Whether you are planning to live in Thailand or temporarily stay in the country as a digital nomad or remote worker, it is important to understand Thailand’s income tax system so that you do not get into trouble or get caught by surprise during your stay.
As a continuation of our previous post on visa and tax, we will further examine if foreigners need to pay personal income tax, and if so how much?
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Do you need to pay for income tax when you work remotely in Thailand?
If you are a foreigner working in Thailand under a work permit, you are likely to have your tax ID already. This means you have to pay personal income tax (this is part of your work permit process). However, if you are a digital nomad or simply working remotely in Thailand, this is more complicated.
First, the revenue department would categorize everyone into resident and non-resident.
Residents are everyone in Thailand who spend a total of 180 days in Thailand within 1 calendar year. For example, you are a resident if you spent January to March in Thailand, left then came back to stay from September to December. On the other hand, non-residents are everyone who spends less than 180 days in Thailand within 1 calendar year.
The law requires residents to pay personal income tax for income they earn in Thailand AND a portion of income from foreign sources they bring into Thailand. Whereas, non-residents only need to pay tax for income that they earned in Thailand.
In summary, digital nomads or remote workers, who spend less than 6 months in Thailand and work for employers overseas, will not need to pay tax. If you are looking to generate income from sources in Thailand, this may raise concerns on whether you have the necessary working permit.
So, how much is income tax in Thailand?
Unless you are planning to take up a full-time position in Thailand, foreigners who are only paying for a portion of income brought into Thailand are likely going to pay less than 10% of that income as a tax.
Like many other countries, the formula to calculate taxable income is assessable income – deductions – allowance.
Thailand follows a progressive tax rate for personal income, which ranges from 5 to 35% of taxable income (each bracket increases by 5%).
In case you are not familiar with progressive tax calculation, we will give you an example with some numbers. Let’s say a person has THB 750,000 (~USD 24,000) of taxable income. This person would pay (150,000 * 0%) + (150,000 * 5%) + (200,000 * 10%) + (250,000 * 15%) = THB 65,000 (~USD 2,000).
Certain type of capital gain would also be counted as part of assessable income, hence it is also a good idea to understand how capital gains tax work in Thailand.
Thailand income tax expense deduction and allowances
Thailand allows an expense deduction of 50% of total expenditure, capping at THB 100,000 for YA2020. You can claim these expenses using tax invoices from registered merchants. There is a limit of income deduction of 40%, but the government also capped this at THB 60,000.
For allowances, the common ones that apply to most people are:
- Personal allowance: THB 30,000
- Spouse allowance: THB 30,000
- Child allowance: THB 15,000 each, up to 3 children
- Child education allowance: THB 2,000 for each child
Other allowances that you can consider:
- Life insurance premium: actual premium paid capped at THB 100,000
- Long term equity fund: actual investment amount capped at less than 15% of salary or THB 500,000
- Mortgage interest: actual amount paid but capped at THB 100,000
There are tax calculators which would also help to take into account these various allowances – one example is this one from UOB. There are many tools online that can help you to understand how much income tax in Thailand that you need to pay.
New government initiatives in 2022
The Thai government has announced a plan to waive personal income tax for a few groups of foreigners in Thailand in February 2022. While exact details are not out yet, the government has an intention to waive personal income tax for professionals who are looking to work remotely in Thailand. However, it is very likely that the waiver will only apply to income earned from work outside of the country.
So, do digital nomads need to worry about paying tax in Thailand?
If you want to stay in Thailand for an extended period of time (longer than 6 months) whether on an employment contract, remote working or as a digital nomad, you should think about the tax implications.
Fortunately, foreigners may only be assessed on a portion of the income they bring into Thailand. With progressive tax and various deductions and allowances, you are likely going to be paying less than 10%.
Go check out other posts that we have on Thailand: