Tax residency in Thailand for digital nomads is a hot topic these days. This isn’t a surprise given that Thailand is one of the digital nomad hotspots. Many people, for example, call Chiang May the digital nomad capital. Thailand does offer great internet infrastructure, delicious food, beautiful nature and, of course, a low cost of living.
Living in Thailand
We already briefly mentioned why so many digital nomads like Thailand. You can decide for your own what attracts you most about it. Yet, we also want to discuss the possible tax advantages that Thailand has to offer. Nevertheless, the first step is always to check how you can legally reside in the country for a longer time. In most cases, you will need a visa to do so.
Up till recently, most people would just opt for a visa run. This means that when your tourist visa expires, you briefly visit another country and then come back to get a new tourist visa. However, Thailand is scrutinizing this practice as that’s not the purpose of a tourist visa. Thailand does offer plenty of other options to obtain a long term Thai visa though. You can also always have a look on the official website of the Thai government. For now, we’ll focus on the tax consequences of tax residency in Thailand for digital nomads.
Thai Tax Rules
Tax Residency in Thailand
In order to determine if you are a tax resident of Thailand, you need to apply the days test. This means you need to have a look at the amount of time you spend in Thailand. However, the Thai rules regarding the days test do differ slightly from most other countries. Most countries which apply this criteria, define that you need to spend 183 days in the country in order to become a tax resident. For tax residency in Thailand for digital nomads, you need to spend 180 days in the country.
Basically, this means you still need to spend around half of the year in Thailand. If you still travel very actively, this might pose a problem. However, if you enjoy spending at least half of your time in Thailand, tax residency in Thailand for digital nomads is a great choice!
Tax Residency in Thailand for Digital Nomads: Tax Rates
Thailand applies progressive tax rates. That means that the higher your taxable income, the higher the rate. You don’t pay income tax on approximately the first €4.000. After that, tax rates start at 5%. They go up in brackets of 5% to end up at a maximal level of 35% for taxable income above €130.000. To give you an indication what this means in practice: if your taxable income amounts to €24.000, you would pay approximately €2.500 in taxes.
Territorial Tax Regime
Nevertheless, you need to understand which income is subject to tax in Thailand. Thailand applies a form of a territorial tax regime. This means that your taxable income is not necessary equal to all the income you make.
If you receive local income, that’s fully taken into account to determine your taxable income. This, for example, applies if you work for a Thai employer. However, you only need to include foreign income into your taxable income if you bring it into Thailand. This is the case if you spend the money there (e.g. payment by card of cash) or if you deposit it in a Thai bank account. This changed as from 2024.
Practical Example
So, let’s say that you make €10.000 per month or €120.000 per year. Yet, you only spend €2.000 per month or €24.000 per year in Thailand on living expenses. In that case, your tax liability will only be calculated on €24.000 and not on your total income of €120.000. We already discussed that the tax liability for a taxable income of €24.000 is around €2.500. Consequently, your overall tax rate will be just over 2%!
Furthermore, if you only spend six months out of twelve in Thailand and travel those other six months, you can even limit your tax burden further. The reason is simply that we discussed before that you only pay tax on money brought back into Thailand. In the aforementioned example, that would mean you would only pay taxes on €12.000 (6 months x €2.000). This would result in a tax bill of approximately €650!
Tax Residency in Thailand for Digital Nomads: Social Contributions
Thailand levies social contributions at a rate of 5%. However, it is sometimes unclear how these social contributions apply to income brought in from abroad. In any case, the capped amount per year is around €250. Therefore, the impac is limited in any case.
Setting up a company in Thailand
Another way to organize yourself when you want tax residency in Thailand for digital nomads is to incorporate a company in Thailand. However, given that the corporate tax rate in Thailand amounts to 20% this isn’t the preferred option.
Tax Residency in Thailand for Digital Nomads: Conclusion
If you don’t mind spending six months (or more) per year in Thailand, tax residency in Thailand for digital nomads can be a great tax setup. Definitely if you make more money than you need to cover your living expenses in Thailand. Feel free to reach out if you want to know if Thailand is also a good option for you or which other tax setups are suitable for your situation.
