Agreement on a tax treaty may take some time
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It may take quite some time before a new tax treaty between the Netherlands and Thailand comes into effect. “Not until Thailand agrees at all levels. We don't know how or what at the moment.” Ambassador Remco van Wijngaarden stated this at a 'meet&greet' with Dutch people in Hua Hin and the surrounding area. More than a hundred compatriots and their partners attended the meeting.
In any case, it is clear that the new treaty, which replaces the old one from 1976, will not enter into force on January 1, 2024. It is now known that the Netherlands would, among other things, tax all outgoing private pensions through withholding tax. If deregistered Dutch people already pay tax in Thailand, the amount is much less than would be the case in the Netherlands. Insiders have the impression that, on reflection, Thailand regrets that the Netherlands is levying taxes and Thailand is left empty-handed.
Van Wijngaarden did not want to say anything about the content of the new agreement. This has been negotiated at official level, but only once the procedure in Thailand has been completed will the treaty be put on the table in the Dutch Council of State and the States General, among others. “And the content can still change until then,” says Van Wijngaarden.
Former top accountant Hans Goudriaan added that in his opinion the treaty is not a hammer decision and that it could take a long time before it is ratified. This is evident from the course of events in treaties between the Netherlands and other countries. Goudriaan is concerned about the effect. “How can you prevent savings from the Netherlands, which have already been taxed once, from being taxed again in Thailand? The question is whether this is provided for in the treaty. In any case, we will do everything we can to delay the treaty's entry into force. The interests of many Dutch people will be harmed if the treaty does not stipulate that transfers of assets, such as savings accrued in the past in the Netherlands in Thailand, will not be taxed and will be exempt,” says Goudriaan.
According to Ambassador Van Wijngaarden, we should not speculate about that. The procedure will only start if Thailand agrees with the contents of the treaty. He did promise Goudriaan to organize an information meeting for Dutch people by then, in collaboration with the Ministry of Finance.
Schengen visa
Regarding the existing visa requirement for Thais towards Schengen, Van Wijngaarden noted that Thailand has asked for this to be lifted. A complicated case that must ultimately be decided in Brussels. According to the ambassador, that could take a long time. Currently, 95 percent of applications for a visa to the Netherlands are approved.
Well these “insiders” have a good impression.
The current concept leaves Thailand empty-handed, it is a one-way street. It is not nice that Dutch people who live here long-term and use all the facilities would not pay anything for this. Well, a little bit then.
Moreover, we are dealing with a completely different culture here. The educated Thai who graduated abroad finds it strange the way people in Europe treat tax-paying voters. The Thai/Chinese I know would never accept that.
A Thai is not easily fooled by foreign countries. That's an important point.
It will take some time before the Thais agree on all levels.
To achieve this, the Netherlands will have to put the baton aside and add a lot of water to the wine!
Andrew, from your responses I am increasingly assuming that you do have information about the content of the upcoming treaty. Or the lawyer has blown the whistle. Don't you want to share that information with us?
But if no one knows what it says, there may be something in it that compensates Thailand. Do we know much? And how much money are we talking about? Real civil servant pensions are already taxed in the Netherlands, as are security benefits. This concerns the tax on company pensions (Article 18 treaty) and pensions from government companies (Article 19/2) that are taken from Thailand. Let me estimate from the bottom of my hand: 10.000 people, 25 k euros pension, rate 10%, that will be 25 million euros. One billion THB; yes, quite a lot, or does anyone have better information?
I think there are many with only an AOW plus a small supplementary company pension, if I can remember the reactions over a number of years, the 2800 you mention seems too much to me and I would rather think of a Euro or 1500 per month supplementary pension on average and that's already half the difference. Consider, for example, those who extend their annual income with just over 65.000 income per month.
If Thailand starts to levy taxes on income, I think you will end up with double taxation, with the Netherlands providing compensation for what people already pay in Thailand.
What Andrew van Schaik says that we use facilities (in Thailand) and would not pay for them is incorrect. All our expenditure with foreign money benefits the Thai economy and provides employment and income for many, of all expenditure another 7% goes to the Thai government as VAT and so on. With an average income of 15.000 baht per month for a Thai and at least 65.000 baht per month for a foreigner, you can understand that 1 foreigner has at least 5 times as much money to spend than a Thai.
And then there are no things that are free for foreigners, but for which they pay the same amount (road tax, utilities) and sometimes even a lot, such as attractions, parks, swimming pools, zoos and government hospitals.
correction: minimum 45,000 Baht per month, not 65.000 Baht.
This category of retirees with AOW and a small company pension will decrease drastically over the next two decades. There will be a new category of wealthy retirees. In addition to their company pension, more than 2% have a paid-off home that can be sold before moving to Thailand. So with a lot of savings in the bank. No problem with 75 Baht in the bank and almost all with a monthly income greater than 800.000 Baht. The Thai women are not eagerly looking forward to it because they don't know.
I am probably not the only one who does NOT pay any tax in the Netherlands on his company pension(s) because I have been exempted from doing so.
I only have to pay tax on my state pension.
Has everything to do with the fact that I worked in Thailand from 2006 to 2021 and not in the Netherlands.
I think what Chris writes is completely in accordance with what is stated in the current DTA between Thailand and the Netherlands, but it has nothing to do with where you have lived or worked.
It is not nice that Dutch people who live here long-term and use all the facilities would not pay anything for this. Well, a little bit then.
This comment doesn't hit the mark, you conveniently forget that all the money from abroad enters the Thai economy, so it is spent in Thailand and that many Dutch people have a small business there in Thailand and therefore pay taxes to Thailand and that these Dutch people also keep Thai people at work, too short-sighted of you.
Not everyone can retire.
I am very happy with the new notification of postponement.
For nothing, the appointed specialist has had hundreds of people in uncertainty for months
Measures taken in the expectation that their income would decrease on 1 January 2024.
My confidence has dropped by leaps and bounds as a result.
My kind regards
Jan
Jan, Lammert's view on the effective date of the new treaty has been in doubt for months from several writers, including me. Then a light should have turned on for you; Moreover, you were also free to request information from the embassy and the Ministries of Fin. You failed to do that.
Now, I don't think it is appropriate to attribute your own negligence to someone who has been offering his services here for free for ten years.
@Hans Bos. Thank you Hans for all your information. I find all your postings very useful and informative. Especially this one.
Keep up the good work with your contributions. As far as I'm concerned, you're still in the editorial team...
Under pressure from the Dutch IND, which is buckling under the thousands of weekly applications in the Netherlands, the majority of visa applications from abroad are currently being rejected. This for the strangest and against the law reasons. If an appeal is not appealed, this will mean less work for the civil servants. This was told to me by a well-known immigration lawyer in the Netherlands. Wijngaarden's HR should know better.
Visa applications go through BuZa, the IND only comes into view during objection procedures. The fact that BuZa was unable to scale up staff in a timely manner when the travel restrictions expired has already been discussed here on TB. But rejections of more than 50%? None of that is true.
Before Covid started, the Netherlands rejected 2010% in 6, which steadily decreased to 1% rejections in 2014. Then it rose steadily again to 7% in 2018. 2019 6%, 2020 9%, 2021 21,5% and 2022 16% rejected. For Thailand, a percentage of around 5% is quite common, with some years less, sometimes a little more, but under normal circumstances not significantly higher than 10%.
Over the years I have had contact with the embassy about visa applications and their answers regarding rejections, etc. were always quite correct. If the ambassador says that 95% of applications are approved, I believe it because it is in line with what is normal for Thailand and in line with the reliability of answers to questions to embassy staff in the past regarding visa statistics.
From April next year, everyone can find the 2023 figures on the EU Home Affairs website. If it turns out that the ambassador is just talking about something, I will write something about it.
However, I suspect that the lawyer is what instigated this. Some countries, such as applications from Turkey, Morocco and the like, want to see 30-40% and sometimes up to 50% over the years. At a number of consulates in recent years, “more than half of rejections” could be a correct statement, but that is not common, is not what is normal on average worldwide for applications for a Dutch visa and certainly does not apply to applications from Thailand.
So if anyone should know better here, it is almost certainly not the ambassador...
Source of figures: EU Home Affairs > visa policy > Statistics on short-stay visas issued by the Schengen States > Complete statistics between 2009 and 2022
Monkey sandwich story and mood making. As Rob says, the IND is not involved and many people still come to the Netherlands with a Schengen visa every day. My Thai girlfriend recently received a 5-year Schengen visa.
The lawyer may have been referring to the fact that more than half of the objection procedures via the IND have a negative outcome. A few years ago, I think roughly half of objections were successful, with that number being a lot higher (something like 90%?) when objections were made through a lawyer. If we assume that there is also a group of people who submit a very bad objection and some submit a reasonable objection, we could end up with roughly half of successful objections across the board. And who knows, this may be much lower in more recent years, meaning that more than half of objections fail.
I don't have the time or desire to delve into that right now, but it is a plausible scenario in itself. Where “more than half of objections fail” is mistakenly distorted into “more than half of visa applications to the Netherlands fail”. See the importance of proven sources before such a hearsay thing takes on a life of its own...
The above article places too much emphasis on the question "when will the new Treaty for the Avoidance of Double Taxation enter into force", without answering the question "from what date will the new Treaty apply". And in the end it's the latter that matters!
The new Treaty has not yet been published (not yet published in the Tractatenblad), but in general I think I already know the contents of this Treaty. It contains a source state tax in accordance with the Fiscal Treaty Policy Memorandum 2020. See also the BUZA press release of September 2, 2022, which I have cited several times in Thailandblog.
The crucial question is therefore: from what date will the new Treaty apply? This must ultimately become apparent from the final provisions of the new Treaty. But the fact that this date will occur before the date of entry into force of the Treaty would not be an exception.
I give the following examples:
• Malaysia: entered into force on 02-02-1988 and applicable from 01-91-1985;
• New Zealand: entered into force on 18-03-1981 and applicable from 01-01-1981;
• Suriname: entered into force on 13-04-1977 and applicable from 25-11-1975;
• THAILAND: entered into force on 09-06-1976 and applicable from 01-01-1976!
Now, regarding Thailand, replace “1976” with “2024” and it will be clear to you!
In addition, there are two countries whose Treaty has already been signed but has not yet entered into force. And then it's about:
• Columbia, signed on February 16, 02 and
• Cyprus, signed on 01/06/2021.
I therefore do not share the suggestion raised by the above article that, since the date of entry into force is after January 1, 2024, the date of application of the Treaty will not be on January 1, XNUMX.
Ambassador Van Wijngaarden's comment that the new Treaty was only negotiated at official level is also far too simplistic. In doing so, he overlooks the press release from BUZA of September 2, 2022, containing the announcement that the new Treaty has already been adopted by the Council of Ministers on September 2, 2022. And with that we have clearly passed the “official level” in the Netherlands!
I find it the most normal thing in the world that the Netherlands, in accordance with the Fiscal Treaty Policy Memorandum 2020, advocates a source state tax when reviewing new treaties. The Netherlands, not the new country of residence, has fiscally facilitated the pension and often also the annuity payment on the assumption that these payments will lead to the levy of income tax in the payment phase. We are therefore talking about a deferred obligation to pay income tax.
There is often even a tax advantage for the taxpayer. People often fall into a higher bracket during the accrual phase (with deduction) than during the taxed benefit phase.
Lammert de Haan, tax lawyer (specialized in international tax law and social insurance)
Kudos again to the real expert!
