Today, THAI ACCOUNTANT answers a question from one of our payroll clients regarding the options to buy stocks of a parent company by employees of a Thai affiliate company.

As employees of a Thai affiliate company of an overseas parent company in the USA, it is stated in the terms of our employment that we have an option to purchase stocks of the parent company at a price lower than the market price. When we use this option to buy the stocks, will we be required to pay for tax?

Answer:

An option to purchase stocks of the parent company at a price lower than the
market price is considered assessable income derived from employment within Thailand (income under Section 40 (1) of the Revenue Code), and considered as income derived from the posts in Thailand under Section 41, first paragraph. Therefore, you shall include the benefits received from the purchase of stocks at a price lower than market price as your assessable income for personal income tax purpose. The assessable income of Thai employees derived from the purchase of stocks of a parent company (these are shares which are not publicly traded in the Stocks of Exchange of Thailand) is calculated from the market value of the stock less the exercise price of the stocks on the day ownership is
transferred to the employees.

Furthermore, any contributions the Thai affiliated company made to the purchase of stocks in the parent company as part of the scheme are considered as benefits from the employment under Section 40 (1) of the Thai Revenue Code, and are thus required to be included as assessable income for the purpose of calculating personal income tax.

More to consider:

Gains derived from the sale of shares on a stock exchange in the USA are assessable income under Section 40 (4) (b) and are regarded as overseas sourced income, and therefore subjected to Thai income taxes if you are considered to be a Thai tax resident and the proceeds are brought into Thailand in the same year they were received, in accordance with Section 41, second paragraph.

When you received dividends on the shares acquired from the exercise of the stock options, it is also considered as overseas sourced income, according to Section 41, second paragraph, and therefore subjected to Thai income taxes if you are considered to be a Thai tax resident and the income was brought into Thailand in the same year the dividend was paid.

Learn more about personal income tax and Thailand taxation. Contact MSNA for further information.

THAI ACCOUNTANT answers a question regarding the tax implications on income earned overseas.

I always visit your website and read your informative articles about doing
business in Thailand which is very helpful to foreigners like me. Now I’m considering moving there for a possible business opportunity and residency. My source of income will be profits from a company which is based and only operating outside of Thailand. I am very curious about what I will pay for tax: will it be my total global income or only the portion of it that is brought into Thailand?

Answer:

First, we thank you for reading our information posted on our website. We are happy to know that this has helped you to consider doing business here inThailand.

Referring to your question, when you reside in Thailand for more than 180 days (continuously or not) in a calendar year, the portion of income from overseas that is earned and brought into Thailand within the same calendar year will be subject to Thai tax. This we mean, the income earned in 2012, and brought into Thailand in 2012. For instance, if you bring $ 100,000 of the income that you earned overseas in 2011 into Thailand in 2012, it is not subject to Thai tax.

Contact MSNA to know more about Thai taxation and Thai visa matters.

This post about “RMF and SSF – Personal Income Tax Saving Strategy” was updated in 2021.

RMF stands for Retirement Mutual Fund.

A taxpayer’s personal income invested in one or more RMF’s (which are in compliance with Thailand Securities and Exchange Act) (combined with contribution to provident fund and/or government pension fund) is tax exempt up to 30% of his income in the year, but not more than Baht 500,000 when combined with other retirement funds for example SSF and provident fund. The following conditions apply to RMF:

1. The taxpayer has to buy RMF at least once a year and he must not cease buying RMF for more than one year continuously.
2. The taxpayer has to hold the RMF for at least 5 years from the date of the first purchase and redeem it when he is at least 55 years old unless the redemption is due to disability or death. And when the taxpayer has hold the RMF for more than 5 years and is at least 55 years of age, he can stop buying RMF, or if he wants to buy more RMF, he does not need to comply with no. 1 above any more.
3. The taxpayer must not receive dividends or any other money from the RMF during the holding period and must get the investment and all benefits back only on redemption.
4. The taxpayer must not get a loan or take money from the RMF fund that he has invested in.
5. The taxpayer must attach to his personal income tax return the certificate of RMF purchase issued by the company that manages the RMF.

SFF stands for Super Savings Fund.

Super Savings Fund is any mutual funds to promote long-term savings. A taxpayer’s personal income invested in one or more SSF’s which are in compliance with Thailand Securities and Exchange Act is tax exempt up to 30% of his income in the year, but not more than Baht 200,000. The following conditions apply to SSF:

1. The taxpayer has to hold the SSF for at least 10 years from the purchase date.
2. The taxpayer may use the SSF tax exemption during the years 2020 to 2024.

Contact MSNA, a Thai accounting company in Bangkok, for any tax or accounting questions.