By Barry Kenyon

[Gaybutton]

Should Thai retirees escape to the Philippines to avoid income tax?

By Barry Kenyon

November 12, 2024

There’s currently much speculation about Thailand’s retirees considering a move to another regional country. They are hunting to escape the looming if still-muddy liability to pay Thai personal income tax on some foreign income transmitted to Thailand. They need to be watchful as Cambodian authorities, for example, can in fact tax foreign retirees on their worldwide income but choose, anyway for now, to ignore cash not earned in Cambodia.

The Philippines is unusual in that it publicizes the non-taxation of foreign income such as pensions, inheritances and capital gains. So it’s worth examining the retiree entry regulations of Thailand and the Philippines because they are by no means the same or even similar. The Philippines has introduced the Ease of Paying Taxes Act 2024 but, contrary to some reports, this did not affect the tax-free status of retirees living on overseas assets.

Although there are many retirement visa options in Thailand for those 50 years plus, the easiest without doubt is the non-immigrant “O” type. A visa-free entry stamp can be converted by local immigration to a three months non-immigrant “O” which then receives an extension of stay for 12 months (fifteen months in all the first time). Annually, the retiree returns to immigration for a further 12 months extension for 1,900 baht or US$55. Agents can facilitate the process for a service fee.

The basic requirement, as is well known, is at least 800,000 baht in a Thai bank or proof of monthly remittances from overseas of at least 65,000 baht. Evidence of local address is required and there is an ongoing rule to report it every three months. A re-entry permit is needed for those leaving the country, but a medical insurance policy is not currently mandatory. Given that third parties can help with the cash bond, if required, the non “O” route is far and away the most popular track for retirees. It’s also the cheapest by miles.

Retirees to the Philippines need to apply for the core Special Resident Retiree’s Visa (SRRV) which is multi-entry but requires an annual re-registration of the ID card. It requires a personal and not third-party bond of (usually) US$10,000 to US$20,000 in a Filipino bank which may have to be left there for the duration depending on whether investments are made. Family members can be included at a reasonable extra cost. Medical insurance is not required, but a medical report on the individual is needed prior to entry and must be authenticated by a Filipino embassy or consulate. Police clearance from the country of origin or recent residence is needed according to the government website.

Compared with Thai immigration practices with the “O” type, the Filipino version is much more of a hassle to process. Not to mention the interview with the Philippine Retirement Authority or PRA. However, the extra perks are considerable. No exit or re-entry clearance. The status of a permanent resident from day one and the publicized chance to apply for citizenship after 10 years. The chance to work for an employer provided the (not too difficult) Alien Employment Permit is applied for. The facility to bring in US$7,000-worth of household goods tax free. PRA assistance is applying for a driving licence, or when dealing with Filipino bureaucracies.

In summary, the longer term retirement visa bonuses in the Philippines are more bountiful than those in Thailand. But the Thailand “O” is certainly much cheaper to process and requires much less initial documentation. Perhaps Thailand’s resident expats should appreciate it more.

https://www.pattayamail.com/latestnews/ ... tax-479718

[Gaybutton]

There’s currently much speculation . . .

In my opinion that is the whole point. Speculation - to the point that it is about to become part of my "I Don't Get It" list. It seems like everyone is talking about it except the Thai government. To date, there hasn't been a single word about it that I am aware of from the Thai government. To the best of my knowledge, the only time anyone in the Thai government mentioned anything at all about starting to income tax expats was when the former Prime Minister, Srettha, mentioned it - almost in passing - a grand total of once.

Most expat retirees whose sources of income are limited to pensions and Social Security are protected by tax treaties, but many seem to think the treaties might be ignored and they're going to be taxed anyway. Based on what? What has anyone in the Thai government said or done to indicate any such thing is likely?

Do as you wish, but personally I'm planning on doing nothing until and unless the Thai government starts telling us we're going to be income taxed - and we will be taxed in violation of the tax treaties.

Until then I'll be following the advice my attorney friend in the USA gave me many years ago - "Don't worry until there's something to worry about."

[Jun]

Most expat retirees whose sources of income are limited to pensions and Social Security are protected by tax treaties, but many seem to think the treaties might be ignored and they're going to be taxed anyway. Based on what? What has anyone in the Thai government said or done to indicate any such thing is likely?

Didn't the double tax treaties protect GOVERNMENT pensions ? Where I live, the majority of "middle class" people will have some kind of private pension or other source of income. Which, as I understand it would not be protected in the same way.

It's almost like the civil servants who draft these treaties decided to protect themselves, whilst screwing the rest of us.

[Gaybutton]

Didn't the double tax treaties protect GOVERNMENT pensions ?

I looked it up before, but now I really don't remember and I'm too lazy to look it up and wade through it again. I think the point of the treaties is to prevent income that already has been taxed from being taxed again. My own pension is a government pension, but I doubt whether it will matter because, again, the Thai government still has made no mention of taxing us at all whether our pensions are government pensions or not.

[thaiophilus]

I think you're right about the intention that DTTs generally apply to all pensions, not only government ones.

But I think you need to clarify what you and Jun mean by "government pension". I believe in this context it normally only refers to a pension paid to a former employee of the government. So for example the UK "state pension" is not a government pension and would be taxed in the same way (whatever that is ) as a "workplace" (aka ‘occupational’, ‘works’, ‘company’ or ‘work-based’) pension.

[Jun]

I think the point of the treaties is to prevent income that already has been taxed from being taxed again.

I think it's slightly different.
The key word in the title is "Double".

