An Essential Tax Guide for American Expats Living or Doing Business in Thailand

Thailand has remained a top destination for Americans to build a thriving business and consider it a second home due to its diverse culture, vast natural resources and low cost of living. Additionally, US expats can enjoy financial freedom and simplicity when they decide to settle in the country. However, to benefit from Thailand's advantageous offerings and booming economy, interested Americans need to understand the country's tax system.

Who needs to pay Thai Taxes?

Not all foreigners visiting Thailand are required to pay Thai taxes. In fact, according to the Revenue Department, foreigners who are obliged to pay taxes may fall under either of the two categories: resident or non-resident.

  • Resident:

Foreigners who have resided in Thailand for more than 180 days are considered Thai residents and must therefore pay taxes to the country. The taxes that Thai residents are taxed according to their worldwide income. This means they are taxed based on their locally-earned income and foreign income.

  • Non-resident:

On the other hand, foreigners who have spent less than 180 days living in the country but are continuously reconducting business and contributing to Thailand's economy are considered non-resident. As opposed to residents, they are taxed on the income they earn within the country only.

What are the tax obligations for American expats?

Whether you fall under the resident or non-resident category, here are some of the important taxes you need to know.

  • Income Tax

Much like the United States, the income tax rate in Thailand for US Expats is progressive. It is divided into eight brackets ranging from 0% to 35%. The rate at which an individual is required to pay greatly depends on their net income.

People earning less than 150,000 baht are exempt from paying income tax. Moreover, those that earn an income between 150,000 baht and 300,000 baht are given a 5% income tax rate. The tax rate increases as the income increases. The highest income tax rate worth 35% is given to individuals earning over 4 million baht.

As stated in statutory guidelines, the Personal Income Tax Return must be filed and paid by the foreigner by March 31 the following year.

  • Corporate Tax and Withholding Tax

Foreign companies conducting business within Thailand must pay a corporate tax rate of 20% if their taxable net profit exceeds 3 million baht at the end of the accounting period.

Additionally, foreign corporate entities are subject to a withholding tax based on their assessable income. This includes dividends, interests, rentals, royalties, and service fees that have been paid to and from the country. Generally, the withholding tax Thailand has a 15% rate, but dividends paid to resident and non-resident companies and individuals have a 10% tax rate.

  • US Federal Tax Return

All US citizens and green card holders must file a US Federal Tax Return if they earn a minimum income of $10,000. Regardless of where they live or earn their income, they must pay federal income tax and file tax returns every year.

However, to reduce tax liability, US expats can take advantage of exclusions and tax deductions. For more information on the eligibility requirements, be sure to hire accounting services to guide you throughout the process.

What are the forms you need to file?

To help you navigate through Thailand’s tax system, here are the forms you need to take note of and file every year.

  • Form 1040: This is the US Income Tax Return for individuals, which must be filed when paying US Federal Taxes.

  • Form 4868: If an extension is necessary for paying and filing income tax returns, you must submit Form 4868 to grant you more time to prepare and finalize your taxes. From the original deadline of April 15, this form will allow an extension until June 15.

  • Form 8938: If you have foreign assets such as investments, government bonds, or real estate worth $200,000 or more, you need to file a Form 8938, also known as the Statement of Specified Foreign Financial Assets.

Hire Professional Accounting Services

Being in a foreign country and adjusting to a new financial situation, it's understandable to feel overwhelmed. In addition, familiarizing yourself with Thailand's tax system may take some time to get used to. So, to avoid making mistakes and incurring unwarranted penalties, the best solution is to hire accounting services to help you with all your tax requirements.

With their guidance, you can reap the benefits of Thailand’s booming economy and enjoy its diverse culture without the hassle of worrying about the technicalities.