The Revenue Department has ruled that a person who resides in Thailand for up to 180 days a year and earns overseas income from work or assets will be subject to personal income tax, according to Section 48 of the Revenue Code.
According to legal experts, the policy appears to have three specific targets: residents trading in foreign stock markets through foreign brokerages, cryptocurrency traders, and Thais who have been exploiting a loophole that allowed them to bring foreign earnings into the country tax-free after keeping it in an offshore account for more than a calendar year.
"The principle of tax is that you must pay tax on income you earn from abroad no matter how you earn it and regardless of the tax year in which the money is earned," said a Finance Ministry source who requested anonymity.
The previous rule allowed residents with a foreign income to be taxed only if the money is remitted into Thailand in the same year in which it was earned. The tighter measure is meant to close the loophole of people deferring transfer of their overseas income to a different year.
The new rule, which will take effect on Jan 1, 2024, will enable authorities to tax the foreign income of individuals in 2025. However, the new regulation also brings up questions about whether this is the most effective way to generate revenue for Thailand. There is concern among experts that the new policy may alienate private bankers and financial institutions, who might consider the regulatory environment in Thailand to be too uncertain or onerous.
From a socio-economic standpoint, the long-term effects of this policy might exacerbate existing income inequality in the country. The wealthiest individuals, equipped with resources and private banking services, could potentially evade these reporting requirements, exposing middle-class traders and those without the financial muscle and accountants to work around the system.
In summary, while the Revenue Department's new policy aims to increase revenue by closing existing tax loopholes, the potential fallout could be significant. The guidelines complicate the conduct of businesses, create barriers to effective enforcement, and raise questions about their ultimate impact on the economic and social fabric of Thailand.