DFDL Thailand Legal Alert: Thai Revenue Department Issues Game Changing Personal Income Tax Instruction External

On September 15, 2023, the Thai Revenue Department issued a bomb-shell departmental instruction (No.161/2566) that fundamentally changes a long-standing and well recognized rule of personal income tax regarding Thai taxation of offshore income.

Previously, offshore (i.e., non-Thai) income earned by a Thai resident taxpayer was not taxable unless remitted into Thailand in the same calendar year it was earned. This rule has been relied upon for many years and is considered a standard rule of practice for both Thai nationals and foreigners, who happen to be residents of Thailand for tax purposes (i.e., individuals residing in Thailand for 180 days or more in any calendar year).

This new instruction significantly alters the previous approach and will have significant implications for not just newly earned foreign source income but previously earned income maintained offshore. The new position is that any foreign (i.e., non-Thai) source income earned outside Thailand will be subject to Thai personal income tax regardless of when it is remitted into Thailand. This changes what was a permanent exemption from taxation on such income into a mere deferred tax liability, to be paid in ANY year the income is eventually repatriated.

In addition to surprising everyone with this change, the Revenue Department has also taken an aggressive position by making the effective date January 1, 2024. As it stands now, any and all offshore income earned this year or hereafter will be subject to taxation upon repatriation, however, it appears that any income earned prior to January 1, 2023, but repatriated before the current year end should not be subject to this new rule and not subject to taxation.

Individuals having accumulated offshore income earned prior to January 1, 2023 should give considerable thought as to whether repatriation prior to December 31, 2023 may be warranted.