How to Buy Business in Thailand?

 

Although buying an existing firm is a common possibility for entrepreneurs, starting a new business in Thailand is frequently the first option. If you buy a business in Thailand, it has several benefits because it will be fully incorporated and prepared to launch or continue operations. Also, obtaining a work permit in Thailand and immigration benefits can go more smoothly than starting a new company.

In this article, we’ll look at some of the important factors to take into account while deciding how to buy a business in Thailand.

• If you don’t have much time to read through this article, let us help you with some precautions that you must take when you buy a business in Thailand – 
• Do the right due diligence before buying an existing business.
• Check that you buy the business formally through business purchase agreements or share purchase agreements.
• After you are done with the purchase, you have to complete the following tasks mandatorily:
  • Finalize and register the share transfer, 
  • Change the directors, and,
  • Make changes to the company’s structure, such as new articles of incorporation and a shareholders’ agreement.

Now, if you want to know more, continue reading our knowledge-rich article on how to buy a business in Thailand!

Before going deep into the process of buying a business in Thailand, let us first update you on the advantages and disadvantages of doing so. This will help you make the right decision!

Advantages of Buying a Business in Thailand

• The initial work necessary to launch the business will already have been finished.
• It may be easier to secure money as the business will have an established record.
• For the good or service, a market will already be established.
• There may already be a customer base, a steady income, and a solid brand reputation.
• You should be able to use the experience of current personnel.
• Many of the issues will have already been identified and fixed.

Disadvantages of Buying Business in Thailand

• It frequently takes a substantial capital commitment to buy an existing firm.
• To help with cash flow, many months’ worth of working capital will be needed.
• You might need to uphold or renegotiate any unfulfilled agreements the last owner made.

What Should You Consider When You Buy a Business in Thailand?

When you buy a business in Thailand, DO consider the following aspects:

1. Due Diligence
2. Contract Drafting and Review, and,
3. Company Restructuring and Registration

Due Diligence to Buy Business in Thailand

Similar to buying real estate in Thailand, doing your homework is crucial when purchasing an existing business. Due diligence gives prospective buyers the chance to check important information about the target company.

The areas that must fall under your scanner of due diligence are as follows:

• The company registration details, 
• Current shareholder list, 
• Current director(s), 
• Business balance sheets and bank statements,
• Employment contracts and all other contracts signed/entered into,
• Inquire about any potential disputes the company may be involved in.

A proper due diligence process must include a background check to see if it has any tax debts or financial legal actions, such as bankruptcy.

Contract Drafting and Review

The next step is to create and prepare the business purchase agreement/share transfer agreement and the contract outlining any other terms and conditions for the sale of the company if the due diligence process proceeds smoothly with the approval of the transaction.

Content of Business Purchase Agreement

You must follow a legal process when buying a business, that starts with a Business Purchase Agreement. With a business purchase agreement, you can buy a firm with certainty. If you are purchasing shares of the company that owns the firm, this sort of transaction must hold a Share Purchase Agreement (SPA).

Such an agreement requires the buyer to acquire the business in accordance with the terms and circumstances of the agreement. A SPA frequently includes the following terms:

Term 1: Party Identification

The mention of this clause is at the start of the business purchase agreement. It includes the full names and addresses of the buyer and vendor.

Term 2: Description of the Business

This is a description of the business’s operations along with other legal representations and warranties. This description should contain an attestation confirming the seller’s legitimacy as the seller of record for the sale.

Term 3: Financial Details

This includes information about the purchase price, any deposits the seller may have requested, and the time and date of the transfer.

Term 4: Details of the Sale

It is crucial to specify the type of sale, along with the inclusive and exclusive assets in the deal. This clause will also contain a section on property transfers that describes the state and cost of assets including machinery, tools, and property.

Term 5: Covenants

This will include information about the seller’s closing-related obligations, such as taxes, debts, fees, benefit transfers, and salary. You can also mention buyer and seller contracts in this section, as well as safety measures like a non-compete clause.

Term 6: Transfers and Obligations

You and the seller must understand who is in charge of what, including the seller’s position, new employee training, and customer obligations. You can specify that the finalization of a bill of sale is mandatory to complete a transaction.

Term 7: Closing

The business purchase agreement must mention the logistics, the closing date, and the time in detail. It also carries out title transfers and stipulates the payable amount of money at closing.

