Income Tax questions

[pablo]

I've been doing a little research (online), with regard to income taxes in Thailand.

It seems fairly clear cut, for the Thai person...earning income.

Also, for those expat's who are living in LOS, and have business and or income, via "work permits"....again, fairly clear cut. (although, there are many exemptions, allowances, etc)

My question is for expat's who derive their income from oversea's, or their (home country). Specifically, those who derive no income at all, from Thailand. ie..retiree's, pensioner's.

Is it a case of using existing "tax treatie's", when they exist? And if so, do you still have to pay some amount of income tax to Thailand?

One site stated that if you stayed in LOS for a (total) of 186 days per year, you'd be taxed. Another said the same...but only 180 (contiguous) days, per year.

Now, I've confused myself?????



Pablo

[Nicke]

I would think that people who get money from overseas dont pay any taxes at all, including the bunch of people who live here and make money from internet.

Most of them live here as "tourists".

[pablo]

[quote=Nicke;370613]I would think that people who get money from overseas dont pay any taxes at all, including the bunch of people who live here and make money from internet.

Most of them live here as "tourists".[/QUOTE]


Yeah, staying "beneath the radar", so to speak. 5555

But, the sites I've been reading, are kind'a scary. They even say, pensioner's living in Thailand will be taxed (income), on funds brought into LOS, from overseas.

But, if you're already paying taxes at home...and a "treaty" exist's, then little or no tax in LOS. (I guess)

It's probably one of those "law's" thats on the Thai books....but rarely get's looked over. (wink, wink)

Just curious, though.


Pablo

[LivinLOS]

My understanding is it works like this..

The Thai rules state that drawing money (to live / spend / etc) that wasnt earnt in the current year (tax year, calender year ?? unknown) is not in any way liable for tax.. Now this leads the really dumb issue of even if your earning money, who is to say that money you earnt this year going into the bank account is the money you move over, you can move over last years money while saving this years and repeat next year. However the insanity and badly written legal rules just stop surprising you after a while.

The second issue here is even if your working remotely or making money from overseas while in Thailand. There is no facility for sole proprietorship, or self employment, or any legal structure or framework to pay them taxes on money made. To them unless you are employed by a Thai company with a WP and its required employees and past history of tax payments (you dont get a WP until it has a tax history anymore and so catch 22 already) you cant declare income !!

Essentially for people in the position of receiving retirement income there is no tax levied and none expected.

For someone working remotely in Thailand the options are kind of punative, you can set up a company, pay company taxes, employ thais, have your dead directors, then after the company has a history you can get a WP earn your 60k per month, pay texes on that and get a long stay B visa and tax history and WP.. Almost no one does this due to the costs involved but I am lead to believe that if an American does they can qualify for an 80 something thousand deductible each year for overseas tax credits.. So IF your going to have US based tax issues you can lower your contribs that side by doing this.

I am no lawyer but thats how the system works on the ground at this time.

Personally all my life I have moved any earnings into blind offshore trusts and can draw down on those how I wish with no proof of beneficial ownership. I dont understand why everyone doesnt operate this way.

[MrDK]

LiL,

Even though I wasn't the one asking the question, thank you for the detailed explanation. I am sure it is of great value to many of us here who may consider relocation to Thailand.

US Tax code does allow for exclusion of foreign earnings (excluding interest, dividend, pensions and annuities) any US earnings may not be excluded. In other words many income sources that typically contribute to retirement will still be taxable. Moving the part of the nest egg that is not tax deferred to offshore accounts may be a smart move. Such move may also protect assets from law suits and divorce settlements.

In the US there may be a loop hole setting up a trust in an LLC, where the LLC has foreign expenses (your income). In the US an LLC is not taxed.

