Around 20,000 Americans live in Thailand, which manages to maintain a careful balance between its rich cultural heritage and cutting-edge future. The Land of Smiles is a great place for American expats to base themselves on because of its laid-back atmosphere and tropical climate. Taxes are only one of the obligations that come with living abroad in Thailand. Knowing how other nations’ tax laws affect you while you are a US citizen living abroad is crucial. As an expat, you will need a Thailand tax guide to check your liabilities.
Here is all the tax information you require if you are a US expat in Thailand.
Residency Requirement for US Expats in Thailand
You might be able to qualify for Thai residency despite the fact that you live in the US. Knowing this is crucial since it will help you calculate how much income tax you owe and to which countries by understanding your resident status.
Thailand’s residence criteria are rather straightforward in comparison to those in some other nations. The Revenue Department of Thailand categorizes residents and non-residents into two categories that are equivalent to the IRS. Both categories may apply to US expats living abroad.
If you spent 180 days or more in Thailand during a tax year, you are a resident of the nation. Thailand views those who have only recently moved there as non-residents.
So, if you spent seven months (approximately 210 days) in Thailand in 2022, the nation will see you as a resident. However, if you spend less than three months (approximately 90 days) residing in this Asian nation in 2022, you are not a Thai resident.
How do Thailand Tax Laws Work for US Expats?
If you meet Thailand’s residency requirements, you must pay two sorts of taxes: a portion of your foreign income generated outside Thailand and income taxes to Thailand on any income produced there.
You are exempt from paying taxes to Thailand on any foreign money made during your visit. Nevertheless, you must meet the criteria to be eligible as a non-resident. However, you will have to pay taxes on any income made while you were a resident of Thailand.
If you’re an expatriate, the US further demands that you pay income taxes in both situations. Additionally, if you visited any other nations in 2022, you should check their residency laws to see if you owe taxes to those nations.
Current Income Tax Rates for US Expats in Thailand
Thailand has a progressive tax system, charging you a percentage of tax based on how much money you make annually, just like the US. This system, which varies from 0% to 35%, is based on the baht, Thailand’s national currency. As of January 31st, 2023, one baht is equivalent to around $0.030 USD.
The tax rates in Thailand in 2022 are:
To know more, check this link from Thailand Tax Guide for Foreigners
Social Security Tax Rates for US Expats in Thailand
Whether you are a resident or a non-resident, Thailand has social security taxes that you must pay if you earn money there, just like the US.
Your employer will match your contribution, adding another 5% to social security, on the first 15,000 Baht you earn in Thailand. Then, the Thai government contributes an additional 2.5%.
This implies that you might have to pay social security taxes to both the US and Thailand.
Value-Added Tax Rates for US Expats in Thailand
Value-added tax, also known as VAT, is a tax that US citizens residing abroad in Thailand may have to pay in addition to income tax and Social Security contributions.
Similar to the US sales tax, this tax is applicable to the price of several goods and services you purchase in Thailand. VAT is a nationwide tax irrespective of states or territories, in contrast to the US sales tax.
Thailand’s official VAT tax rate is 10%. But as of right now, it is 7% through September 30, 2023.
Deadline for US Expats to Pay Taxes in Thailand
You must file your Personal Income Tax (PIT) return in Thailand once a year, whether you are a resident or not. Thailand tax obligations for the previous tax year are due on March 31st.
You must additionally submit a mid-year return by September 30th of the applicable tax year if you are in the entertainment profession or earn advertiser fees.
On this day, you must file your tax returns and pay any unpaid taxes (if they were not deducted from your paycheck).
How Can US Expats file Tax Returns in Thailand?
Through the website of Thailand’s Revenue Department, you can submit your tax returns online. Additionally, this website has links to outside tax preparation businesses that can assist you in preparing your income tax return. To make sure they understand all of their tax obligations and to make sure any tax breaks and credits they may be eligible for are claimed, US expats may find it beneficial to consult with a tax service in Thailand.
Do US Expats in Thailand have to file US Taxes?
Yes. If you are still a US citizen or have a Green Card, you must submit a US tax return. It is regardless of whether you are a resident of Thailand or a non-resident who paid Thailand taxes.
The US holds a citizenship-based taxation system, rather than a residency-based system. For this reason, you must submit a US tax return and notify the same to Internal Revenue Service (IRS).
Are US Expats in Thailand Taxed Twice?
