Thailand tax brief

Thailand tax brief for Australian expats

Known as the “Land of Smiles”, Thailand is fast becoming a preferred destination for Aussie expats to live and work. This idyllic, diverse country offers a unique blend of traditional and modern. You can see this by the way Thailand looks toward the future, while holding on to its impressive cultural heritage.

To assist Australian expats moving to this paradise in Asia, we’ve outlined a few facts about the Thailand tax system and how individuals living in Thailand are taxed.

  • Who is considered a Thailand resident
  • What needs to be included on your Thai tax return
  • How non-residents are taxed
  • Whether you have to pay social security
  • Other taxes you should be aware of, and more.

Who is a resident of Thailand?

In Thailand, permanent residency is highly sought after. As such, each year, only 100 residents per country are selected to become permanent residents. To qualify, you must:

  • Hold a Thai non-immigrant visa for a minimum of three years before applying
  • Hold a Thai non-immigrant visa when applying
  • Have an Academic or Expert Category visa, or
  • Qualify for the:
    1. Investment Category (at least 3-10 mil baht invested)
    2. Working/Business Category
    3. Humanity Reasons Category (you must have a relationship with a Thai citizen or someone who has residence as husband or wife, mother or father or the guardian of a Thai child under 20).

Do I need to lodge an Australian tax return?

Regardless of your Australian tax residency status, and regardless of whether you are a Thailand tax resident, typically, if you hold an Australian tax file number then you have tax return lodgement obligations in Australia. Whilst outside the scope of this article, take a look at an earlier article that we wrote, explaining whether you will need to lodge an Australian taxation return whilst you are living outside Australia:

Do I need to lodge a tax return while living overseas?

If you’re a non-resident for Australian taxation purposes, you won’t required to pay income tax on the income you have earned from sources outside of Australia. You will however be required to pay tax on any investment income you have earned in Australia (e.g. Australian interest, Australian dividends, Australian rent and other Australian sourced income etc).

If you are an Australian resident for tax purposes, you’ll be subject to tax on your worldwide income and gains, no matter where you earn the income (whether within Thailand or elsewhere) and no matter where your assets are located.

In your tax return, you’ll need to declare any income you have earned whilst in Thailand – even if you’ve already paid tax there. In this case, you may be eligible to claim a foreign tax offset (so as to avoid double-taxation).

Does Thailand tax me on my worldwide income?

If you are a resident of Thailand, then yes, you are expected to pay income tax on all income, regardless of where it is earned (i.e. including foreign income earned from outside Thailand that is remitted to Thailand in the year that it is derived).

Non-residents however, are only subject to tax in Thailand on income and gains that they derive from sources in Thailand.

Under Thailand law, all income which is considered assessable is classed as Personal Income Tax. Personal Income Tax includes income from:

  • Non-cash payments for accommodation and use of a work vehicle
  • Employment
  • Royalties
  • Dividends
  • Rental agreements
  • Business

If done in a precise order, there are various deductions you can claim from your assessable income. On your tax return, enter the assessable income amount, then subtract deductions (i.e. expenses) and personal allowances. The remaining amount will be taxed.

Foreign income tax-planning opportunity!

However, for Australian expats living in Thailand, there’s potentially a big tax-planning opportunity that you can use to your advantage! To do so, you’ll need to understand Thailand’s foreign income remittance rule.

The foreign income remittance rule – If you are a Thai tax resident who earns foreign income and you bring that income to Thailand in the same year that it is derived, then it will be subject to tax in Thailand. If however you repatriate that income into Thailand in later income years (or not at all), that foreign income is exempt from Thai personal income tax.

Additionally, foreign capital gains derived by tax-resident individuals of Thailand, are only treated as income if they are brought into Thailand in the year in which they were derived.

As you can see, with proactive planning deferring the remittance of foreign income and gains is a useful strategy for minimising your potential tax liabilities whilst you are living/working in Thailand as an Australian expat.

Does my Thai income need to be included on my Australian tax return?

This depends on your residency status. If you’re an Australian resident for tax purposes, you’ll be taxed on your worldwide income. So, you have to declare all Australian and foreign income on your Australian tax return.

However, if you aren’t an Australian resident for tax purposes, you will only be taxed on income derived from sources within Australia. This means you will not need to declare the foreign income you receive on your Australian tax return.

What are Thailand’s personal tax rates?

Whether you are considered a non-resident or permanent resident of Thailand, you will be taxed on all income generated within the country. The amount you are expected to pay will vary though, based on the income you earn during the financial year.

Here are Thailand’s personal tax rates for 2019 (please note, all quoted figures are in Baht).

Thai Personal Tax Rates

Net Income (THB) Tax Rate
0 to 150,000 Exempt%
150,001 to 300,000 5%
300,001 to 500,000 10%
500,001 to 750,000 15%
750,001 to 1,000,000 20%
1,000,001 to 2,000,000 25%
2,000,001 to 5,000,000 30%
Over 5,000,000 35%

How are non-residents taxed in Thailand?

As mentioned previously, there are two categories of taxpayers in Thailand: residents and non-residents. According to Thai taxation law, residents are expected to pay income tax on both the income you have generated in Thailand and that which was generated outside of the country.

If you’re a non-resident, you’re only expected to pay taxes on the income generated in the country (income, investments and otherwise) during the time you lived there. And, it’s important to remember, if you earn 150,000 baht per year, you are entirely exempt from paying income tax.

Is there an Australian-Thailand tax treaty?

Yes, there is. In fact, Thailand is just one of the 41 countries that Australia currently holds bilateral agreements with. The key purpose of this treaty is to prevent Australian citizens from paying double taxation while residing in Thailand. Put simply, the treaty ensures you are not taxed on your foreign income in Thailand, then taxed on the same income when back in Australia.

In addition, the Australian-Thailand tax treaty is designed to prevent the following:

  • Tax avoidance and evasion from individuals and businesses who generate income in Thailand, and;
  • Disputes regarding a taxpayer’s residency status and where their income is generated.

What is the Thai tax year?

In Thailand, the tax year begins on January 1st, and ends on December 31st, to coincide with the calendar year. To pay income tax for the previous year, your tax return is due by March 31st. However, the filing date can vary, depending on your occupation. If you earn your income through:

  • Selling property
  • Engineering
  • Accountancy
  • Architecture
  • Fine arts, or;
  • Healing,

then your tax return must be filed on or prior to September 31st. In this case, tax is due on June 30th the following year.

It is highly recommended that tax payments are made on or before the above dates. The reason is that significant penalties apply for late payments.

Do I file tax individually or with my spouse?

In 2012, the Revenue Department created new guidelines for the filing of spousal tax returns. These guidelines state that not all of the wife’s assessable income should be classified as the husband’s income. Therefore, if you and your spouse earn separate incomes, you’re both required to pay and file your own tax returns.

However, there are circumstances in which you are required to file a joint tax return with your spouse. If, for instance, you and your spouse run a business (and individual income cannot be proven), you must file taxes jointly.

Do I have to pay social security in Thailand?

Yes, it is a condition of your employment in Thailand. When you find a job, you are required to sign up for comprehensive Social Security Office (SSO) coverage. As an expat, you will likely be enrolled in a company pension scheme (commonly known as a Provident Fund). Employees are required to contribute 15% of their total income to the pension fund.

Come tax time, you’ll be eligible for the following concessions:

  • Tax relief for the lower 15% of your income
  • Capital growth in your pension account is entirely tax-free, and;
  • In certain circumstances, payouts may be completely tax-free.

As mentioned previously, it’s a condition of Provident Fund membership that you contribute 15% of your total salary to the pension scheme. However, it is not a one-sided contribution – as your employer is required to match it.

If you leave your current job, however, your Provident Fund membership with that company is terminated. As such, you may not be able to claim back the total amount of contributions your employer has made.

The reason for this is there is a “vesting period” before the money your employer has added is considered yours. While the vesting period varies depending on the fund you are with, the period is generally 10 years or less.

Are my non-Thai assets subject to tax?

While not all non-Thai assets are taxable, some must still be included on your Thai tax return. As an expat, you are taxed on your worldwide income. So, any income generated in Australia while in Thailand is taxable (but only if that income is remitted to Thailand in the year that it is derived (refer previous discussion about the tax-planning opportunity relating to Thailand’s foreign income remittance rule). Investment income (i.e. from Australian shares, bank accounts or investment properties) is also classified as taxable in Thailand where that income is remitted to Thailand in the same year that it is derived.

As a resident for Australian taxation purposes, you are also taxed on all capital gains you make throughout the year (worldwide). On the positive side, however, the 50% capital gains discount still applies to you. So, if you’ve owned the asset(s) for at least 12 months and two days, you only need to report 50% of the gain in your Australian taxation return.

Are there any other taxes I should be aware of?

Yes, aside from income tax, Thailand has a range of other taxes you should know about. These include:

Stamp duty – Several transactions (i.e. homes, cars, etc.) are subject to stamp duty, which ranges from 0.1% and 1% of the total purchase price. However, in some cases (such as loan documents), stamp duty is a flat THB 10,000.

Property tax – According to the assessed rental value of your property, you will pay up to a 12.5% house and land tax. This tax is imposed on the owner, and doesn’t apply to owner-occupied residences.

Specific business tax – Various Thai businesses are subject to the specific business tax (SBT). It’s calculated as a percentage of gross profits, and varies from 2.75%-3.3%. SBT applies to these businesses:

  • Banking
  • Finance, credit and security
  • Factoring
  • Life insurance
  • Brokerage
  • Stock market securities
  • Trades in immovable property

Inheritance tax – This tax applies to recipients of property valued at (THB) 100 million or more. Generally, inheritance tax is 10%, but it’s reduced to 5% if the legatee is an ascendant or descendant of the decedent. You’re required to pay inheritance tax if you’re:

  • Of Thai nationality (including a legal entity registered under Thai law, a legal entity in which Thai shareholders own over 50% of its share capital, and a legal entity with over half of persons in management of Thai nationality).
  • A non-Thai national with Thai residency, and;
  • A non-Thai national who receives an inheritance of property in Thailand.

Gift tax – Money and property received by a spouse (ascendant or descendant) as a gift valued at (THB) 20 million or more, must pay a gift tax of 5%.

If you’re ready to start an exciting life in the Land of Smiles, and you need help with your Australian tax returns, or if you need some tax advice about your situation, simply contact our team today.

References cited:

Shane Macfarlane CA
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