[LivinLOS]

My thing is I have always been either my own boss or a contract person.. So invoicing for work done to my own businesses (as consultant / advisors) or to clients direct and shifting any earnings offshore immediately means a lot more saving than just 'tax deferred'.. Basically it all becomes 'deferred'

You can then be legally be an employee of the offshore company and draw down 'income' thats enough to cover your visible living expenses or exactly match any tax bands you wish. If you want to really push the issue you can have a contract that has the company (your company but no one can find that out) rent or own your home, provide your car and give you a 'expenses' credit card.. If contractually your home and car and living costs are paid as part of your employment package your 'income' for tax purposes gets mighty small..

Of course they (the tax peeps) hate you for doing this and I havent moved countries multiple times for no reason so it all depends how close to the wind your prepared to sail. The side benefits of being a 'man of straw' and in many ways unsue-able, the asset protection side, are also all good. Even the aspect of estate planning and death duties are helped as you can arrange for inheritance to happen in a less formal nature.

[MrDK]

At the age of 59.5 you can start withdrawing from tax deferred retirement accounts. At that time they will be rolled into IRA's. I know that an IRA can exist in a trust and that a trust can exist in an LLC. I am assuming then that an IRA can exist in an LLC.

An LLC has no tax liability and technically can only exist for a limited time, however, the time restriction is easy to overcome. Since an LLC has at least one owner funds will eventually be distributed and the owner pays income tax. Since loses in an LLC cannot be deducted in anyone's tax fillings the normal requirements for showing a profit after a few years does not exist. So an LLC can exist without showing a profit. The LLC can pay the owner and the owner is liable for taxes. To the extend the owner is exempt from paying taxes IRS will not collect.

LLC's are established for either of two reasons in the US. 1. To keep profits generated by the company in the company (re-invest). 2. (most importantly) to avoid personal or corporate liability (LLC = Limited Liability Company).

The company I worked for before was an LLC owned by a larger corporation. In the event a lawsuit should be filed against the company the corporation would be excluded from liability and so would any of the officers. Only the value of the LLC can be lost.
In another scenario, I have a friend that has a $2M boat owned by an LLC. The LLC in in debt in the amount of $1.9M. Should there ever be an accident the max financial loss is limited to $100k.

[K2]

Originally Posted by LivinLOS

I dont understand why everyone doesnt operate this way.

Me neither

Good summery there mate

[MrDK]

Originally Posted by K2

Me neither
Good summery there mate

Agree too.
BTW. Opening an account in Switzerland is not always easy when you are a US tax payer. The first four banks I called flat out would not talk with me. Two of the were Danish banks and I hold a Danish passport.

It all has to do with nexus. Swiss banks cannot invest in American securities with money deposited by American tax payers. When I finally found a bank that would work with me I had to sign all kinds of documents assuring them that I would limit my investments.

[LivinLOS]

OK.. But simple methods that radically change the ballgame are to just open a company in a jurisdiction that has non disclosure of beneficial owners, shareholders and directors AND no tax liability on money made by the company outside of its home country.. Seychelles, BVI's, etc are all cheap to incorporate and annually file nil returns.

Then the company gets bank accounts held in a safe offshore location.. For any EU residents its now advisable to get outside of the states that are declaring back to the EU 'on request'.. So IoM and channel Isl are less appealing than they were. So now you have a first world bank, usually savings deposit and net banking, a corp credit card, and they are all owned by a company that it is impossible to find the owner of.

My experience was that the swiss banks present the worst deals, on interest given, on the nickel and dime charges, on the net banking (tho this was a good few years back) and I presume this was because the 'swiss banking' image attracted the custom base. What they did have that I have not seen elsewhere was numbered accounts (so not even names involved) and a supreme level of old world banking charm. Being greeted by a grey haired gent who knows your name but wont utter it, and taken through marble foyers to hidden waiting rooms and down to impressive subterranienian vaults is exactly the kind of experience the elite dirty money wants to feel. I dont have enough to need that kind of service (or costs) and am just a high street but offshore, little fish, kinda guy.

