Revenue Department orders with foreign sources of income Is it worth it?

Revenue Department Order P.161/2566, dated September 15, 2566, stipulates that individual income earners who have income abroad whether from work or property located abroad If such income is brought into Thailand in any tax year, it must be included in the calculation of income tax in the year of import. It will come into effect from 1 January 2567.

This is despite the government's aim of closing legal gaps and increasing tax revenue. But there are challenges to this order on both legality and legality dimensions. and clarity of guidelines This will inevitably affect the Thai economy.

rule of law : Interpretation

Section 41, paragraph 2 of the Revenue Code It is the principle of collecting income tax from the residence of the income earner, meaning anyone who is in Thailand for more than 180 days in any tax year or calendar year. and have income due to work duties or activities conducted abroad or because of assets abroad Such income must be subject to personal income tax when such income is brought into Thailand in the same tax year.

However, Section 41, paragraph 2, does not expressly state that Those who have income from sources abroad and bring such income into Thailand in the same tax year are obliged to file taxes, but this is an interpretation of the law since this law came into effect.

Revenue Department Order No. 161/2566, dated September 15, 2566, this issue cancels the interpretation of the Revenue Department's EPO Resolution No. 2/2528, dated February 21, 2528, which used to have an interpretation guideline that If such income comes from an income source abroad It will be subject to personal income tax in Thailand when imported in the same tax year. Most people who have those funds bring in income in different tax years. This is considered tax planning (Tax Planning) that is legal and has been used as a practice by taxpayers and accepted by the Revenue Department for 38 years and is also consistent with the original explanation of tax law since this section came into effect.

I am not opposed to taxing the income of those earning income from investments abroad. But I would like the government to consider 3 issues:

1. Legality of the said Revenue Department order
2. Value and impact on the Thai economy
3. Proposal for fair and appropriate taxation of foreign income tax sources. beneficial to the country and able to compete with foreign countries Especially Singapore or Hong Kong.

Issue that 1 Legality of Revenue Order P.161/2566

The Revenue Department issued Order P.161/2566 that changed the interpretation that had been in place for more than 38 years. It is an order to interpret tax law instead of proposing to amend the law to become a Royal Decree or an Order Act. Therefore, this is an unlawful order because the issuance of such an order interprets the law against the principles of tax law interpretation. and expands the administration's interpretation of the law. (or the Revenue Department) itself

The principles of interpreting tax laws are If it can be interpreted in many ways. must be interpreted strictly And if there is any doubt, it must be interpreted in favor of the taxpayer. If and when the government thinks that the law has gaps It must be enacted as a new law. In this case, the authority to interpret the law should be the Tax Court. Not the Revenue Department itself

In this regard, I would like to quote opinions from many tax lawyers in Thailand, including explanations from tax law textbooks that we and lawyers have used as principles for interpreting the law for a long time as follows:

1. Special Professor Chaisit Trachutham, lawyer who is a former judge of the Supreme Court. He is a professor with knowledge and expertise in taxation and is a former chairman of the State Audit Commission. gave his opinion on this order that It's a command that you don't like. Because it is an incorrect interpretation of tax law, that is, the principles of tax law interpretation must be strictly interpreted. If there are many interpretations It must be interpreted in a way that favors the taxpayer as well. For example, this case can be interpreted in two ways:

• Case 1: Bringing in income in any tax year is subject to tax and
• Case 2: The interpretation of the EEC resolution since 2528 is an interpretation that is favorable to taxpayers. and taxpayers have always considered this a practice.

Therefore, the Revenue Department's order to be interpreted according to Case 1 is interpreted as requiring tax payment. Regardless of whether assessable income is brought in from abroad in any tax year, it is therefore incorrect. In addition, the said Revenue Department Order No. 161/2566 is not a law or rule. Therefore, there is no effect for taxpayers to comply. and if such order is considered an administrative order It is an administrative order that is not liked because it causes revenue officers to do things that are incorrect. Therefore, it is not a law or rule and therefore has no effect for taxpayers to comply with as well.

2. In addition, among the tax law textbooks Regardless of each teacher's explanation of the income tax code. Whether it is by Special Professor Paichit Rojanavanich and the group, which are textbooks that have been used for a long time until now. He explained that Source of income from outside Thailand

If it is to be brought to pay taxes in Thailand, two elements must be met: must be a resident of Thailand during the tax year, a total period of up to 2 days, and have assessable income from work performed abroad. or business conducted abroad or assets located abroad and bring money into Thailand By bringing assessable income arising in the tax year in which the income earner is a resident of Thailand into Thailand in the same year. But if assessable income from previous years is brought in, it is not subject to income tax according to the Revenue Code.

3. Acharn Koment Suebwiset, former professor of tax law. and is a famous legal director of the Revenue Department It has been described in the same way.

In addition, there are many tax law textbooks that give similar interpretations.

I myself have the same opinion as the professors and experts who have given the examples. In particular, the interpretation of tax laws must be interpreted strictly. And if it can be interpreted in two ways, it must be interpreted as being beneficial to the taxpayer. Moreover, from the past interpretation of the Revenue Department. and from textbooks that serve as guidelines for those who have earned personal income in the past It uses the principle that income tax must be paid in the same tax year.

Therefore, if the government sees that the interpretation of Section 41 has gaps in the interpretation of the law that allows people with income abroad to plan tax avoidance, the government should propose amending the law to make it clearer instead.