Term 8: Warranties

The premises and equipment must be under warranty in compliance with all applicable laws and regulations as of the closing date. You should also ensure that payment of all taxes is up to date. This tactic guarantees that both the buyer and the seller engage in a transaction in good faith.

Company Restructuring and Registration

It will be necessary to make some structural adjustments to an existing business when buying it in order to give the buyer full ownership.

The “transfer of shares” and the “replacement of the company directors” are the two most important necessities in this process.

How Will You Transfer Shares When You Buy Business in Thailand?

This process comprises the following steps:

Step 1: Execution of Share Transfer Instrument

The transferee and the transferor must sign a “Share Transfer Instrument” in order for the process to begin. The Share Transfer Document must have the names of the transferor and transferee, the number of shares, and the share numbers. Both parties must sign the document with a minimum of one witness.

Step 2: Update Shareholders Register

After the successful deal, modification of the company’s shareholders registry is mandatory. Additionally, the purchaser and seller must report these changes to the Ministry of Commerce of Thailand. Without completing this step, the share transfer holds an invalid status.

Step 3: Issue New Share Certificate

The Thai Limited Company must issue a share certificate to the transferee.

Step 4: Pay the Stamp Duty

In Thailand, payment of stamp duty is mandatory before the transfer of shares. Charges for Stamp Duty is 1 Baht for every 1,000 Baht, or fraction thereof, of the paid-up value of shares.

Replacement of Company Directors

One can complete this process in the following steps:

Step 1: Conduct a Board of Directors Meeting

In order to pass the resolution about the change of the company’s director and/or the authority of the director, the Board of Directors often needs to call for a shareholders’ meeting.

There won’t need to be a resolution from the shareholders’ meeting if the company’s articles of association allow the board of directors to alter the director’s authority.

Step 2: Organize Shareholders’ Meeting

Businesses must provide shareholders with enough notice before the meeting. Also, the notice must be printed no later than seven days before the meeting date in a local newspaper.

Also, stockholders whose names are on the shareholder registry must get a notice through registered mail. If the registered mail was delivered to the shareholder at the given address, it will be presumed to have been received. Seven days before the meeting, this must be completed.

Only if one-fourth of the company’s shareholders are present can the shareholders’ meeting be held.

Unless otherwise specified in the notice to call for the shareholders’ meeting, the shareholders must receive the notice at least seven days prior to the meeting.

Step 3: Obtain Director’s Signature

The required forms will be filled out once the Board of Directors meeting or the shareholders have authorized the change of directors. The director must sign the documents with consent from other authorized directors of the company. Please take note that the director must physically be present in Thailand in order to sign the necessary paperwork. It is mandatory to complete this formality within 14 days from the date of resignation of the previous directors.

Step 4: Register the Change to the Department of Business Development

The forms must be submitted to the Department of Business Development once they have been filled out and signed. The business must modify its company affidavit to reflect the change in staff within 24 hours of the filing.

After 14 days of the transition, the authorized “former” director must fill out the application forms at the Department of Business Development for changing the director and/or the authority of the director, along with copies of the ID cards and passports of the new and old directors (signed).

The Process of Company Restructuring is as follows:

To register the company’s restructuring, it is mandatory to finish or prepare the following procedures, legal paperwork, and official forms:

• Performing the share transfer,
• Registration of a new shareholder list, 
• Changing the company directors,
• Registration of the new board of directors, 
• Drafting a company resolution to authorize the new owners to access the corporate bank account, 
• Any amendments to the company structuring, such as new articles of associations and shareholders’ agreements.

Now, if you have read up to here and are really about to initiate your process to buy a business in Thailand, let us help you with this. With more than a decade of experience in helping investors successfully register their ventures in Thailand, our expertise is going to make your task easier. Email us your queries at officer@konradlegal.com.