[fun2have]

thanks for LIL, i often thought that would be the way to do it.
money being held in a 3rd party country/accounts then just use "normal" transactions to free up funds in thailand.
avoiding income tax in your country of origin.

[Robaht]

Originally Posted by LivinLOS

For someone working remotely in Thailand the options are kind of punative, you can set up a company, pay company taxes, employ thais, have your dead directors, then after the company has a history you can get a WP earn your 60k per month, pay texes on that and get a long stay B visa and tax history and WP.. Almost no one does this due to the costs involved but I am lead to believe that if an American does they can qualify for an 80 something thousand deductible each year for overseas tax credits.. So IF your going to have US based tax issues you can lower your contribs that side by doing this.

I have started the paperwork on a US Amity company which will give me 99.4% control of a Thai company and work permit, etc -- but it does get expensive, especially the money to fund it (2 million baht for export company or 3 million for a consulting firm). Not all the money needs to be funded immediately with the export company, but I am not posting to discuss requirements/rules, etc. -- only to say that a) yes, not a lot of people go this route due to cost and b) if you are US citizen you get an $80k exclusion on foreign-earned income and can benefit from possibly another $20k or so from living expenses (housing costs actual less the US government housing allowance for given country equals the extra exclusion). So you can reduce your taxes but there is a cost/benefit trade off too.

But then again, I plan to work in Thailand and generate revenue here, it is not as if I am a stock trader working the markets from here. I just cannot imagine a scenario where someone who does not have a bank account in Thailand, who enters on tourist visas, who regularly draws money into the country for living expenses, who stays out of trouble, who works alone in his room and isn't trying to do any business at all in Thailand with Thai businesses, and who doesn't talk about it, is ever going to get taxed.

[LivinLOS]

Plus also you have the Amity regs which is a golden deal on ownership and lack or Thai partnership (as now made a nightmare under FBA).. For a Seppo its actually appealing IF you still pay US taxation..

Even for the tele worker as a US citizen it becomes interesting if they still have US commitments thanks to the deductibles..

[ATMwalking]

Yes, Lil is bang on for the first part.

If you are in thailand for more than half the year than you are tax resident. If your earnings are from outside of Thailand and you don't remit funds in the same calendar year, then you are excluded from thai tax. You'd then want to look at the double taxation treaty between Thailand and the country you are earning the money from and also perhaps your country of citizenship.

For the working remotely, I really don't buy into it being an issue. That assumes the foreign company paying you does not have an immediate permanent establishment, revenue, or any sort of a nexus in Thailand.

I know the work permit rules aren't crystal clear like the taxation rules. I think it is more because they are out of date. This means it could be read that remote working should have a work permit. This isn't the intent. The argument that you are required to get a thailand work permit for not working in thailand is too strange of an interpretation. Even in thailand that doesn't make sense.

Take a day trader for example. There is no interaction with Thailand. No impact. There was the case of the tsunami volunteers. With the volunteers you could argue they were taking work away from thai tradesmen. In the day trader example it just doesn't hold. You are a ghost within thailand. Sort of there but not having any real verifiable or material presence.

[LivinLOS]

Well while I personally wouldnt bother as its simply to difficult and such low risk I tend to think the opposite..

If your sat working in Thailand your working in Thailand.. I have had these discussions over and over on Thai visa and the law says it, my logic says it, so thats what I think.. Its the fact that theres no simple WP system to legalize yourself under 'self employed' structures that makes it a problem.

I also notice (and this is no dig BTW) that its most often US citizens that feel otherwise.. I tend to think this is because US peeps always pay tax at home (or are supposed to) no matter what and so they are less familiar with paying in the country they are working in. As a Brit or a mainland Euro we seem far more used to the idea of you pay taxes to the country you are residing in or working in while the money is earnt.