Thanks Lammert!
The new treaty also facilitates the exchange of data between the treaty partners. Thai banks and other financial institutions have already been instructed to prepare this. this is an indication that Thailand is taking the new treaty very seriously.
Hello Lambert,
All this fuss about the new tax treaty between the Netherlands and Thailand is driving me crazy. I don't understand it anymore. It just makes my head uneasy.
I only have 1 question
1) Is it justified that Thailand will levy income tax on money I send to Thailand? Tax has already been paid in the Netherlands on the money I send. Then that money would be double taxed. I am now talking about the current treaty. That cannot be the intention. Still with the old treaty, still with the new treaty. It is precisely intended to prevent double taxation.
Hi Fred,
You resent the idea that your euros are taxed twice when transferring them to Thailand, namely on you when you receive your income and in Thailand on the income brought there. However, this is a very common practice, even when the giver and recipient both live in the Netherlands.
An example of this.
Suppose you donate to a child of yours living in the Netherlands. You have paid income tax on that part of your income that you give to your child. Your child pays gift tax on what you donate minus the statutory exemption. In fact, your euros are largely double taxed, but with two different taxpayers.
And if you decide to pay your child's gift tax (we call this "duty-free donation"), you will also pay gift tax on the gift tax then donated.
The Tax Authorities have even come up with a slogan for this, namely: “We can't make it more beautiful”.
This is different when it concerns an alimony obligation to, for example, an ex-partner living in the Netherlands or Thailand. Then you can deduct this alimony obligation from your taxable income.
This “problem” can become much worse if you do not live in the Netherlands but in Thailand, while your ex-partner lives in the Netherlands. Under the new Treaty, you pay full income tax in the Netherlands on your Dutch income, without being entitled to a deduction for your alimony obligation, while your ex-partner living in the Netherlands also owes income tax on the alimony received. The Netherlands then levies twice on essentially one and the same euro.
Unfortunately: it is no different.
A tax treaty is intended to prevent a taxpayer from paying income tax twice on one and the same income, namely in the source country and in the country of residence. But that is not the case in your case because in your case it concerns two different taxpayers.
Here we are talking about pension, but what happens to savings (capital)?
According to this article, Thailand will tax “money abroad” in January 2024.
https://www.thaienquirer.com/50744/thai-government-to-tax-all-income-from-abroad-for-tax-residents-starting-2024/
The treaty now states:
5 Where a resident of Thailand derives income or owns capital which, in accordance with Article 6, 7, 10 paragraph 7, 11 paragraph 5, 12 paragraph 4, 14 paragraphs 1 and 2, 15 paragraphs 1 and 3, 16 paragraph 2, 17 , 19 and 22 paragrpahs 1 and 2, of this Convention, may be taxed in the Netherlands, Thailand shall exempt such income or capital from tax, but may, in calculating tax on the remaining income or capital of that resident, apply the rate of tax which would have been applicable if the exempted income or capital had not been so exempted.
Which states that Thailand may collect “but may”.
How does it seem that something that has never happened before, but is now coming into effect?
So is this your savings outlawed?
Suppose you have sold your house and that money is (still or remains) in a Dutch bank and if you take part of it to Thailand, you will now pay tax in Thailand.
Over 2 tons, in time, you will lose 14000 euros (at 7%). Extra visa costs, nothing in return.
Depending on what the Netherlands does with that problem. Only Thailand is now ready faster, because it has been included in the treaty.
In Thai people it is said that you have to give that up, so do all foreigners have a TIN?
So the Netherlands will collect and Thailand will immediately collect in January, thanks to the “but may”!
Please tell me (sincerely) that I don't understand and am wrong.
