Thai tax resident with UAE Freezone

[Jomtien]

Dear OffshoreCorpTalk members,
First, i would like to thank you all for the great information provided here. I am a 6 months lurker here and it helped me a lot.

My business is online affiliate markerting. I just setup a company in IFZA. I was before in a UE tax hell country (>40% tax).
I was planning to live full time in Dubai, and become a UAE tax resident, but it does not seems to really fit me.
So i am wondering about living in thailand with the elite visa. I will become a thai tax resident since I plan to stay most of the year. I don’t own anything in my home country, and i will only be visiting for a few weeks per year.
I know that due to PE rules, the company should pay tax in Thailand. But i also learned here that it is not enforced in Thailand. With the new tax rules in thailand, remitted income will be taxed.

1/ Can I keep an income in UAE, even though I live in Thailand or do I need to switch to only receive dividends?

2/ With the money earned in UAE, and not remitted in Thailand: can i really use it tax free? I can buy real estate in a third country or invest in etfs? It seems too good to be true but I don’t see the catch here.

3/ Do you see a pitfall with living in thailand and receiving income and dividends from UAE?

Thanks a lot for your opinions

 

[Sigma]

Following...in the same situation.

 

[wellington]

3/ Do you see a pitfall with living in thailand and receiving income and dividends from UAE?

Based on the new rules, regardless of earning income/dividends whilst in Thailand, unless its remitted its tax free from a Thai perspective.

Confirmed with Revenue Department Thailand, can't comment on the UAE side.

1/ Can I keep an income in UAE, even though I live in Thailand or do I need to switch to only receive dividends?

I see no harm in this, my own income (deferred dividends) is paid out every 5+ yrs e) and that is kept overseas in a manner of speaking, new policy means its taxable if remitted, old policy was it's only taxable if in the same year 'earned/paid'.

2/ With the money earned in UAE, and not remitted in Thailand: can i really use it tax free? I can buy real estate in a third country or invest in etfs? It seems too good to be true but I don’t see the catch here.

No tax in Thailand unless remitted (see earlier comment) for Dubai you'd need to confirm that side but i imagine you can re-invest it.

Also factor in any other countries including citizenship or touch points, not just Thai/Dubai.

 

[yngmind]

Dear OffshoreCorpTalk members,
First, i would like to thank you all for the great information provided here. I am a 6 months lurker here and it helped me a lot.

My business is online affiliate markerting. I just setup a company in IFZA. I was before in a UE tax hell country (>40% tax).
I was planning to live full time in Dubai, and become a UAE tax resident, but it does not seems to really fit me.
So i am wondering about living in thailand with the elite visa. I will become a thai tax resident since I plan to stay most of the year. I don’t own anything in my home country, and i will only be visiting for a few weeks per year.
I know that due to PE rules, the company should pay tax in Thailand. But i also learned here that it is not enforced in Thailand. With the new tax rules in thailand, remitted income will be taxed.

1/ Can I keep an income in UAE, even though I live in Thailand or do I need to switch to only receive dividends?

2/ With the money earned in UAE, and not remitted in Thailand: can i really use it tax free? I can buy real estate in a third country or invest in etfs? It seems too good to be true but I don’t see the catch here.

3/ Do you see a pitfall with living in thailand and receiving income and dividends from UAE?

Thanks a lot for your opinions

You will have to pay CT in the UAE or in Thailand, there is a DDT with UAE and Thailand - United Arab Emirates - Corporate - Withholding taxes.

not sure exactly how it's gonna work, but if you don't pay CT in the UAE you will have to pay it elsewhere (Thailand in your case)

 

[wellington]

You will have to pay CT in the UAE or in Thailand, there is a DDT with UAE and Thailand - United Arab Emirates - Corporate - Withholding taxes.

Companies incorporated in Thailand are taxed on worldwide income. A company incorporated abroad (i.e. a company organised under foreign laws or a foreign company) is taxed on its profits arising from or in consequence of the business carried on in Thailand.

The corporate income tax (CIT) rate is 20%.

A foreign company not carrying on business in Thailand is subject to a final withholding tax (WHT) on certain types of assessable income (e.g. interest, dividends, royalties, rentals, and service fees) paid from or in Thailand. The rate of tax is generally 15%, except for dividends, which is 10%, while other rates may apply under the provisions of a double tax treaty (DTT).

----

Now if the company has substance overseas, and is 'automated' and no nexus to Thailand except owner/director... then there should be 0% tax applied in Thailand...

That will continue as confirmed with Revenue Department, the territorial taxation aspect will remain, hence income remitted is taxed on remittance non on earning.

Same applies to the corporation, unless it engages in domestic markets.

 

[yngmind]

Companies incorporated in Thailand are taxed on worldwide income. A company incorporated abroad (i.e. a company organised under foreign laws or a foreign company) is taxed on its profits arising from or in consequence of the business carried on in Thailand.

The corporate income tax (CIT) rate is 20%.