[ATMwalking]

Originally Posted by LivinLOS

If your sat working in Thailand your working in Thailand.. I have had these discussions over and over on Thai visa and the law says it, my logic says it, so thats what I think.. Its the fact that theres no simple WP system to legalize yourself under 'self employed' structures that makes it a problem.

Can't be that way. That means if that day trader is in singapore for a couple days, is he now working and tax liable there? What if he was trading on a plane soaring through different countries airspaces, does he owe money to each of those countries? It isn't as simple as "where your are sitting right now is where you pay taxes". No tax law works that way.

Again I think the bigger problem is thailand just hasn't caught up with the idea of working remotely. If they had then it would be excluded for obvious reasons. Also it isn't self-employment as you are in no way employed (performing tasks for compensation) in Thailand. The tax rule is clear and that then confines the work permit aspect.

It really doesn't matter anyhow. If they pull the trigger on the FBA, it is all going to unwind over here and the local Feds will be more than busy chasing the 40,000 companies that are clearly in violation. If they want to hunt down remote workers then they might as well just hang a sign at the airport saying "long stay farang under 55 and not on a pension are not welcome".

[LivinLOS]

Originally Posted by ATMwalking

Can't be that way. That means if that day trader is in singapore for a couple days, is he now working and tax liable there? What if he was trading on a plane soaring through different countries airspaces, does he owe money to each of those countries? It isn't as simple as "where your are sitting right now is where you pay taxes". No tax law works that way.

Actually it can do..

Certainly in Europe you can be liable for taxation from Day 1 even when being a non national and working for a non national company.. This was my specialized subject and how I retired.. I have been in and out of courts all over Europe on this ticket

The issues you state are very real.. Theres some people who are given blanket dispensations such as truck drivers, high specialist surgeons, touring performers etc.. Otherwise the home country employer must obtain an E101 document that keeps the employees social security payments back in the home country. Secondly even with that document in hand theres many grey area consideration on how the income taxation side of the deductions (as opposed to social security) are handled.. Often the country the employee is seconded to will define the employer as having a 'fictitious permanent establishment' incountry and assess income taxation from Day 1 again.

Its a legal minefield but in europe certainly being seconded to a second member state 'usually' incurrs payments to the member state that the employee is physically working in under the OECD model conventions.

Thats also even for an employee of a non national country being paid by that company for short term work done in a seconded member state. For self employed persons without a established home country operation (defined as for an employer as having active current employees in the home member state concurrently) they simply wont have it in many industries and many member states (my field was construction and Benelux and Germany mostly) you simply cant get a (foriegn) man onto a Dutch or German building site under self employment for 1 day, he owes his contribs in the local market he works in. Otherwise 100's of men come there, work for the high social cost rates and then leave without ever making social cost payments and dont declare on thier return hom, this is a milti million / billion Euro scam that happens non stop between high social costs member states and migrant workers.

Again I think the bigger problem is thailand just hasn't caught up with the idea of working remotely. If they had then it would be excluded for obvious reasons. Also it isn't self-employment as you are in no way employed (performing tasks for compensation) in Thailand. The tax rule is clear and that then confines the work permit aspect.

Again here I disagree.. What would you call it if a person is a one man business / works for themselves and employs no one then ?? Thats classic self employment.

I do agree that Thailand would be well advised to wake up, create a legal system and collect taxation on it.. the trade off of allowing a 1 year visa for the income tax raised seems a no brainier to me, especially as 1 year visa's are attainable by other methods. All they are doing is losing revenue and preventing startups.

It really doesn't matter anyhow. If they pull the trigger on the FBA, it is all going to unwind over here and the local Feds will be more than busy chasing the 40,000 companies that are clearly in violation. If they want to hunt down remote workers then they might as well just hang a sign at the airport saying "long stay farang under 55 and not on a pension are not welcome".

Perhaps true but also its the loss of revenue I see as a loss for Thailand instead of the extra hurdles for remote workers.. Cheating the system is hardly rocket science but I think improving it for alls benefit makes more sense.