Navigating New Tax Rules to Save on Foreign Income Tax


According to the Revenue Department’s directives ref. Por. 161/2566 dated September 15, 2023, and ref. Por. 162/2566 dated November 20, 2023, guidelines have been established for officers to advise individual taxpayers with income from abroad. Under the Resident Rule, individuals living in Thailand for more than 180 days in a year and earning income from abroad will be affected by these guidelines starting January 1, 2024.* From this date, individuals residing in Thailand and earning income from abroad must include this income in their personal income tax calculations at a progressive tax rate (5% - 35%). This new law has raised concerns among investors holding foreign investments.

In this article, the SCB Wealth Planning and Family Office offers the following offshore investment advice:


  1. Invest in Funds Registered Under Thai Law That Invest in Foreign Assets:  This type of investment is considered domestic. Profits and capital gains are tax-exempt, while dividends are subject to a 10% withholding tax (Final Tax), which does not need to be included in the personal income tax return. Taxpayers will not be entitled to a tax credit or refund for this dividend income.
  2. Invest in Depositary Receipts (DRs) or Fractional Depositary Receipts (DRx): This option allows investment in foreign stocks or units through Thai platforms like InnovestX. It is considered a domestic investment, and the personal tax burden will be the same as in No. 1.
  3. Change the Investment Format from an Individual to a Legal Entity Registered Abroad: This option may be complex and requires a clear understanding of international taxes.
  4. Change the Investment Format from an Individual to a Legal Entity Registered in Thailand: Setting up a company to invest abroad results in a corporate income tax burden of 20% of net profit, which is lower than the highest individual tax rate of 35%.


 

 

Legal Entity

Individual

Tax Rate

  • Corporate income tax at 20% of net profit.
  • Dividends paid to individual shareholders are subject to a 10% withholding tax.

The effective tax rate is 28%. For example, if Company A has a net profit of 100 baht, it pays 20 baht in corporate income tax, leaving 80 baht. If this 80 baht is paid as dividends, 8 baht is withheld (10% of 80 baht). The total tax paid is 28 baht, or 28%.

Progressive personal income tax (5% - 35%) based on net income, with a maximum rate of 35%.

Deduction of Expenses Related to Investment

Can deduct expenses related to business operations.

Expense deductions depend on the type of income; some income, like interest and dividends, cannot be deducted.

Losses from Investment

Losses from selling shares can be deducted when calculating net profit for corporate income tax.

Investment losses cannot be deducted.



Investing abroad through a legal entity generally results in a lower tax burden compared to individual investments. Legal entities can also deduct expenses for taxes. Therefore, investing through a corporate structure is another viable option for investors interested in international opportunities. However, this approach involves higher management costs, such as accounting, audit, and legal fees, and requires compliance with annual legal obligations like shareholder meetings and financial statement submissions. This method is suitable for significant foreign investments. For smaller investments, individual investment as described in Nos. 1 and 2 may be more appropriate.
SCB and InnovestX offer a variety of funds and products to suit different investment needs. For more information, contact your Relationship Manager or the SCB Call Center at 02-777-7777.


*For more information, please read the article “Update on the Latest Foreign Income Tax Before Planning to Bring Money Back to Thailand.” ”

SCB PRIVATE BANKING customers interested in family asset management to pass on wealth can contact the Wealth Planning and Family Office Division of Siam Commercial Bank at familyofficeteam@scb.co.thor consult their Relationship Managers.

 

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