Thailand, while a favorite vacation spot for many Germans, also holds allure for expatriates.
Tax amendments in Thailand
Thai income tax rates, although not exceedingly low, are unable to contest with rates in conventional tax havens like Dubai. These rates fluctuate between 0 to 35 percent, with the peak tax rate of 35 percent applied to yearly incomes surpassing 5 million Baht (approximately 127,000 Euro at present).
For emigrants to Thailand, however, another point has traditionally been particularly attractive: Thailand does not tax income earned abroad if it does not flow into Thailand. Prior to January 1, 2024, foreign income was only taxed in Thailand if it was transferred within the same tax year it was earned. As such, by merely postponing the transfer to Thailand, taxation could be effortlessly evaded.
Taxation of foreign income in Thailand since early 2024
This loophole has been closed in the beginning of 2024. As per the Thai Ministry of Finance’s Ordinance No. 161/2566, dated September 15, 2023, all foreign income brought into Thailand is now subject to Thai income tax. This holds true regardless of whether the income is transferred to Thailand within the same calendar year it was earned.
In fact, it is anticipated that the Thai tax authorities will now examine more meticulously. The authorities possess the authority to cross-verify income declarations and foreign expatriates’ bank statements submitted to immigration authorities for visa extensions or renewals, in order to detect any irregularities.
Optimizing tax on foreign income in Thailand
This signifies that expatriates to Thailand should prudently contemplate which income they transfer to Thailand. For salary payments that, in accordance with the Double Taxation Agreement (DTA) between Thailand and Germany, are solely taxable in Thailand, it might be beneficial to transfer them considering the lower tax rates (as mentioned above).
Generally, it would be prudent to ensure that income is subject to moderate taxation in Germany (for instance, in an asset management company or a family foundation), and then only make distributions (profit distributions or foundation distributions) to Thailand as required. Such distributions usually attract a source tax of 25 percent in Germany. However, under the DTA with Thailand, this can be reduced to a more appealing 15 to 20 percent. Under the DTA, no additional taxation occurs in Thailand.
We are available to assist you with your tax inquiries if you’re considering a move abroad.
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Double Taxation Agreements with Germany
