On 15 September 2023, the Director General of the Revenue Department issued the Revenue Departmental Order No. Por. 161/2566 re: Income Taxation under section 41, paragraph two of the Revenue Code ("New Order"). This New Order will require Thai tax resident individuals who bring offshore-sourced income (i.e., income from work or business carried on outside Thailand or income from property situated outside Thailand) into Thailand from 1 January 2024 onward to be subject to Thai personal income tax, regardless of whether such income is brought into Thailand in the same calendar year of receipt or in subsequent years.
In more detail
According to paragraph two of section 41 of the Revenue Code, Thai tax resident individuals, i.e., any person who stays in Thailand for at least 180 days in any calendar year, shall pay Thai personal income tax on the offshore-sourced income when they bring that income into Thailand. The Resolution of the Committee for the Consideration of Legal Issues and Appeals or Petitions of the Revenue Department No. 2/2528, dated 21 February 1985 ("Resolution No. 2/2528") ruled that the offshore-sourced income that was brought into Thailand after the calendar year of receipt was not subject to personal income tax.
Since then, the Revenue Department has issued numerous rulings following the interpretation under the Resolution No. 2/2528. Thai tax residents will be subject to Thai personal income tax with respect to the offshore-sourced income, only if that income is brought into Thailand in the same calendar year in which it is received.
New interpretation under the New Order
According to the New Order, if Thai tax resident individuals derive offshore-sourced income and bring offshore-sourced income into Thailand, they will have to pay Thai personal income tax, regardless of whether such income is brought into Thailand in the calendar year of receipt or in subsequent calendar years. The New Order will apply to any taxable income that is brought into Thailand from 1 January 2024 onward. Any regulation, instruction, revenue ruling or practice which is contrary to or inconsistent with this New Order shall be repealed.
It is noteworthy that if the offshore-sourced income is not a taxable income (e.g., proceeds from the sale of offshore securities or assets with no gain) or income that is exempted from Thai personal income tax under the Revenue Code, such as income from insurance, Thai tax residents will not have to pay Thai personal income tax when they bring that income into Thailand.
Although the New Order will empower the Revenue Department to tax offshore-sourced income received by Thai tax resident individuals that is brought into Thailand in any year, it may encourage them to keep their offshore-sourced income outside of Thailand indefinitely so as not to be subject to Thai personal income tax.
In addition, this New Order will bring about a significant change in the taxation principle of offshore-sourced income under section 41 of the Revenue Code, and this change may adversely affect individual taxpayers who have honestly relied on the current interpretation and practices of the Revenue Department. Therefore, it is questionable whether this change should be accomplished through the amendment of section 41 of the Revenue Code, which needs to go through the legislation process, rather than through the issuance of this New Order.