Cost of Thailand Long-term Resident Visa 2023

 

Sometimes it is for business, whereas, sometimes for a peaceful life after retirement – these are the primary reasons why many foreigners approach us for Thailand Long-term Resident Visa. The volume of applications for long-term visas increased greatly after the COVID restrictions got lifted up last year. A few reasons why foreigners prefer a long-term visa in Thailand are as follows:

1. A visa with 10-year validity that you can extend further
2. The requirement to report to immigration once a year instead of every 90 days
3. Avail fast track service at international airports in Thailand
4. Obtain multiple re-entry permit
5. Permission to work in Thailand on a digital work permit
6. Personal income tax rate reduction to 17% for highly skilled professionals
7. Exemption from the four Thais to one foreigner employment requirement ratio

Apart from these reasons, we come across many other requirements that the Thai long-term visa addresses effectively for foreigners.

If you know the details already, to know the Cost of Obtaining a Thailand Long-term Resident Visa straight – Click Here!

The Governor of the Tourism Authority of Thailand (TAT), Mr. Yuthasak Supasorn made a great announcement recently, which is as follows:

The new long-term resident visa is aimed at enhancing Thailand’s attractiveness to ‘high-potential’ foreigners as a regional hub to live and do business. Also, it will embrace a crucial role to promote Thailand as a ‘Remote Worker Friendly’ destination and help us tap this targeted segment. It is expected to attract foreign talent and expertise that can contribute to domestic spending and support economic growth. With the long-term resident visa, the Thai government wants to bring one million wealthy and talented foreigners to Thailand in the next five years.

Source: TATNews, Thailand

Doesn’t this announcement makes the long-term visa for remote workers and digital nomads a great option to immigrate to Thailand? 

So, if you  are a businessperson, retire, remote worker, digital nomad, or investor, you can apply for a Thai long-term resident visa if you hold the following qualifications:

Wealthy Citizens, Investors, or Business Persons

• Hold total assets of not less than US$1 million
• Must have a personal income of not less than US$80,000 per year in the past two years
• Potential to invest in Thailand to the value of not less than US$500,000

Retirees

• Must be at least 50 years old 
• Have investment worth US$250,000 in Thai Government bonds
• Have a minimum annual income of at least US$40,000 or a pension of at least US$80,000

Remote Workers or Digital Nomads

• Have a personal income of at least US$80,000 per year in the past two years
• Hold a work experience of not less than five years
• Work for a legally registered company that has an income of at least US$150 million

Skilled Workers

• Have a personal income of not less than US$80,000 per year
• Hold the necessary skills to address the requirements of the Thai target industries
• Have a minimum of 5 years of work experience in the same domain

Along with the above, applicants have to satisfy any of the following 3 conditions:

• Subscribe for health insurance with coverage worth US$50,000 for at least the first 10 months of their stay in Thailand; or,
• Have a social security certificate covering medical expenses; or,
• Make a cash deposit of at least US$100,000 in a domestic or foreign bank account for the 12 months preceding the visa application.

Now if you fall into any of these categories and meet the eligibility criteria, then you must know about the cost of a Thailand long-term Resident Visa. When we talk about the cost, there is good news for all applicants.

A new long-term resident visa with price revision was declared by the Thai government in May 2022. Foreigners with LTR visas are only partially subject to income tax while they are in Thailand or if they choose to work there. The cost of a 10-year long-term resident visa will be reduced by half, from 100,000 baht to 50,000 baht, according to a statement from the Thai Cabinet. By doing this, the kingdom hopes to entice “high potential” foreigners to live there.

High potential, refers to the potential to invest or the potential to work and contribute to the growth of the Thai economy. Therefore, if you have the funds, skills, or mindset of adding some positive values to the economic growth and development of the Thai Economy, you can go for a long-term visa in Thailand. 
For any and all types of assistance in the process of issuance of a Thailand Long-term Resident Visa, feel free to contact us at officer@konradlegal.com. 

Tax Benefits in Thailand for Startups

 

Tax liabilities can take a different disguise altogether if you are not knowing the regulatory norms. Even if you pay on time, non-adherence can lead to some sort of fine or penalty, or litigation. Similarly, there are a few obligatory aspects that can help you save taxes. In this article, we will explain to you the tax benefits in Thailand for Startups and CVCs. But please note that Tax Regulations in Thailand are very stringent and you must hire reliable Thai tax firms to manage everything smoothly.