Hypothetically, if you're taxed at 20% in your home country and the tax rate on the same income would be 30% in Thailand, the treaty is to protect you from paying double tax of 20%+30%= 50%.
However, Thailand could charge you the extra 10%.

Except for where the wording specifically protects against that. I thought government pensions were such an example. Now just because you're OK, it doesn't mean everyone else is

This is my impression formed from having to deal with DTTs for overseas investment income.

[Gaybutton]

If they ever actually tax us, do you think they are going to get that complicated? I doubt it.

[Jun]

If they ever actually tax us, do you think they are going to get that complicated? I doubt it.

Yes. Exactly like that and worse.

I've had instances where I've paid some tax on investments overseas, capped by treaty & then had to pay more tax in the UK so that the total matches the UK tax rate.

Sadly, there is no convention that taxes should be simple. For example, the 6871 page US tax code.

[Gaybutton]

Cambodia not currently taxing the overseas income of expat retirees

By Barry Kenyon

November 14, 2024

Those contemplating a move to Cambodia because of fear of the Thai Revenue Department are on safe ground as matters stand. Foreign retirees in Cambodia are not being taxed on their international transfers: officials at ABA and Maybank, two leading banks with foreign customers, said the subject was not currently being discussed. The Cambodian government in its tax-related publications clearly avoids the specific issue of retirees.

The Ministry of Foreign Affairs and International Cooperation states that a foreigner spending more than 182 days in the kingdom during a year is deemed to be a “resident” of the kingdom. The text continues that “residents” are taxable on their worldwide income and there is no qualifier that the cash must be remitted to Cambodia to be liable. There is a separate government requirement that sums exceeding US$10,000 must be declared to the Bank of Cambodia before the transfer.

However, the context of the tax-liability discussion relates to “resident” foreigners who are working in Cambodia with a “salary”. The regulations state that their overseas income, if already taxed in the home country, can be credited against any further Cambodian Revenue demands. This ruling is not dependent on double taxation treaties. Cambodia has eleven DTAs but none with a country outside Asia. In other words, working expats are subject to taxation on their actual wages both in Cambodia and abroad.

Given that companies submit tax returns in Cambodia, individuals do not normally prepare their own returns. Technically, Cambodia does not have personal income tax but is concerned only with cash actually being earned. By extension, there is no requirement for retirees to get involved with Revenue matters and websites promoting Cambodia as a tropical paradise seldom even mention the subject of taxation.

The question is whether the tax-free haven for retirees could change. It would not be difficult for the government to do so, for example by divorcing worldwide income from the need to have a “salary”. However, there is no indication of that intention and the Cambodian revenue authorities are much less proactive and influential than their Thai counterparts. As a Phnom Penh bank official said, “It simply wouldn’t be worth the effort”.

The Cambodian retiree visa costs around US$300, annually renewable, but must be based on a an initial E-class (formerly business) 30 days visa when entering the country. The use of visa agents is widespread, almost compulsory in fact, and very little documentation is required. Proof of retiree status and of steady income is sometimes called for. There is also the requirement to download the Foreigners Present in Cambodia address registration app. In other words, the retiree bureaucracy in Cambodia is much easier than in Thailand. Of course, the pros and cons of living over there are a much bigger agenda.

https://www.pattayamail.com/latestnews/ ... ees-479846

[Gaybutton]

New British law to crack down on overseas benefit fraud starts in 2025

By Barry Kenyon

November 14, 2024

British pensioners abroad, including Thailand, will soon lose UK banking confidentiality if suspected of cheating on their state pension. The Data Protection and Digital Information Bill, presently at committee stage in the House of Lords, is expected to come into force early in 2025. It requires British banks and building societies to share with the Department for Work and Pensions (DWP) the accounts of British citizens, both at home or abroad, where fraud looks likely.

The main abuse amongst a small minority of British expats is hiding the fact that they live in countries not eligible to receive annual increases in the state pension. The rules are idiosyncratic as such inflation-linked raises are permitted in some countries (e.g. the EU and the Philippines) but not in others (e.g. Thailand and Australia). Around 500,000 British pensioners live abroad with “frozen” state pensions and the DWP believes that overpayment amounts to 100 million pounds.

Miscreants usually keep a UK address for postal contact with DWP even though they are spending all or much of their time abroad. One Thai-based Brit was found out last year when a DWP letter sent to his London address was returned by a neighbour with the comment “Lucky Sod Lives in Pattaya”. Another was exposed after his UK wife found out he was enjoying himself in Bangkok rather than working in Baghdad as she had been mischievously told. The new act will likely show up in computerized data those state pension claimants receiving annual increases who appear (from their bank accounts) to be based in foreign lands.

However, the Thailand-based pressure group to end frozen UK pensions pointed out that cheating is a very minor problem. The bigger issues, according to a spokesman, are DWP mistakes in processing claims and the nonsense of discrimination according to which country you happen to live in. Neither the previous Conservative government, nor the incumbent Labour one, has shown any interest in remedying the problem.

Another issue of concern to many expats in Thailand is the unreliable international postal system. Every three years, the UK authorities demand a certificate of life (proof you are still alive) to continue payments, but the letters are dispatched by ordinary air mail via an agency in Holland. Many letters are never delivered, leading to suspension of payment when no reply is received. “The whole system is insane and discriminatory,” said Pattaya-based Frank Weston who is 68. He suggested that the paper trail should end and be transferred to a digital system.

https://www.pattayamail.com/latestnews/ ... 025-479979