Thai Revenue Department provides welcome clarity to newly proposed tax rules – last year, on the 15th of September 2023, the Thai Revenue Department announced new tax changes under Department Order No. P 161/2023 that are set to impact Australian Expats living in Thailand from 1 January 2024.
Under the new tax changes, Australian Expats living in Thailand are now required to begin reporting the foreign-sourced income they remit into Thailand as assessable income from 1 January 2024. You can read more about these changes in our previous blog here.
What’s New?
More recently, on the 20th of November 2023, the Thai Revenue Department released Department Order No. P162/2023 which offers further guidance on the changes to help clarify how they operate.
The new department order clarifies that only foreign-source income earned from 1 January 2024 will be covered by the new interpretation set out in P161/2023, and does not extend to foreign-source income earned prior to 1 January 2024. This amendment is established with a second paragraph added to Section 1 of P 161/2023 stating:
“The provisions of paragraph one shall not apply to assessable income arising before 1 January 2024.”
This is welcome news for Australian Expats, as any foreign-sourced income earned before 1 January 2024 that is subsequently remitted into Thailand on or after that date would not be reportable as assessable income in Thailand.
The change in interpretation effectively quarantines the income earned in prior years from being taxed in later years, should it be remitted in Thailand. It also abolishes the retrospective nature of the original legislation.
Planning Opportunities for Australian Expats
For those Australian Expats who do not plan to remain in Thailand permanently, limiting the amount of remittances into Thailand is going to be effective in reducing your overall exposure to tax in Thailand.
Naturally, for those planning on living in Thailand indefinitely, limiting your remittance may not be a long-term solution given the reliance on the income to meet living expenses.
In this instance, however, beginning by remitting income earned prior to 1 January 2024 before income earned post 1 January 2024 should shield you in the short term.
To ensure the correct taxation of foreign-sourced income remitted into Thailand, it may also be wise to begin demarcating your foreign-sourced income held outside Thailand into accounts based on when the income was earned.
For example, any foreign-sourced income earned pre 1 January 2024 should be separated (where possible) from foreign-sourced income earned post 1 January 2024.
This should simplify Thai tax reporting and mitigate the risk of income earned being taxed incorrectly.
Conclusion
Australian Expats should continue to stay informed for further updates relating to this significant change in interpretation.
There are still areas of the new legislation that need to be worked out where both pre and post-1 January 2024 income have been mixed and how this might operate at the time of remittance.
If you’re unsure about how the new rules may impact you, reach out to your tax adviser for details on how this may impact your individual financial situation.