Tax Residency in Thailand

In Thailand, an individual or entity is considered a tax resident based on the criteria outlined in the Thai Revenue Code. According to Section 41 of the Revenue Code, an individual is deemed a tax resident if they meet any of the following conditions during the tax year:

• They reside in Thailand for an accumulated period of 180 days or more in any given tax year.
• They have an intention to reside in Thailand continuously or have ties indicating their permanent residence in the country.

For entities, tax residency is determined based on their place of incorporation or establishment. An entity incorporated or established under Thai law is considered a tax resident of Thailand.

The rationale behind these criteria is to ensure that individuals and entities contributing to the Thai economy through significant presence or ties are subject to taxation. By defining tax residency based on physical presence or substantial connections to Thailand, the legislation aims to capture income generated within the country's jurisdiction.

Thailand has entered into tax treaties with various countries, which may modify or provide exceptions to the standard criteria for tax residency. A significant change in 2024 is the new regulation regarding the taxation of foreign-earned income for tax residents. From January 1, 2024, Thai tax residents are required to pay taxes on foreign-earned income brought into Thailand, regardless of when it was earned. This includes pensions, which may be affected by this new regulation. However, if a pension is already taxed in a person's home country, they might not need to pay Thailand income tax due to double taxation agreements.

In the case of the tax treaty between Thailand and specific countries, the treaty may introduce modifications to the criteria for tax residency. Key provisions within these treaties relate to tax residency for individuals and entities and may provide exceptions to the standard criteria defined in Thailand's domestic tax laws. For example, the treaty may provide exceptions to the physical presence test or introduce tie-breaker rules to determine tax residency in cases where an individual or entity qualifies as a tax resident of both Thailand and another country. These modifications aim to provide clarity and consistency in determining tax residency for individuals and entities with connections to both countries.

The rationale behind these treaty-specific modifications or exceptions is to promote certainty, fairness, and efficiency in cross-border taxation. By aligning tax residency criteria and resolving conflicts between domestic laws, tax treaties facilitate international trade, investment, and cooperation while minimizing tax disputes and double taxation.

In summary, the criteria for tax residency in Thailand are defined by the Thai Revenue Code, primarily based on physical presence or substantial connections to the country. However, tax treaties, such as the one between Thailand and other countries, may modify or introduce exceptions to these criteria to prevent double taxation and promote cross-border investment. Understanding both domestic tax laws and international tax treaties is essential for individuals and entities engaged in cross-border activities to ensure compliance and optimize tax planning strategies.