A foreign company not carrying on business in Thailand is subject to a final withholding tax (WHT) on certain types of assessable income (e.g. interest, dividends, royalties, rentals, and service fees) paid from or in Thailand. The rate of tax is generally 15%, except for dividends, which is 10%, while other rates may apply under the provisions of a double tax treaty (DTT).

----

Now if the company has substance overseas, and is 'automated' and no nexus to Thailand except owner/director... then there should be 0% tax applied in Thailand...

That will continue as confirmed with Revenue Department, the territorial taxation aspect will remain, hence income remitted is taxed on remittance non on earning.

Same applies to the corporation, unless it engages in domestic markets.

It's not easy to create a substance overseas, what if a company have no substance overseas?
This company should be liable for Thai CT because of the PE.

 

[wellington]

It's not easy to create a substance overseas, what if a company have no substance overseas?
This company should be liable for Thai CT because of the PE.

Thailand doesn't really need Substance Overseas -it's territorial.

Current tax norm is the following:

Companies incorporated in Thailand are taxed on worldwide income. A company incorporated abroad (i.e. a company organised under foreign laws or a foreign company) is taxed on its profits arising from or in consequence of the business carried on in Thailand.

The corporate income tax (CIT) rate is 20%.

A foreign company not carrying on business in Thailand is subject to a final withholding tax (WHT) on certain types of assessable income (e.g. interest, dividends, royalties, rentals, and service fees) paid from or in Thailand. The rate of tax is generally 15%, except for dividends, which is 10%, while other rates may apply under the provisions of a double tax treaty (DTT).

---

The dividends mentioned there is corporate to corporate not corporate to director... the director however is charged on remittance from 2024...

I had a lengthy discussion with Revenue Department HQ on this...

Basically free and clear except funds remitted (commercial->commercial or Commercial-Personal).

Revenue Department Number: Customer service: 02 272 8000

Would suggest you speak to Revenue Department (have someone do for you if you don't know the lingo).

However my understanding nothing is changing on the front of a overseas company and a director residing in Thailand -> unless they remit to Thailand either personally or to a local entity.

If that does happen then the revenues/dividends/income commercial and personal overseas is outside of their jurisdiction/interest/tax net.

Aseannow.com is currently down -> but covered in this https://webcache.googleusercontent....ector-fees-and-taxes-in-thailand/&hl=en&gl=th

Page 6 https://www.tilleke.com/wp-content/uploads/2011/05/Thailand-Tax-Guide.pdf

"b. The term "carrying on business in Thailand", for income tax purposes, is very broad.Foreign juristic entities are deemed to be "carrying on business in Thailand" if they havein Thailand an employee, agent, representative or go-between and thereby deriveincome or gains in Thailand. Accordingly, such person has the duty to file a return andpay corporate income tax in respect of such income or gains on behalf of the foreignjuristic entities."

As it stands half the expat community (professionals) have an overseas vehicle for 'consultancy', paying the tax onshore for income ranges from 50,000THB to 150,000THB per month, the remainder usually via Singapore/HK.

These people are not required to pay tax for the HK company providing the consultancy services (as is) unless remitted within the same year... either for corporate or for themselves...

Future will mean the personal will have to pay tax (remittance based) but the corporate should remain the same.

Having said that 6b. opens up avenues for pulling a overseas company onshore for taxation, but merely being a director of a overseas company that does zero business in Thailand shouldn't open the company to Thai corporate tax, say like it would open a offshore company to say European tax.

This is because Thailand is predominantly still a territorial tax country even with the changes focused on taxation for remittance, and outlined by the Government their intention is to obtain tax and close a loop hole for the wealthy Thais that mature their funds from their overseas companies/investments into the following tax year before remitting... but not to bring offshore companies under domestic taxation rules.

 

[Jomtien]

Thanks for the clarifications @wellington

The company will pay CT in UAE.

Regarding the income, my setup is to receive income both in form of salary and dividends (in order to stay at 0% CT in UAE).

Is a salary treated like a foreign-sourced income, just like a dividend? Or is it better to only receive dividends while staying in Thailand?

 

[wellington]

Thanks for the clarifications @wellington

The company will pay CT in UAE.

Regarding the income, my setup is to receive income both in form of salary and dividends (in order to stay at 0% CT in UAE).

Is a salary treated like a foreign-sourced income, just like a dividend? Or is it better to only receive dividends while staying in Thailand?

My understanding is the following.

If the company is offshore/overseas.

You earn a income from it, unless the income is remitted it's not taxable in Thailand.

However if you have a income (employee) there may be a touch point for CT in Thailand.

If however its dividends then it's operating overseas and you are merely a Director/Shareholder.

Thus unless there are other touch points, it should be CT overseas (if any) and if dividends paid overseas then tax free in Thailand, unless remitted.

If you have dividends tax overseas but don't intend to remit to Thailand, then you'd probably best (as an example - needs checking) if a UK citizen for example where not resident... and no other touch points.

