Taxation is a complex area where many people feel uncertain due to the various intricacies involved, requiring a thorough understanding of each criterion to maintain compliance. Numerous individuals have experienced retroactive tax assessments. Regardless of whether your income is significant or modest, if the Revenue Department detects any discrepancies, you may be subject to retroactive tax charges or penalties, whether the error was accidental or intentional.
Whether you are a Thai national or a foreigner living in Thailand, understanding when you are obligated to pay income tax can be confusing. In this article, “A Guide to Personal Income Tax in Thailand,” Ravenwing has outlined the various criteria for personal income tax obligations. We’ve categorized the scenarios in which individuals are required to pay personal income tax based on two main principles: Source of Income and Principle of Residency.
Source of Income
If an individual earns assessable income in the past tax year, they are subject to income tax under the Revenue Code if the income is derived from:
Employment or business duties performed in Thailand
An employer's business conducted in Thailand
Assets located in Thailand
Income derived in any of these cases is considered to originate from a source within Thailand, and the taxpayer must pay income tax on that income, regardless of whether it is paid in Thailand or abroad.
Examples
Case of Employment in Thailand
Mr. Dum works for a company based in Bangkok. He is a regular employee of the company. Regardless of whether his salary or benefits are paid in or outside of Thailand, Mr. Dum must pay income tax because he earns income from duties performed in Thailand.
Case of Business in Thailand
Mr. Matsumoto, a resident of Japan, operates a distribution business in Thailand. Even if Mr. Matsumoto has never stayed in Thailand, he must pay income tax on the income earned from his business operations in Thailand.
Case of Employer’s Business in Thailand
Ms. Dang is an employee of a company in Thailand. The company assigns her to work in the United States. Ms. Dang must pay income tax because her income is derived from her employer’s business in Thailand.
Case of Assets in Thailand
Mr. John, who resides in the United States, owns a house in Bangkok and appoints Mr. Dee to manage the property, collecting rent and sending it to him in the U.S. Mr. John must pay income tax to the Thai government because the income comes from assets located in Thailand.
Principle of Residency
An individual who has assessable income in the past tax year must pay tax if they are considered a resident of Thailand, defined as staying in Thailand for a total of at least 180 days within the tax year. This applies to income earned from:
Employment or business duties performed abroad
Assets located abroad
Income brought into Thailand
This income is referred to as foreign income. If it is brought into Thailand, the taxpayer must pay income tax according to the Revenue Code (Section 41, Paragraph Two). If the income is not brought into Thailand, it is not subject to tax.
Examples
Case of Foreign Income Not Taxed
Ms. Noi works in the Middle East and sends THB 20,000 per month to her family in Thailand. She does not need to pay income tax, as she does not reside in Thailand, even though the money is transferred there.
Case of Residency Requirement Not Met
Ms. Ning participated in the Miss Universe pageant in the United States, where she spent two months preparing and competing. After winning, she returned to Thailand for 20 days before traveling to other countries for six months. She then returned to Thailand with her THB 3,000,000 prize money. Miss Ning does not have to pay income tax because she stayed in Thailand for only 110 days, not meeting the 180-day requirement.
If you are still uncertain about your personal income tax obligations or have questions specific to your unique situation, Ravenwing is here to assist you. Feel free to reach out to Ravenwing through our provided channels, and let us work with you to ensure your tax matters are managed confidently and effectively.
Disclaimer: Informational Article, Not Legal Advice
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