26-9-2023 (BANGKOK) The Revenue Department of Thailand has announced amendments to its notification regarding the taxation of specified foreign-sourced income. The update specifies that Thai residents earning overseas income will be subject to personal income tax (PIT) under Paragraph 2 of Section 41 of the Revenue Code. This policy change, which ends nearly 40 years of exemption for foreign-sourced income, aligns with international standards on the exchange of financial information to enhance tax transparency and fairness.
Vinit Visessuvanapoom, Deputy Director-General and spokesperson for the Revenue Department, clarified that the collection of tax on foreign-sourced income has never been fully exempt. The prior rule, established four decades ago, required residents with foreign income to pay taxes only if the income was brought into Thailand in the same year. Exemptions were granted if the income was remitted to Thailand in the following year.
The primary reason for this policy shift is the proliferation of double tax agreements, of which Thailand currently has 61. Such agreements prevent individuals or companies operating in multiple countries from being taxed twice on the same income. Additionally, advancements in technology and international data exchange agreements now enable efficient tax administration.
The Revenue Department emphasizes that tax collection on overseas income was historically insignificant due to limited technological development, which hindered the ability of individuals to work or invest abroad. The government intends to avoid imposing tax burdens on workers who send money back to Thailand, as it has been one of the nation’s primary sources of income. The tax on overseas income will be primarily based on self-declaration, digital technology, and international information exchange systems for verification.
This new rule will take effect on January 1, 2024, applying only to tax residents in Thailand. Tourists and short-term workers are exempt from this policy, as are individuals taxed in a foreign country with a standing double tax agreement with Thailand.
During the transition period leading up to the rule’s enforcement, the Revenue Department plans to collaborate with stakeholders to address issues related to this initiative and to formulate supporting regulations and laws.
According to Mr. Vinit, the revision of PIT collection aims to boost Thailand’s international reputation as a member of various bilateral and multilateral agreements, foster equitable tax collection from domestic and foreign sources, and promote transparency in tax practices.
