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While Thailand is the home to many diverse cultures, its inhabitants enjoy a simplicity found few places in the world. Perhaps it’s this freedom that becomes glue to the shoes of US expats who settle there. But is it possible for expats to enjoy the same simplicity when it comes to expat taxes in Thailand? Review these 8 facts to make filing taxes easier while living in Thailand.
Once you have lived in Thailand for more than 180 days in a calendar year you are considered a resident. Prior to that 180 days you are considered a non-resident.
Thailand income tax applies to worldwide income, just as the US does. But unlike the US, only residents are taxed on their worldwide income while non-residents are taxed only on the income earned in Thailand.
Thailand tax rates vary depending on your personal income. Rates are progressive and range from 0% for those who earn less than 150,000 baht to 35% for those who earn more than 5,000,001 baht.
The currency used in Thailand is the baht, and its abbreviation is THB. The Thai personal income tax rates are shown here in baht.
Income Tax Rates in Thailand
Taxes in Thailand revolve around a calendar year and your Personal Income Tax return (“PIT”) must be filed by March 31 for the prior year. If you happen to be a public entertainer or earn advertising fees, you are required to file a ‘mid-year’ return by September 30th.
Thailand uses a social insurance system where employees contribute 5% on the first 15,000 baht of income, and employers pay a matching 5%. The Thai government adds a 2.5% contribution to the insurance system.
Thailand and the US do not have a social security agreement with each other. This means some US expats will be required to pay into both social security systems on some Thai earnings.
You will pay a 7% value added tax (VAT) on certain items you purchase in Thailand. There is also a stamp duty on signed documents such as leases.
If you are a US citizen or resident, then you will still be required to file US taxes each year. If you have assets in foreign bank accounts, then you may be required to report those as well. Specifically, anyone with $10,000 or more in a foreign bank or financial institution during a calendar year will be required to file the FBAR.
The US and Thailand entered into a tax treaty in 1996, and it remains in effect. One purpose of this treaty is to remedy double taxation, which should relieve some of your expat taxes. The tax treaty provisions that cover items on your tax return should be properly applied. You may need to consult with a tax advisor to make sure that happens.
Fortunately, there are several ways to lower or eliminate your US tax obligations. The first is the Foreign Earned Income Exclusion, which allows you to exclude a certain amount from your foreign earned income on your US taxes in Thailand.
The second is the Foreign Tax Credit, which allows you to offset the taxes you paid in your host country with your US expat taxes dollar for dollar. Like most US tax credits, the Foreign Tax Credit can shrink the US expat taxes you owe. One dollar of credit reduces US tax by one dollar. Your Foreign Tax Credit will be limited to only those Thai taxes that are allocated to your Thai earnings subject to US tax. That means that any Thai tax on the Thai earnings you exclude with the FEIE and the Foreign Housing Exclusion will not be included in the calculation of your Foreign Tax Credit.
And third is the Foreign Housing Exclusion, which allows an additional exclusion from income on US expat taxes for certain amounts paid for household expenses that occur as a consequence of living abroad.
If you have any questions about filing your US expat taxes or Thailand tax, please contact us.
Download our free guide on how to save on your US taxes for expats! Or, our expert CPA’s and IRS Enrolled Agents can answer any specific questions you have about your expat taxes in Thailand as an expat. When you file with us, our expat tax experts will investigate every possible tax credit and deduction to maximize your savings. Get started with your US expat tax return today!