Not only startups but there are also provisions of tax exemption for investors on their funding to startups in Thailand. Any person or organization who directly or indirectly invests in Thai startups in form of Venture Capital (VC), Corporate Venture Capital (CVC), or Private Equity Trusts, all are eligible for tax benefits in Thailand. These exemptions hold approval vide a draft Royal Decree of the Thai Revenue Code. This Draft Royal Decree seeks to repeal Royal Decrees No. 597 (B.E. 2559) and No. 636 (B.E. 2560), which prohibit capital gains tax on investments in startups.

The Draft Royal Decree in the Government Gazette is applicable until June 30th, 2032 for all startups and investors. The government expects that these tax advantages will make it easier for Thai startups to attract more funding. Henceforth, this will result in a faster expansion of Thailand’s GDP and a rise in employment.

Let’s take a quick glance through the norms of eligibility for tax benefits in Thailand for startups and investors.

Eligible Startups

A startup must engage in the targeted activities of the “Target Industries”. This classification holds the endorsement of pertinent government agencies. The Committee on Policy for National Competitive Enhancement for Targeted Industries mandates this categorization. Note that, the startup business must rely on technology as the foundation for its production process and services. Additionally, it must be in accordance with rules established by the Director-General of the Revenue Department. The National Science and Technology Development Agency (NSTDA) and the National Innovation Agency (NIA) are the government entities in charge of issuing the certification of the target activities.

Eligible Target Investors for Tax Benefits in Thailand

The Draft Royal Decree requires that all target investors qualifying for income tax exemptions must hold shares of the startup, CVC fund, or PE Trust for at least 24 months prior to the transfer of shares. Additionally, they should refrain from exercising their rights under the earlier Royal Decrees No. 597 (B.E. 2559) and No. 636. (B.E. 2560).

• Either abroad or in Thailand, an investor can register a CVC fund or PE Trust. On the final day of each month, to comply with Thai legislation, the CVC fund or PE Trust must have paid-up capital.
• Additionally, they have to file Accounts with the Securities and Exchange Commission for a financial period of THB 20 million or more.
• Individuals or corporate entities that solely participate in Thai CVC funds and Thai PE Trusts must be shareholders of the CVC fund or unitholders of the PE Trust.

Inability to comply with these regulations will lead to termination of tax exemption for CVC fund or PE trust.

Tax Benefits in Thailand: Terms and Conditions

Direct Investment

If a startup engages in the Targeted Industries and generates at least 80% of its total revenue from the target activities in the two preceding accounting periods prior to the transfer of shares, then a person or a legal entity registered in Thailand or abroad will be eligible for income tax exemptions on the gains from the transfers of shares in that startup.

Indirect Investment through VC

Tax benefits for VC funds will vary depending on the degree of investment made by the PE Trust and CVC fund. Additionally, it depends on the level of investment made by CVC fund shareholders and PE Trust unitholders. The following illustration will make things more clear:

Tax benefits in Thailand for CVC and PE Trust

If a startup generates at least 80% of its revenue from the targeted activities in each accounting period for two consecutive accounting periods prior to the transfer of shares, the CVC fund will benefit from exemptions from corporate income tax on the gains from the transfers of shares in that startup.

There is no corporate income tax for PE Trusts.

Tax benefits in Thailand for shareholders of CVC funds and unitholders of PE Trusts

Tax breaks will be given to PE Trust unitholders and CVC fund shareholders on the following:

Gains from transfers of shares in CVC funds and PE Trusts, where the investors in the CVC funds and unitholders in the PE Trusts will receive personal or corporate income tax exemptions in proportion to their investments, provided that such startups generate at least 80% of their income from the target activities during each accounting period for two successive accounting periods prior to the transfer of shares.

Gains from the dissolution of CVC funds and PE Trusts based on the percentage of retained earnings received from the startups’ target activities, provided that these startups generate at least 80% of their income from the target activities each accounting period for two consecutive accounting periods prior to the dissolution.
Startups confront legal challenges, which Konrad Legal Company Limited is aware of. Your company can achieve its objectives with the assistance of our Legal, Accounting & Tax Professionals for Startups in Thailand, including learning how to successfully draw in new investors. Call us right away for further details. You can also email your concern to officer@konradlegal.com.

