The Thai Revenue Department is drafting a law to tax the income of individuals residing in Thailand that originates from overseas.
The draft follows the international principle of worldwide income under the residence rule, said Kulaya Tantitemit, the director-general of the department.
This principle holds that income earned by an individual, regardless of its source country, must be taxed by the country where the individual resides for a specified period.
The drafting of the law requires an amendment to Section 41 of the Revenue Code.
The amendment would stipulate that individuals residing in Thailand for 180 days or more must pay personal income tax on income earned overseas, regardless of whether that income is brought into Thailand.
Ms Kulaya said the proposed amendment would specifically target personal income tax and would not include corporate income tax or income from mutual funds investing abroad, except for private funds.
If and when it is enacted, the new law would follow a major change that took effect this year in the way income from foreign sources is treated for tax purposes in Thailand.
Current tax law calls for individuals who reside in Thailand for more than 180 days per year to pay taxes to Thailand on income earned locally and also on any income earned abroad that is brought into the country.
Previously, if an individual met the 180-day tax resident requirement and had foreign income, they paid personal income tax on that income only if it was brought into the country within the year it was earned.
This rule was revised effective from Jan 1, 2024. Tax is now payable on foreign income regardless of when it is brought into the country. To give an example, Mr A sold shares in an overseas company in 2020, realised a capital gain and banked the money in an overseas account. If he brings the proceeds from that capital gain into Thailand in 2024, he must report it as assessable income when filing a tax return.
Expats in Thailand, meanwhile, have raised questions about tax treatment of pension income from past employment when that money is brought into Thailand.
If this money is taxed in their home country and that country is one of the 61 that have agreements with Thailand to prevent double taxation, in theory there should be no problem. But debates about interpretation of the law are ongoing.
Ms Kulya said that in practice, collection of tax on foreign income will depend on international cooperation and information exchange. Thailand is already a member of the tax information exchange group spearheaded by the Organisation for Economic Co-operation and Development (OECD).
Section 41 specifies that individuals who have assessable income under Section 40 in the previous tax year from duties, work or business conducted in Thailand, or from the activities of an employer in Thailand or from assets located in Thailand, must pay taxes according to the provisions of this section, regardless of whether the income is paid within or outside the country.
Individuals residing in Thailand who have assessable income under Section 40 in the previous tax year from duties, work or business conducted abroad or from assets abroad, are required to pay income tax according to this provision when that income is brought into Thailand.
Minimum corporate tax
In addition, Ms Kulaya said the department is drafting a law to set a minimum corporate tax rate, following international agreements led by the OECD.
The principle of a global minimum tax (GMT) is to ensure that large multinational corporations pay a minimum tax rate of 15% worldwide in the countries where they operate.
If a corporation pays less than 15% in any given country, it must pay additional tax to bring the total up to 15% in the country where its parent company is headquartered.
The GMT agreement applies only to multinational companies with global revenues exceeding €750 million ($870 million) per year.
In the first 11 months of the 2024 fiscal year, the Revenue Department collected 1.963 trillion baht, exceeding its target by 0.4% or 8.44 billion baht.
The good performance was attributed to government measures to stimulate consumption, such as the easy e-Receipt programme, which increased the collection of value-added tax from domestic consumption.
Ms Kulaya said she expects that by the end of this fiscal year on Sept 30, the department will have met its target of 2.28 trillion baht.
For fiscal 2025, which begins on Oct 1, the Ministry of Finance has tasked the department with collecting a total of 2.372 trillion baht.