You can legally owe tax returns to Thailand and the US if you’re a US expat. However, for this, you have to qualify as a resident of Thailand or generate income here. You might be concerned about paying taxes twice on the same income in this situation. Fortunately, the 1996 US-Thailand tax treaty shields US citizens living abroad from double taxation. The IRS also provides a few more initiatives that can lower your US tax obligation.
The Foreign Tax Credit and the Foreign Earned Income Exclusion are two double-taxation schemes. These are frequently used by Americans living abroad.
Foreign Tax Credit (FTC) for US Expats in Thailand
US residents with unpaid taxes on income obtained in Thailand are eligible for the Foreign Tax Credit (FTC). US citizens living and paying taxes abroad on their foreign income are eligible for a dollar-for-dollar credit under this program. Lowering the amount of income you must pay taxes on, can help you pay less in US taxes.
To be eligible to use this tax credit, you must fulfill certain requirements. You must first pay or owe foreign taxes. Additionally, you have to satisfy the three requirements listed below in order to be eligible for the FTC. Additionally, other requirements are:
- You must pay income taxes in your present country of residence. These income taxes must be levied against you by the nation in which you now reside, either through withholding from your pay or mandating payment from independent contractors prior to the filing date.
- Taxes must be legitimate.
- There can be no additional taxes; only income taxes are allowed.
You might be eligible for the FTC if you satisfy all three of the aforementioned conditions. Therefore, you can make a claim for this credit. However, this is up to the amount of foreign taxes you have paid or owe.
Therefore, if you satisfy these criteria for the FTC in 2022 and made $65,000 in Thailand income, you could claim a tax credit of up to $9,750 utilizing the foreign tax credit.
Foreign Earned Income Exclusion (FEIE) for US Expats in Thailand
The Foreign Earned Income Exclusion is a different foreign tax deduction. This tax benefit is for US expats residing in Thailand might take into account. With the FEIE, you can effectively pay less US tax by excluding overseas income from your US tax return. The FEIE enables you to exclude up to $112,000 of foreign-earned income for the 2022 tax year.
There are prerequisites for this tax credit. If you are a US citizen residing in Thailand, you must satisfy one of the following two requirements:
Physical Presence Test
How long you’ve been outside the US is determined by this exam. If you spent 330 days or more outside the US in any 365-day period, you’ll pass this exam. For instance, you might not pass the Physical Presence Test for the 2022 tax year if you lived in Thailand in 2022 but returned to the US for a total of 40 days during that year.
Bona Fide Residence Test
This exam evaluates your foreign resident status. For this, you have to be a foreign resident of Thailand for more than one calendar year. Additionally, you must be able to present proof of your residency. It can be by presenting a residency card or visa, paying income taxes to the nation, or having family members who are also foreign residents live with you. This will make you pass this test.
If you pass either exam, you can use the FEIE to have the first $112,000 of your income for the 2022 tax year excluded from your US tax return. In other words, if you made $99,000 in income in 2022 and passed one of the FEIE tests, you would actually be able to reduce your US taxable income to $0, which would effectively result in a tax refund.
Additionally, you can apply the FTC and FEIE to other forms of income. For instance, you may use the FEIE to reduce your US tax burden if you earned $85,000 in foreign income. When it comes to passive income (like investment or rental income), you could then use the FTC. However, you cannot utilize both tax-saving strategies on the same income.
FBAR Filing Requirement for US Expats in Thailand
While the majority of the essential requirements for US citizens living in Thailand are covered above, there are a few more common tax reporting requirements that you might run across.
US citizens living abroad who have overseas bank accounts worth more than a specific amount are required to file the FBAR (Report of Foreign Bank and Financial Accounts), a financial disclosure form. You must file an FBAR if you have a foreign bank account that had $10,000 or more in it at any point during the tax year. You must additionally submit an FBAR if you had more than one international bank account with a cumulative balance of $10,000 throughout the tax year.
Are there any more Tax Requirements for US Expats in Thailand?
You can have additional US tax obligations depending on the kind of employment you do while residing abroad. For instance, if you run your own business, you might need to record it on your US tax return and pay business taxes.
The regulations governing overseas business taxes can be complicated and differ depending on whether you run your own company, operate as a freelancer, or own a controlling interest in a foreign corporation. This Thailand tax guide is surely by now able to explain to you the basics of taxation for US Expats.
When you reside abroad, managing your US taxes is more challenging. Konrad Legal CPA is here to guide you through the complete tax procedure or just have a few inquiries about your tax liability.
Contact us at officer@konradlegal.com now to get started by meeting with your Thailand Tax Guide – LIVE!