Open Real Estate Agency in Thailand

 

There is high demand in the Thai market! Due to this, many significant sectors in Thailand have developed quickly over the past ten years. Additionally, investors worldwide are now placing bets on the country’s real estate market. The primary activities of a real estate agency in Thailand are leasing offices or buying/selling properties. Take note that, both these activities will result in a successful business and significant profits from various commissions. To fulfill your wish to open a real estate agency in Thailand, our business registration professionals are always active. With the right assistance and direction from our consultants, the process of registering a company in Thailand is not difficult.

Thailand’s real estate laws are not significantly different from laws of a comparable nature in other nations. The real estate industry is of great interest to investors globally since it is closely tied to the tourism industry. The tourism industry in Thailand is booming now. Therefore, it’s crucial to become familiar with the unique limitations of the Thai government on land ownership by foreigners. You can prepare yourself to open a real estate agency in Thailand no sooner after reading through this article.

Why Open a Real Estate Agency in Thailand?

Most foreigners choosing to enter Thailand to start a business prefers to set up a real estate agency. Thailand’s real estate industry is very alluring and provides fantastic chances. In Thailand’s most significant cities, many tourists and international residents are looking for the ideal condominium for their stay. Therefore, a real estate agent will undoubtedly be helpful in this regard. A knowledgeable real estate agent will tell you about the various fees, properties that are available, and market prices.

Companies may stand out in the market by registering trademarks in Thailand.

For more information on opening a real estate agency in Thailand, get in touch with our Thai company formation experts.

Documents required to Open Real Estate Agency in Thailand

You can begin your activities with our advisers’ assistance in less than four weeks. Firstly, you prepare of forming a limited company in Thailand with a minimum of three shareholders and executive management. Henceforth, reserve a name for your new firm and sign the Memorandum of Association, specifying the owners, capital, and company’s objectives. The next step is to open a bank account and register the company for VAT at the Thai Trade Register. To open a real estate agency in Thailand and operate lawfully, you will need a business visa and a Thai work permit.

To open real estate agencies, in addition to hiring foreign staff, they also need to employ Thai personnel. It’s beneficial to know that you don’t need a real estate license to start a business in this area. If the Thai Land Department and the Ministry of Commerce accept your documents, registering a company becomes simpler here. Henceforth, you can start operating in less than a month. You can ask for our assistance and direction if you wish to start a business in Thailand.

Tips on Real Estate Legislation in Thailand

Thailand’s real estate legislation features a few special provisions relating to foreigners owning land and homes. You should be ready to advise your clients on the prospects and limits of their investment if you plan to start a real estate firm in this nation.

Foreign corporations may own land in Thailand under certain circumstances, according to Thai law. Investors can buy residential land only if they can demonstrate their contribution of more than 40 million baht to the Thai economy. Condominiums, which involve sharing a property with other owners, are also open to foreign visitors. They can also sign a lease agreement for a maximum of three years, after which the contract must be registered with the Thai land department.

More information on the kinds of services that real estate agencies may provide in the context of Thai law is available from our Thai attorneys.

Best Practices to Start Real Estate Agency in Thailand

An investor must abide by Thai business legislation in order to establish a real estate agency. You might also need to recruit local partners as foreign investors so that you can create Articles of Association for your real estate company jointly. In order to reach your clients in the local market, your local partner might be of great assistance in coming up with a suitable name for your business.

In order to know which services you can provide to both domestic and foreign clients, whether businesses or people, you should also be knowledgeable about current Thai real estate legislation.

Please feel free to get in touch with our Thai attorneys to streamline the process of forming your real estate company and learn more about the country’s legal system. Email us your plan at officer@konradlegal.com.

Thailand Tax Guide for US Expats

 

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
• How do Thailand Tax Laws Work for US Expats?
• Current Income Tax Rates for US Expats in Thailand
• Social Security Tax Rates for US Expats in Thailand
• Value-Added Tax Rates for US Expats in Thailand
• Deadline for US Expats to Pay Taxes in Thailand
• How Can US Expats file Tax Returns in Thailand?
• Do US Expats in Thailand have to file US Taxes?
• Do US Expats in Thailand Need to Pay Tax Twice?
  • Foreign Tax Credit (FTC) for US Expats in Thailand
  • Foreign Earned Income Exclusion (FEIE) for US Expats in Thailand
    • Physical Presence Test
    • Bona Fide Residence Test
• FBAR Filing Requirement for US Expats in Thailand
• Are there any more Tax Requirements for US Expats 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!