Delicious food, tropical climate, exotic settings, and low cost of living are some of the primary factors contributing to the growing numbers of expats in Thailand. In 2016, Bangkok, the infamous capital city of Thailand, was reported to have recorded the most number of visitors worldwide, reaching up to almost 22 million visitors overnight.
Moreover, Thailand’s strategic location, friendly business landscape, various business structures, and rapid-growing economy attract many foreign entrepreneurs and investors to start a business in the country. In 2020, World Bank ranks Thailand as the 21st easiest countries to do business. All of these factors make Thailand one of the most sought after nations for ex-pats to settle down and retire.
While Thailand boasts simplicity in business set-up and other aspects of life, its tax system can get quite complicated. This article guides you through what you need to know about taxes for ex-pats in Thailand.
Who is considered as a Thailand’s tax resident?
Taxpayers in Thailand are categorized into resident and non-resident. An expat who has lived in Thailand for more than one-hundred and eighty days in a tax calendar year would be considered a resident for tax purposes. In contrast, expats who have not exceeded the one-hundred-and-eighty-days rule shall be treated as a non-resident for tax purposes.
Is foreign income taxed in Thailand?
Thailand taxed incomes earned from all over the world. However, unlike countries like the United States, Thailand only taxed the worldwide income of residents, while non-residents only need to pay taxes for incomes earned within the country.
What are Thailand’s tax rates?
Tax rates imposed are dependent upon the ex-pat’s income. Thailand’s tax rates are progressive and rise according to earnings. Expats who earn less than THB 150,000 will be exempt from income tax, while those who earn over THB 5,000,000 per year will be taxed at thirty-five percent.
When are taxes due?
Thailand utilizes a calendar year. Expats must file their Personal Income Tax return on or before 31st March for the previous year. If they earn advertising fees or work as a public entertainer, they need to file a mid-year return by 30th September.
Social security in the country
Thailand utilizes a social insurance system. In this system, workers are required to contribute five percent on the first THB 15,000 of income, with the employers paying the same percentage. The government contributes an additional 2.5 percent to the insurance system.
Some American expats, however, may need to pay for both social security systems on some Thai incomes since there is no social security agreement between Thailand and the United States.
Other taxes available in Thailand
Expats have to pay a seven percent value-added tax on some things they purchase in the country. Stamp duty is also required on documents they sign, such as leases.
Americans in Thailand: US taxes and financial reporting requirement and ways to save on the taxes
American citizens or residents are required to file for US taxes every year. If they own assets in foreign bank accounts, they may also need to report them. Those who own $10,000 or more in a financial establishment or a foreign bank during a calendar year must file for the Foreign Bank and Financial Accounts or FBAR.
Luckily, American ex-pats can reduce or eliminate their US tax duties. One of the ways would be to exclude a certain amount of their foreign-earned income in their US expat taxes through the Foreign Earned Income Exclusion. They can use Foreign Tax Credit to offset the taxes they have paid in their host country with their US expat taxes dollar for dollar.
Also, the Foreign Housing Exclusion permits an extra exclusion from earnings on US expats taxes for some amount paid for the household costs, which happen as a result of living outside of the country.
Withholding tax for expat employees and employers
Tax on expats’ employment income is withheld by their employer and remitted to Thailand’s tax authorities, typically every month. The amassed amount will be offset against the tax bill during tax return filing, thereby decreasing the possibility of expats paying a high amount of tax.
On the other hand, expats who pay out incomes under section 40 of Thailand’s Revenue Code, which includes wages and benefits, is required to withhold tax at a progressive rate based on the employee’s net income per year. They also need to release a withholding tax Thailand certificate to the employee. This withholding tax obligation also applies to an employer with a company founded under foreign law.
Seeking advice from a competent accounting outsourcing services provider in Thailand
Foreign entrepreneurs or investors who intend to start a business in Thailand should opt for a professional Thailand accounting company to help them handle their businesses’ bookkeeping and accounting while making sure they stay compliant with Thailand’s tax and accounting rules.