Tax residency in Thailand: what a European family needs to ask.

This is not tax advice, and here is why that matters

Asia Global Partners is a private office, not a firm of tax advisers, and nothing here is advice on which anyone should act. We are writing this because the same misunderstanding arrives in our office several times a season, usually from a family that has already spent seven months in the country. The purpose is to give you the vocabulary and the shape of the problem so that the conversation with your own adviser at home is efficient rather than exploratory. Every point below has exceptions, and the exceptions are where the money is.

The one hundred and eighty day line

Thailand determines individual tax residence by physical presence. A person present in Thailand for an aggregate of one hundred and eighty days or more in a tax year, which for individuals runs with the calendar year, is a Thai tax resident for that year. The days do not need to be consecutive. Visa type is irrelevant to the test: a person on repeated visa exempt entries can be tax resident and a person holding a ten year visa can fail to be. This surprises Europeans more than any other single feature of the system, because in much of Europe residence tests are built around a permanent home, a centre of vital interests or a family location as well as a day count.

The practical consequence is that the day count is a variable a family can manage, deliberately, in advance. It is also one that a family can blunder into by accident: an extended winter, a delayed return because of a school term, and a summer visit can add up without anyone tracking it. Keep a simple record of arrival and departure dates from the first year, before you think you need one. Immigration stamps and boarding passes are the evidence, and reconstructing three years of them retrospectively is genuinely painful.

What Thai tax residence does and does not mean

Becoming a Thai tax resident does not by itself change your immigration position, does not by itself end your tax residence in your home country, and does not by itself mean you owe Thai tax. It means Thailand's rules on the taxation of residents now apply to you. Thai source income, meaning income arising from work performed in Thailand or from Thai assets, is generally taxable in Thailand whether or not you are resident. Foreign source income is where the interesting question lives, and it turns on a remittance principle.

The remittance principle

Thailand has historically taxed residents on foreign source income only to the extent it is brought into Thailand, rather than on worldwide income as it arises. That is the essential structural difference from most European systems, and it is the reason people speak of Thailand as a remittance jurisdiction. The detail of how and when remitted foreign income is taxed was revised by the Revenue Department in guidance issued in recent years, with the practical effect that foreign income earned by a tax resident and brought into Thailand is assessable, and with particular treatment for the timing of the year in which income is earned and the year in which it is remitted. There has also been public discussion of moving further toward a worldwide basis.

Two things follow, and they are the only two we will state as guidance. First, the mechanics of how a family funds its life in Thailand, which account the money comes from, what it consists of, and when it moves, can matter to the outcome in a way that would be irrelevant in most European countries. That makes it worth designing before the first year rather than tidying afterwards. Second, this area has moved more than once and may move again, so anything you were told two years ago should be re-checked rather than relied upon.

Double taxation agreements, in general terms

Thailand has an extensive network of double taxation agreements, including with the United Kingdom and with most European Union member states and Switzerland. In general terms, such treaties do three things. They provide tie breaker rules for deciding which country treats you as resident when both would otherwise claim you. They allocate taxing rights over particular categories of income between the two states, and pensions, employment income, dividends, interest, royalties and immovable property are typically treated under separate articles with different outcomes. And they provide a mechanism, usually credit or exemption, to relieve the same income being taxed twice.

What a treaty does not do is make tax disappear, apply automatically without being claimed, or produce the same answer for two families with superficially similar circumstances. Treaties differ from one another in important detail, and the article that governs your particular pension or your particular business income is a matter of reading that specific treaty against your specific facts. That is precisely the work you are paying an adviser for.

Leaving a European tax net is a separate exercise

Arriving in Thailand is only half the question. Ceasing to be tax resident where you came from is its own body of law and it is generally stricter than people assume. The United Kingdom applies a statutory residence test built on days, ties and work patterns, with split year treatment in defined circumstances. Several European countries look at where your permanent home, your family and your economic interests sit rather than only at days, and some apply exit charges or extended tail rules to former residents. Sweden, Germany, France, Spain, Italy, the Netherlands and Norway all have their own particular traps and none of them resembles the others closely enough to reason by analogy.

• Have I ceased to be resident where I came from, on that country's own test, and can I evidence it?
• Am I Thai tax resident this year, and can I prove my day count?
• Which treaty applies, and what does it say about each of my income types specifically?
• How is each stream of income and each capital movement characterised in both countries?
• What does the timing and route of remittances into Thailand do to my position?
• What are the reporting and filing obligations in both countries, and by when?
• What happens to this analysis if I change my day count, sell an asset, or start working here?

How our office actually helps

We do the unglamorous half. We keep an accurate record of the family's presence in the country, we make sure the immigration plan and the intended day count are consistent rather than in quiet contradiction, we introduce Thai counsel and accountants where the family does not have them, and we insist that the home country adviser and the Thai adviser exchange positions in writing before anyone acts. Then we stand back. The most valuable thing a private office can do on tax is to make sure the right professional has the right facts early, and to refuse to guess in the meantime.

Thai rules on the taxation of foreign source income have changed in recent years and further change has been publicly discussed. Nothing here is tax advice. Verify the current position with the Thai Revenue Department and with a qualified Thai tax adviser, and settle your home country position with your own tax adviser there before you act.

This briefing is general information, not legal, tax or investment advice. Thai rules change frequently and individual cases differ. Verify current requirements with the relevant authorities, including the Immigration Bureau, the Board of Investment, the Land Department, the Department of Business Development and the Revenue Department, and take advice on your own facts before acting.