Thailand’s new tax law opens both a challenge and opportunity for foreigners residing or investing in the country. To navigate along this undeniably complex legislation successfully, it is essential for foreign investors to comprehend and fully grasp its impact on their financial activities in Thailand.
Thailand has a long history of being praised for its diverse culture and natural beauty. It should come easy as no surprise that many foreigners opt to stay in Thailand, either permanently or just temporarily. While you enjoy the cuisine and tropical climate, you might find Thailand’s new tax law quite challenging.
Thailand’s New Tax Law on Foreign Investors
Foreign investors, retirees, and professionals will be able to leverage from a range of new incentives as Thailand’s government attempts to encourage high-earning foreign people to help the country’s COVID-19 recovery. A resolution offering immigration, tax, and land ownership advantages for qualified professionals and foreign investors was adopted by the Thai cabinet.
Within five years, the government anticipates that the incentives will draw more than a million foreign businesspeople and professionals, injecting more than 1 trillion baht (US$30 billion) into the economy. Immigration, tax, and real estate are the three areas under which the incentives fall.
Tax
The same income tax rates and tax exemptions for income generated outside of Thailand will be available to qualified applicants. Furthermore, they are eligible to apply for the Eastern Economic Corridor scheme’s fixed income tax rate of 17 percent.
Lands and Possessions
Relaxed limitations on foreign ownership and rental of land and property are available to qualified candidates.
Thailand’s Office of National Economic and Social Development Council would be in charge of managing the incentives. They will be in effect from 2022 to 2026 for five fiscal years before authorities decide whether to extend them based on how well they performed during that time.
While the Thai government has approved incentives in certain areas, prospective candidates should be aware that specifics in some areas, such as land and property, have not yet been clarified.
Immigration
A 10-year long-term resident visa for Thailand is available to qualified applicants, along with visas for their spouses and kids. Additionally, a work permit will be automatically provided to qualified applicants. This is a brand-new category of visa that was unheard of before in Thailand. Those with long-term resident visas do not, unlike those with other types of visas, need to notify the appropriate authorities in writing in advance of stays of more than 90 days. It is possible that firms won’t be required to hire four Thai workers for every foreign worker or any other hiring limitations that apply to international workers, but this is still up in the air.
Four different types of foreigners are eligible for the incentives: high-income global citizens, high-income seniors, high-skilled professionals, and those who work in Thailand.
Qualified for the Incentives:
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People From Prosperous Nations
A person must have US$1 million or more in assets and have earned at least US$80,000 during the previous two years in order to qualify for the rewards. They also need to have health insurance that covers at least $100,000 and invest at least US$500,000 in Thai government bonds or real estate.
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Affluent Retirees
Applicants must be retired pensioners at least 50 years of age with a steady pension of at least US$40,000 annually. They must also invest at least US$250,000 in Thai government bonds or real estate, as well as have medical insurance that covers at least US$100,000.
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Professionals In Thailand Are At Work
Digital nomads, or foreign professionals who operate remotely from Thailand, must have earned at least US$80,000 over the previous two years and have at least five-year work experience to qualify.
- Highly Accomplished Individuals
This category includes professionals who have made at least $80,000 in the past years or $40,000 annually and work in specific sectors, such as the construction, logistics, and digital systems industries, as well as specialists and researchers who are employed by government agencies or teaching at universities.
Taxation in Thailand
The corporate tax, personal income tax, value-added tax (VAT), tax compliance, tax planning, tax incentives, gift tax, specific business tax, and tax on inheritance are just a few of the multiple facets of taxation in Thailand. It is significant to remember that tax rules and regulations might change. It is advised to consult official government sources, such as the Revenue Department of Thailand, or seek expert guidance from licensed tax advisors for detailed and current information on taxation in Thailand. Here is a description of each:
1. Corporate Tax
The standard corporate income tax rate in Thailand is 20% for both domestic and foreign companies. However, the rate may vary based on factors such as type of business, industry, location, and tax incentives granted by the government. Certain industries and projects may be eligible for tax privileges and reduced tax rates through the Board of Investment (BOI) promotion.
2. Personal Income Tax
Thailand employs a progressive tax system for individual taxpayers. The personal income tax rates range from 0% to 35% based on the taxpayer’s annual income. The income thresholds and tax rates are subject to change, and various deductions and allowances are available to reduce taxable income.
