On September 15, 2023, the Thai Revenue Department (TRD) released Departmental Instruction No. Paw 161/2566 (2023) concerning income tax payments according to Section 41, Paragraph 2 of the Thai Revenue Code (TRC). This newly introduced guidance is expected to have a significant impact on the tax regulations governing the repatriation of foreign-sourced income to Thailand by Thai tax residents, with implications scheduled to be enforced starting from January 1, 2024, and beyond.
Current Practice
Before the issuance of this recent departmental directive, a Thai tax resident was subject to income tax on foreign-sourced income only if such income was transferred to Thailand within the same calendar year in which it was earned. In other words, foreign-sourced income remained non-taxable if it was brought into Thailand in the following calendar year.
Note: A Thai tax resident is defined as an individual who resides in Thailand for a cumulative duration of 180 days or more within a single tax year.
Practice Effective 1 January 2024
According to the recent departmental directive, Thai tax residents with foreign-sourced income will be subject to taxation in Thailand regardless of the timing of remittance of such income into the country. It’s important to note that this rule exclusively applies to Thai tax residents.
Our view
This new guideline poses significant challenges for Thai tax residents who have income from both Thai and foreign sources. While the departmental instruction doesn’t have the force of law, it serves as the tax authority’s enforcement directive.
There are several unresolved issues that the tax authority still needs to address regarding the implementation of this new rule. These include determining the applicable tax rates (whether a flat tax will be imposed, if different tax rates will be specifically applied to foreign-sourced income, or if the standard progressive tax rate will be used), how to differentiate between principal (funds from legacy investments, inheritance, original investment capital) and earnings (interest, dividends, remuneration) from commingled funds, and establishing the relevant foreign currency exchange rates for tax assessment, among others.
We are actively monitoring further developments in this matter and we aim to provide additional updates and clarifications on this topic in the near future.
Grant Thornton is a leading business advisory firm in Thailand, offering Audit and Assurance, Talent Acquisition Management and Executive Recruitment, Advisory, Business Consulting, Tax and Legal Consulting, Japanese Business Practice Consulting, Business Process Outsourcing, and Business Risk Services.
