Thailand, one of the most vibrant economies in Southeast Asia, is a popular destination for many US expatriates. The exotic culture, rich soil, breathtaking beaches, and bustling cities are among the many factors that draw in expats from the US.
If you have found your way into such a financially growing economy, consider a few valid aspects of taxation.
Here’s what to pay particular attention to:
The Tax Residence Status
The Revenue Department is the Thailand Internal Revenue Service (IRS) version. The agency ranks expats according to the length of stay in the Asian country. An expat has a 180-day threshold to be termed a Thai resident. Before this period, the department regards you as a non-resident. Depending on your residence status, you’ll face certain tax obligations.
Income Tax in Thailand as an Expat
Generally, foreigners staying in Thailand are liable to income tax, depending on the length of their stay. Expats with foreign income can only pay income tax after surpassing the 180-day threshold. If a person leaves Thailand before completing a tax year, they must file taxes for all earnings received during their stay.
Foreign Income
In Thailand, foreign income is subject to income tax. However, the requirements are different based on your residence status. Thai natives, whether within the country or abroad, must pay income tax. However, US expats are taxed only when their income is earned in Thailand.
Eligibility for FEIE
The Foreign Earned Income Exclusion (FEIE) allows Americans living in Thailand to exclude a portion of their income from their US taxes. However, this only happens when the applicant meets specific requirements, and the amount to shield from taxation is also limited.
The applicant must demonstrate eligibility through the Bona Fide Residence or Physical Presence Test. The former requires evidence of living in Thailand for over a year, while the latter requires proof of living outside the US for at least 330 days. As such, you’ll need to present documentation like a residence card, visa, income tax statements, etc.
FATCA and FBAR Reports
While you could easily evade the IRS and Department of Justice radars, things are tighter in Thailand, a common destination for many US natives. To avoid aggressive federal scrutiny for tax fraud, tax evasion, failure to file, etc., US persons living in Thailand must abide by several tax agencies’ requirements.
The Foreign Account Tax Compliance Act (FATCA) and the Foreign Bank and Financial Accounts Reports (FBAR) enhance strict tax rules to reduce tax evasion. As such, candidates can safely file their taxes and meet the requirements for filing reports regarding foreign income and assets.
Conclusion
Taxation requirements for American expats in Thailand change frequently. Hence, depending on a few factors, you should keep updating your knowledge of IRS requirements to be in the safe zone. These include your marital status, asset value, and residence.