Thailand: Tax overhaul looming? Taxation of foreign-sourced income


published on 28 September 2023 | reading time approx. 3 minutes


On 15 September 2023, Director-General of the Revenue Department issued Revenue Department order 161/2023 regarding “Payment of Income Tax under Section 41 Paragraph Two of the Revenue Code”. The mentioned provision deals with the taxation of income of tax residents in Thailand received abroad (foreign-sourced income).  



In general, the Thai Revenue Code states that a tax resident is only required to pay tax on foreign-sourced income (e.g., income received from employment abroad from a foreign employer, income received from property located abroad, etc.) if such income is brought into Thailand (remittance principle).  Under the current interpretation of the Thai Revenue Code, foreign sourced income was only subject to tax, if it was remitted into Thailand in the same year the tax resident has derived such income. Thus,  foreign-sourced income was not subject to Thai income tax, if the assessable income was not brought into Thailand within the same tax year the tax resident has received it. Thus, if foreign-sourced income received abroad in 2021 was brought into Thailand in 2022, it was not subject to Thai income tax. 
The aforementioned regulation now states that foreign-sourced assessable income is subject to Thai income tax when brought to Thailand regardless of the year it has been derived. Thus, foreign-sourced income received in 2024 and brought into Thailand in 2025 would now also be subject to Thai income tax. The guideline is scheduled to be enforceable from 1 January 2024 onwards. Thus, while maintaining the remittance principle, Thailand would widen the scope of taxable income significantly. 
The Director-General of the Revenue Department announced a “focus group” to “discuss” the impacts of the guidelines, also assuring that there will be no double taxation. In this regard, the Revenue Department issued a clarification on 19 September, outlining that income previously taxed abroad would not be taxed in Thailand, subject to applicable treaties on the avoidance of double taxation. For example, in the case of income received from immovable property, the tax treaty between Germany and Thailand states that such income shall be taxed in the country the property is situated in. 
It remains to be seen how the regulation will be implemented in practice after the feedback of the focus groups. Thailand seems to want to address the case that income is neither taxed abroad or in Thailand (due to the current implementation of the remittance principle in Thailand), i.e., the opposite case of double taxation. 


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