Tax rethink needed
Re: "Amendment to see overseas income taxed", (Business, Sep 26), "Tax uncertainty" (PostBag, Nov 19).
Should Thailand consider exempting its retirement/mobility programmes from the proposed tax on foreign income?
The government should carefully consider whether to exempt foreigners in the country's retirement/mobility programmes from the proposed change to the tax on foreign income, slated to commence on Jan 1, 2024.
Foreigners in these programmes are overly impacted by the change, having no permission to work in Thailand, and by design, forced to remit funds to Thailand during their stay. Such remittance is to the benefit of Thailand and is the very reason these programmes exist. In the circumstances, it seems both unfair and counterproductive to burden these foreigners with significant tax obligations. After all, other retirement/mobility hubs globally offer full tax exemption on foreign income, while others offer generous tax concessions combined with social benefits and even permanent residence.
The proposed tax change will not only discourage remittance but is likely to make a long stay in Thailand far too onerous for many. Even where a Double Tax Agreement (DTA) exists, the onus would be on the foreigner to declare the funds remitted, and produce the documents needed to satisfy tax authorities they have paid an amount of tax on the income at source, which was equal to or greater than, the tax they would have paid on the same amount of income in Thailand. Such bureaucratic burdens are exactly what foreigners are trying to avoid in their retirement or during a long stay.
Furthermore, DTAs can only aspire to provide tax equalisation. Reduction of tax payable at source by means allowances, offsets, credits, deductions, write-offs, as well as full or partial exemptions on certain types of income, is generally not accounted for by DTAs. This makes additional tax payments in Thailand a distinct possibility for many. Likewise, DTAs are of little use to those whose income is derived from countries that have a lower tax rate than Thailand. DTAs do offer some important protection, for example, the DTAs of several countries specify that pensions taxed at source are fully exempt from tax in Thailand. However, beyond this, DTAs offer very little to individual taxpayers. Many foreigners may well discover the tax change increases their total tax bill, and some may even find they would be better off returning home or relocating to one of the many other retirement/mobility hubs.
Affluent foreigners, which Thailand claims to be actively seeking to join its retirement/mobility programmes, are also likely to be negatively impacted by the change. These individuals often have complex tax profiles and are very conscious of tax planning. They would be very reluctant to relocate to Thailand if they felt the tax change exposed them to potentially costly and time-consuming interactions with the Revenue Department.
The Ministry of Finance has mentioned on several occasions that the proposed tax on foreign income is unavoidable as it is required to fulfil Thailand's obligations under the OECD international tax transparency standard. With respect, this seems to be an overstatement. One only needs to look to the many countries that have recently enacted tax codes to comply with the very same standard. All these countries now tax foreign income remitted by companies, but many have chosen to specifically exempt individual taxpayers, and for very good reason.
If Thailand is serious about wanting to promote itself as a viable retirement/mobility hub and reap the benefits, the government must give careful consideration to exempting foreigners in these programmes from the proposed tax on foreign income. Such a move is just common sense.
M P Foscolos