Thailands New Offshore Income Tax Regulations

1. Thailand’s New Offshore Income Tax Regulations On 15 September 2023, the Director General of the Revenue Department issued the Revenue Departmental Order No. Por. 161/2566 (“Order”) under Section 41, paragraph 2 of the Revenue Code.1 This recent directive has introduced a new twist for Thai tax residents and their offshore investments or portfolio with its new tax guidelines on foreign sourced income. The outlined Order essentially introduces a new tax collection policy which requires individuals with derived assessable income from work or business conducted from outside of Thailand (e.g. employment, dividends, capital gains, interest, or assets brought into Thailand) to declare and pay taxes on such income, irrespective of whether such income is brought into Thailand in the calendar year of receipt of such foreign sourced income, or in any subsequent calendar years. In other words, income earned abroad or offshore and brought into Thailand in the subsequent year will no longer be exempt from Thai personal income tax, as was the previous interpretation for the past 30+ years. This new directive applies irrespective of the tax year in which the income is earned and will take effect from 1st of January 2024 onwards.

2. Tightening Tax Collection on Foreign Income The Order, serving as a new guiding framework for tax officials, supersedes the previous interpretation that a Thai tax resident is subject to income tax on foreign sourced income if it is remitted to Thailand in the same calendar year in which it was earned. Under the previous interpretation of Section 41, paragraph 2 of the Revenue Code, the taxation of foreign sourced income was subject to certain conditions. The law stipulated that foreign sourced income be factored into the calculation of personal income tax if both below criteria were met: The individual resided in Thailand for 180 days or more in any given tax year; and The foreign sourced income was brought into Thailand within the same tax year.If an individual chose to delay bringing foreign sourced income into Thailand until the subsequent year, they were exempt from personal income tax. Potential Implications to the Order It is important to note that the Order functions as a guiding framework for tax officials at the Revenue Department to interpret and put in place procedures to monitor and collect taxes. Moreover, the same Order states that any regulation, ruling, or Departmental practice conflicting with or inconsistent with this Order shall be repealed. The introduction of this fresh directive presents the potential for additional regulations to be issued in the future, which could potentially affect Thai tax residents and their offshore portfolio and income and may have implications on the timing of their ability to repatriate their foreign sourced income. As this could potentially affect existing offshore investments and related structures, we encourage our clients to take the time to consider and review existing offshore portfolio to see if there are any potential gaps, or if any additional tax planning could be done. Order from the Revenue Department Order No. Por.161/2566 re: Income Taxation under section 41, paragraph 2 of the Revenue Code. © PDLegal Asia (Thailand) Ltd., (including PDLegal LLC Advocates & Solicitors and its affiliates). Disclaimer: The information provided in this letter does not, and is not intended to, constitute legal advice; instead, all information in this letter is provided for general information purposes only. It is not intended to replace consulting the detailed provisions of applicable laws, rules, regulations, or forms and should not be relied upon as such. It is strongly recommended to seek legal advice before making any decisions based on the information available in this letter.