Thailand’s taxation of pensions from abroad is causing unrest

In Thailand you can live very well for relatively little money. Many pensioners from Germany want to spend their retirement there. Now new tax regulations are causing unrest.

Enjoying retirement under palm trees: That’s what many people dream of. Thousands of Germans have fulfilled this dream, moved to Thailand and live there on their German savings. Not only do they enjoy an affordable life with sun, sand and sea, but also the prospect of not paying taxes.

Thailand, the tax haven for pensioners – that has been history since January 1, 2024. The reason is a new interpretation of the Thai tax law. It states: “If you are a tax resident in Thailand and earn income abroad, if you bring it here you will be subject to Thai tax,” said Nathanan Junprateepchai, legal expert at the Thai Tax Authority.

This also applies to all Thai citizens with money abroad, he emphasizes – but also to thousands of pensioners from Germany who live on their savings and income from Germany.

Pensioners, private individuals and digital nomads affected

“This is a hammer, a very tough number for German pensioners,” says tax advisor Martin Liebenow from the international auditing firm Mazars in Bangkok. But it’s not just retirees who are affected. This is a hard blow for everyone who moves to Thailand and lives on their savings and income from abroad, says Liebenow. Be it pensioners, private individuals or the growing number of digital nomads who can work and live from anywhere, so they can make a home office out of a hammock, so to speak.

Exactly how many people are affected is unclear. At the end of 2022, there were around 4,400 pensions that the German pension insurance paid to German citizens residing in Thailand. For example, private individuals in early retirement or people who are still registered in Germany are not included.

Worry-free, tax-free, totally legal – that was once

Until now, there was a legal tax loophole through which pensioners did not have to pay taxes to either the German or Thai tax authorities. The only condition: You had to stay in Thailand for more than 180 days a year and therefore be a Thai tax resident.

And: They were not allowed to transfer their income – such as pension payments, rental income or investment income from Germany – to Thailand in the same year in which the payments were made. Anyone who wanted to live a worry-free and tax-free life in the land of smiles only transferred their money from Germany the following year.

Problems under palm trees

In the German community in Thailand, the topic is a source of discussion and controversy, as well as uncertainty and confusion. “What does this mean for me?” many people ask themselves. One of them is Herbert Fendrich. The 71-year-old has lived in Thailand for around six years and moved from Swabia to Pattaya. He assumes that he will escape the tax reform because he is registered in Germany and pays taxes there.

The situation is similar for 76-year-old Willi Hoppe, who, as a former civil servant, also pays tax on his pension in Germany. Anyone who pays taxes in Germany does not have to do so in Thailand. This is made possible by a corresponding double taxation agreement.

The two are exceptions to the rule: “I only know a few who are registered in Germany like me and also pay taxes there,” reports Fendrich. The majority are the others. Like Peter, who lives in Chon Buri province. “Thailand is turning from a tax haven into a tax hell,” he fears. He suspects that seniors could sooner or later leave Thailand and move to other countries, such as Vietnam, the Philippines or Portugal.

Many do not want to comment when asked or only describe their concerns anonymously. They are afraid of suddenly being considered tax fraudsters, having to pay back taxes or having problems extending their visa.

Thailand announces change

In order not to completely scare off foreigners who bring money to Thailand, the Thai tax administration has rowed back a bit: taxation of income now only applies to income earned and transferred to Thailand from January 1, 2024 – i.e. new rental income , pension benefits or income. So-called “old income” is excluded. This means: “Savings that are transferred to Thailand from abroad continue to be tax-free – as long as they can be proven to have been earned before January 1, 2024,” explains Martin Liebenow, explaining the legal situation. How this can be specifically proven remains questionable.

Only one thing is certain: uncertainty. It’s big. How will the tax reform be implemented, applied and monitored in practice? Several retirees in Thailand say they are worried about the new bureaucratic burden of filing a Thai tax return with foreign income statements and translated documents.

Some people first urge you to be calm. Like Stefan, who also lives in Chon Buri as a pensioner. Despite the new tax, he still has a much higher quality of life in Thailand than in Germany.