Thailand has never used the Global Income principle, and if it were to be used, it would have to be enacted as a law to collect such taxes. However, you should see what kind of taxes other countries in this region collect. Because Singapore and Hong Kong will both collect from income sources within their territory (Territorial Income) without collecting from income sources abroad (Offshore Income) plus income earned within the country. Dividends and capital gains are also not taxed.

Issue that 2 Long-term effects on the Thai economy: Is it worth it?

I divided it into matters of clarity in practice and the impact on the Thai economy as a whole as follows:

1. Clarity and guidelines for practice The said order also did not specify a clear method for whether income from foreign countries would be subject to double taxation or not. What types of income will be credited or exempt from taxes? How? Including money invested in the capital market. Or buying property abroad, what tax will be levied? Will the excess tax or capital gain be taxed or will the tax be collected only on the interest received? or profits from exchange rates This is because the money brought in may not be separated as principal or interest or profit. which if it cannot be divided like this Income must be subject to progressive tax (35%).

Unclearness in tax collection according to Section 48 as specified It will cause concern for Thai people who have income abroad. Including all foreigners who have been in Thailand for more than 180 days who do not meet the conditions of the special promotion measures that the government has just announced. who pay personal income tax not exceeding 15-17 percent of income

In the short term, there may be investment funds coming in to invest in foreign securities funds in Thailand instead of direct investment by Thai people. But those who have money abroad, High Net Worth type, probably won't bring it back to invest again.

The more unclear there is, The more it makes no one want to bring money into Thailand.

2. When the money is not imported into the country, will it have an effect on the country? This order will affect the majority of those with income abroad. Definitely not bring that money back in to spend or invest in the future. and the countries that will benefit are Singapore and Hong Kong that do not collect Global Income taxes. Investors or those with income may move their money to deposit or invest in these two countries in the future. The countries that will benefit fully are these two countries, especially Thai High Net Worth investors, who probably won't bring money back in again but will invest in these two countries instead.

Currently, there are small investors who invest abroad. (excluding real estate) numbering 55,963, valued at approximately 8,886 million US dollars. This does not include foreigners who are in Thailand and have plans to bring money into Thailand. If these people do not return the money because of such taxation, It will cause an impact on the Thai economy in the long run. Therefore, it is worth thinking about whether the income tax received will be worth the long-term impact or not.

If there are new measures It should be a measure that invites those who have income abroad. Bring the income back in to pay for expenses. Investing in Thailand is probably a better measure than unclear taxation orders. And if the government must collect taxes There must be clear and fair laws and tax payment measures.

For forms of investment abroad Generally, people who have income abroad will find ways to manage or plan their taxes. without bringing income into Thailand to spend Investing may take the form in which those who benefit most are financial institutions in Singapore and Hong Kong as follows:

• May open an account with a bank abroad. When spending money, use credit cards abroad.
• It may be made in the form of a loan from a financial institution. from legal entities using a process called Back To Back, taking the proceeds as collateral and then lending them into Thailand This causes the process of having loan debt instead of having money to invest.
• Ordinary investors may also set up companies abroad. Use various forms of funds In foreign countries with low tax rates, such as Singapore and Hong Kong, etc.

Issue that 3 Proposals: If the government collects taxes, what should it do?

If the government wishes to collect income tax abroad according to the principles of global income tax (Global Income) like the United States. Thailand will need to adjust the income tax structure to be clearer according to the type of income. According to the source of income According to the principles of residence clearly, it may be considered to amend Section 41 and related laws. This can be done by issuing an emergency decree or an act. Details of the tax rate should be specified that are not too high. The calculation methods and rates must be clearly specified. and must not impose double taxation and compare the laws of Singapore and Hong Kong.

Indonesia There used to be a measure to allow Indonesian investors with deposits in Singapore to bring their money back into Indonesia. There is a tax amnesty measure. and collect taxes at a rate that is not very high

I myself have called for restructuring and even proposed a draft of a new revenue code while a member of the National Reform Council. Using the structure of the Revenue Code of Singapore as a model. So that Thailand can compete in the region. But it was not considered.

I have an offer as follows.

1. During the period before the order comes into effect Please send it to the Tax Adjudication Committee according to Section 13 bis and Section 13 sex of the Revenue Code. To determine the legality of this order, whether it is legal or not. or have it considered by a special Council of State committee Otherwise, there will probably be taxpayers who disagree and take the case to the tax court. This will cost money and time that may not be worth it to all parties.

2. Consider the long-term effects on the Thai economy. By comparing the tax value expected to be received from the implementation of this order. Compared to the income tax that is lost when Thai people invest money in other countries instead. What should the Thai government do and consider the worthiness of such an order?

3.Meanwhile If you really want to collect taxes The government should amend the tax collection law to make it clearer, not one by one, like patching up a house, but building a new house. There should be reformation of the entire tax structure. and create clarity in paying taxes for each type of income at an appropriate rate By being able to compete with foreign countries By taking the studies of the National Reform Council and the IMF into consideration at the same time.

At this time, Thailand is calling for more investment in the country. Adjusting Thailand's tax structure to be fair and transparent is and should promote Thailand as a financial hub in the region. This order of the Revenue Department I think the taxes that will be gained are not worth the lost opportunities for Thailand at present.