Tax Alert: The ‘Remittance Rule’ for Foreign-Source Income

Tax Alert: Tax authorities clarify application of the ‘remittance rule’ for foreign-source income of tax residents

On 20 November 2023, the Director-General of the Thai Revenue Department issued Revenue Department Order No. P 162/2023 clarifying that only foreign-source income earned from 1 January 2024 will be covered by the new interpretation of the ‘remittance rule’ applying to such income earned by individual tax residents in the country. The clarification is welcome news for many taxpayers.

The clarification was issued in relation to the departmental instruction (Revenue Department Order No. P.162/2023) issued on 15 September 2023 reversing the long-standing interpretation of the taxability of foreign-source income of individual tax residents, under which certain foreign-source income is taxable only if it is remitted to Thailand in the same year in which the income was earned. Otherwise, the income is not subject to personal income tax. Under the change in interpretation in the guideline, as from 1 January 2024, remittances of foreign source-income of tax residents will be taxable regardless of the year of remittance.

The September instruction gave rise to some uncertainty, including whether it only affects foreign-source income earned/derived/received in 2023 and remitted in 2024. We informally requested clarifications from the tax authorities, and certain tax officers informed us that remittances beginning 1 January 2024 will cover income earned in previous years without any limitation, not even the 10-year prescription period for collecting taxes under the Civil and Commercial Code. The new guideline confirms that only foreign-source income earned as from 1 January 2024 will be covered by the new interpretation of the remittance rule. Nevertheless, remittances made in 2024 of income to be earned in 2024 are taxable even under the current interpretation.