it might be worth having a chinwag with a tax expert to explore avenues for tax optimisation. Whether it’s tax-efficient investments or leveraging specific incentives, there’s likely a strategy to help you keep more of your hard-earned cash.
- Double Taxation Treaty: Australia and Thailand have a Double Taxation Treaty in place. If you’re paying tax in both countries, this treaty may or may not offer some relief. Tax treaties are complex, so it will be best to chat with an expatriate tax advisor who has a lot of experience analysing and advising on tax treaties, in order to get the advice you need.
- Get Informed: Knowledge is power. Make sure you’re across all these changes and how they impact you, sooner rather than later.
- Consult an expatriate tax expert: Tax is tricky at the best of times in just one country, let alone when you straddle two countries like Australia and Thailand, and with these changes, it’s just become a whole lot trickier. Chat with a highly skilled and experienced expatriate tax firm who can assist you to navigate the complexities.
- Stay Compliant: With the Revenue Order 161/2023 due to take effect from 1st January 2024, and with the CRS in play, it’s more important than ever to ensure you’re aware of the rules and that you have your finances squared away so that you don’t make any mistakes, as getting it wrong is likely to be very costly indeed.
Need some help navigating all this?
The recent rollout of this new revenue order, combined with the adoption of the CRS, marks a pivotal moment for taxation in Thailand that warrants your or failing to understand these changes could result in significant consequences and may impact your wealth and finances detrimentally.
Look, we get it. Nobody wants to pay tax, but even less people, want to pay tax unnecessarily.
That’s why it’s crucial to get it right, especially with these new changes. If you’re scratching your head wondering how all this impacts you, we’re here to help, so reach out.
With over 16 years of experience advising Australian expats in over 100 countries around the globe, including Thailand, one of our largest regions in Asia where we clients, our team here at Expat Taxes are well placed to assist.
Our tax team are highly experienced, Australian expatriate tax specialists who know have assisted and advised Australian expats in Thailand for many years.
So, if you have questions about any of the above, or if you want to understand what these changes mean for your specific situation, then we highly recommend that you book a ‘One-Hour’ tax consultation with our tax advisory team via our ‘Book an Appointment’ page.
With the Thai government continuing to focus on increasing tax revenues, the tax landscape in Thailand is not to be taken lightly and as such, the urgency of these changes cannot be overstated.
Accordingly, set aside some time to learn about what these changes will mean for you because these are quite significant changes and they do require your immediate attention.
The sooner you act, the better you will be prepared for when these sweeping new rules take effect.
Disclaimer:This blog post is for informational purposes only and should not be construed as legal, taxation or financial advice. Consult with a qualified expatriate tax specialist, accountant or financial advisor for guidance specific to your situation.