• Company Dubai CT = 0%?
  
  Director Thailand = 0% tax unless remitted.
• 
  Dividends Paid Offshore from Dubai -> UK/EU account = 0% tax.

 

[yngmind]

My understanding is the following.

If the company is offshore/overseas.

You earn a income from it, unless the income is remitted it's not taxable in Thailand.

However if you have a income (employee) there may be a touch point for CT in Thailand.

If however its dividends then it's operating overseas and you are merely a Director/Shareholder.

Thus unless there are other touch points, it should be CT overseas (if any) and if dividends paid overseas then tax free in Thailand, unless remitted.

If you have dividends tax overseas but don't intend to remit to Thailand, then you'd probably best (as an example - needs checking) if a UK citizen for example where not resident... and no other touch points.

• Company Dubai CT = 0%?
  
  Director Thailand = 0% tax unless remitted.
• 
  Dividends Paid Offshore from Dubai -> UK/EU account = 0% tax.

Thank you, you gave us so much info today.

But could you give me a simple answer: why is an offshore company not liable for Thai CT if a director manages the company from Thailand?

I know there are no CFC rules in Thailand, and you don't even have to report it to the Thai government. Probably they will never know about your offshore company, but if we play legal, in theory, it's liable for Thai CT, that what I also heard from a Thai law firm because of the PE in Thailand.

But in really they don't care.

 

[wellington]

Each company is different, for example some have their entire operating substance outside of Thailand, others are automated to the point the director/owner is essentially a passive earner from said company without any physical/digital input.

But could you give me a simple answer: why is an offshore company not liable for Thai CT if a director manages the company from Thailand?

This is the part you need to look into:


Companies incorporated in Thailand are taxed on worldwide income. A company incorporated abroad (i.e. a company organised under foreign laws or a foreign company) is taxed on its profits arising from or in consequence of the business carried on in Thailand.

The corporate income tax (CIT) rate is 20%.

A foreign company not carrying on business in Thailand is subject to a final withholding tax (WHT) on certain types of assessable income (e.g. interest, dividends, royalties, rentals, and service fees) paid from or in Thailand. The rate of tax is generally 15%, except for dividends, which is 10%, while other rates may apply under the provisions of a double tax treaty (DTT).

You can also look into Your off-shore entity’s rental income tax liability in Thailand - Property Taxes - Thailand which will give a vantage point from a offshore (BVI) comparable to a real-estate asset income.

Then work that idea around your business type.

But in really they don't care.

This is correct, but also Thailand... they may change their mind later and retrospect charges.

I know form 1-1.5 hr conversation with them last month that it was explicitly stated there is no tax touch-points personal unless remitted, and no tax corporate wise - i am covered as its substance outside set and i the company is automated (i.e day to day operations no management from myself), plus no business in Thailand.

 

[mrthit]

Hey @wellington can I ask you more about this:

As it stands half the expat community (professionals) have an overseas vehicle for 'consultancy', paying the tax onshore for income ranges from 50,000THB to 150,000THB per month, the remainder usually via Singapore/HK.

Do you mean being hired via a local entity for which providing consultancy services and get part of the income (ie from 50k to 150k) and the rest in a company owned by you abroad (HK/SG) (and remit +1 year

Would you see this work for an IT consultant? Maybe using an EOR as local entity.

 

[wellington]

Hey @wellington can I ask you more about this:

As it stands half the expat community (professionals) have an overseas vehicle for 'consultancy', paying the tax onshore for income ranges from 50,000THB to 150,000THB per month, the remainder usually via Singapore/HK.

Do you mean being hired via a local entity for which providing consultancy services and get part of the income (ie from 50k to 150k) and the rest in a company owned by you abroad (HK/SG) (and remit +1 year

Would you see this work for an IT consultant? Maybe using an EOR as local entity.

I was referring to what it was like when i had a WP in Thailand (circa '12)

We were doing a 150m$ property development, and everyone involved in it had onshore salaries ranging from 80,000-150,000 THB on shore + benefits + taxes paid, and were paid consultancy offshore in HK for the remainder (tax free).

So for example.

1 person 650,000 THB salary a month but 150,000 onshore + 60,000 benefits + flights + family/schooling etc, + 500,000 in HK via consultancy company.

I can't comment say whether its changed (i doubt) - but will perhaps next year.

 

[mimis]

I was referring to what it was like when i had a WP in Thailand (circa '12)

We were doing a 150m$ property development, and everyone involved in it had onshore salaries ranging from 80,000-150,000 THB on shore + benefits + taxes paid, and were paid consultancy offshore in HK for the remainder (tax free).

So for example.

1 person 650,000 THB salary a month but 150,000 onshore + 60,000 benefits + flights + family/schooling etc, + 500,000 in HK via consultancy company.

I can't comment say whether its changed (i doubt) - but will perhaps next year.

Do you offer any services?