3. Value-Added Tax (VAT)
Thailand imposes a value-added tax (VAT) on the sale of goods, provision of services, and importation of goods. The standard VAT rate is 7%. However, some goods and services are exempted or subject to a 0% VAT rate. VAT-registered businesses are required to collect and remit VAT to the Revenue Department.
4. Tax Compliance
Tax compliance in Thailand involves fulfilling various obligations, such as filing tax returns, maintaining proper accounting records, and timely payment of taxes. Businesses and individuals must adhere to tax laws, including keeping supporting documents and complying with reporting requirements.
5. Tax Planning
Tax planning involves organizing financial affairs in a way that maximizes tax efficiency within the boundaries of the law. It may involve utilizing available deductions, exemptions, and incentives to minimize tax liabilities while maintaining compliance with tax regulations.
6. Tax Incentives
Thailand offers various tax incentives to promote investment and specific industries. The Board of Investment (BOI) provides tax holidays, reduced tax rates, and other benefits for qualifying projects in targeted sectors. Additionally, there may be regional investment incentives and specific tax breaks for activities such as research and development or export-oriented businesses.
7. Gift Tax
One certain type of PIT for which the cited source rule and/or residence rule also implement is the gift tax. In this situation, a foreigner who receives mobile property like cash, jewelry, or car, as a gift, stipend, or assistance from an ancestor, a descendant, or a spouse will be charged a 5% gift tax on the overall amount running above 20 million THB every tax year. This 5% Gift Tax shall be applied to the share exceeding 10 million THB per tax year if the moveable or mobile property is given to the foreigner as part of a formal ceremony, on customary occasions, or out of moral obligation of the person who is not in kin, an ancestor, a descendant, or a spouse.
8. Specific Business Tax
Any foreigner who sells or transfers an immovable property within five years of the date of acquisition will be charged a Specific Business Tax (“SBT”) at a rate of 3.3% (including a 10% local tax) at the time the transfer is registered at the Land Office, depending on which is greater: the appraised value or the sale price.
9. Tax on Inheritance
If the net inheritance value from each testator exceeds 100 million THB, any foreigner who is domiciled in Thailand under the Immigration Law is required to pay inheritance tax within 150 days of that date, together with the tax payment. If the recipient is an ancestor or a descendant of the testator, a rate of 5% is applied to the portion of each testator’s net inheritance value that exceeds 100 million Thai Baht (the amount received after subtracting any liabilities). When the net inheritance value exceeds 100 million THB, a rate of 10% is applied.
Other foreigners will also be subject to the aforementioned tax rates, but only if their inheritance is located, registered, withdrawn, or claimed in Thailand.
Foreign Investment Regulation in Thailand
It has never been simple for foreign individuals or firms to operate lawfully in Thailand because of the Foreign Business Act of 1999 (FBA), which is the most significant of these laws and broadly forbids foreign parties from operating in various enterprises in Thailand.
The Foreign Business Act (FBA) generally forbids and restricts foreigners from operating in more than 40 categories of businesses in Thailand unless they have successfully obtained a foreign business license from the government, which is difficult to obtain in practice, or unless they are otherwise exempt from the restrictions under the FBA.
The extensive restrictions placed on foreigners under the FBA are subject to a number of exceptions, including:
- gaining approval from the Industrial Estate Authority of Thailand (IEAT) or the Board of Investment of Thailand (BOI);7
- possessing the minimal capitalization required for certain businesses;8
- requesting protection under certain agreements between Thailand and a few nations;9 or
- by the publication of ministerial regulations, normally exempt.
Thailand’s Non-Resident Income Tax
Thailand’s Revenue Department is in charge of tax collection from foreign employees. However, non-residents who earn money while traveling in Thailand must also pay income tax on that income.
Additionally, you must remember to file taxes on any money you received while you were there if you leave the nation before the end of the tax year. Non-residents are not required to pay taxes on their foreign income, nevertheless.
Final Thoughts!
Charges are levied by governments against their people and enterprises to generate cash that is then used to fund their spending priorities. This entails funding governmental and public initiatives as well as improving the nation’s business climate to promote economic growth.
Visit Kudun & Partners right away if you require a team of knowledgeable legal advisers who have a business mindset and don’t only react to challenges but also develop solutions that are focused on your business goals. The company’s divisions for transfer pricing, corporate restructuring, and tax planning and optimization are led by Thailand’s top tax law experts, who draw on their robust legacy of more than 20 years of combined experience to assist businesses in confidently navigating Thailand’s tax system.