There's nothing to say about that yet. The extra instruction Paw. 161/2566 plus accompanying letter to the Thai Revenue Office, see my responses elsewhere, says nothing about pensions or savings, but talks about income brought into Thailand, plus it reports that those who fall under a tax treaty will face a Thai tax with deduction of income tax already paid in the home country. The distinction between pension money and savings was an approach taken by Thai Tax resulting from their more lenient attitude towards Tax Law Article 41. This has now changed with the new instruction. Now that the new TH-NL treaty has been suspended, you can assume that the old treaty is still in force. The NL tax authorities will be busy because everyone has to file a Thai tax return (how that will work out in practice remains to be seen) and those who pay tax to TH will receive an exemption from NL. Of course, you have to apply yourself because the NL Tax Authorities will not deliver it. In addition to these changes, much commotion has arisen in Thailand and the surrounding area because, apart from the text of the instruction, nothing is known of its further scope and consequences. As if it had descended out of the blue, so suddenly. Thailand has been warned by its own experts and politicians that it will miss out on many investments, and that, for example, larger sums of money from abroad to purchase real estate may not be forthcoming. This does not say anything about the consequences for Thai business. Read BKP from last July:
https://www.bangkokpost.com/business/2612597/calm-approach-on-tax-reforms-urged
and ambiguity was still an asset last month:
https://www.bangkokpost.com/opinion/opinion/2659608/new-tax-rules-need-clarification
and now with Dutch pensioners because it became clear that the new tax treaty has been postponed. Unfortunately, this coincides with the new Thai instructions. So let's wait and see how things will turn out.
Bennietpieter, you are talking about Article 23, paragraph 5, of the treaty. For the Dutch text you can look at the web linkwetten.nl (space) Thailand.
It states that Thailand exempts that income (from article .. and .. etc) from taxation, but that one may include that income or capital when calculating Thai tax. See also paragraph 4, which states the same for someone in the Netherlands who (also) has Thai income. This is called 'progression reservation' in fancy words and Lammert de Haan has given an example of this in this blog. Then look at https://www.thailandblog.nl/wp-content/uploads/Heffing-soczekerheidsuitkeringenvervolg.pdf
No one knows exactly how the new vision will turn out after 1-1-24. I read on the Mazars site that advisors also have questions about the summary communication from the Thai government. And there is now more: the Thai government has already provided an explanation in a 'question and answer' communication. I wrote here earlier that I translated that piece and gave it to Lammert for advice; Lammert is an expert in treaty law and that was not my specialty.
I suggest you wait it out, it's not burning yet. In case of doubt, you can still collect the necessary extra 'old' savings this year, but do not forget that Thailand has a much lower deposit guarantee than the Netherlands.
Ger-Korat, now something about what you wrote: 'If Thailand is going to tax Dutch income, the Netherlands must give a reduction'. That's the world turned upside down! The Netherlands only provides a reduction on income that comes from abroad and is taxed there. This is done as stated in the treaty, and if there is no treaty, the Netherlands applies its own legislation.
It says: The Netherlands has taxes on a number of incomes, Thailand is not allowed to levy taxes
But Thailand may levy tax on other incomes and, when calculating tax on those incomes, may apply the rate as if all income were taxed in Thailand.
I have not read anywhere in official documents that savings will be taxed, so far it concerns income from savings.
By the way: the current and the new treaty thwart the ambition to tax all foreign income in Thailand.
About the sale of a home: I had exactly this discussion at the tax office here a year ago.
I then said: if I sell a car in Thailand, will it be subject to income tax? No
And if I sell a house in Thailand? No
And then the discussion was over.
Thomas, the question will soon be where the money that someone brings into TH comes from.
The foreigner says that his house in Aland has been sold, that he has had an inheritance, and that a savings policy has been paid out, and that money has been left over from his salary before he came to TH, etc. Then the Thai official says 'Show that …and otherwise I tax it as income.”
Well, go ahead! You know how bureaucratic TH is, rules and regulations, stamps the same, translations and then stamps on them, no one has a savings bank book or daily statements anymore and not at all from old years, and then the official cheerfully asks if the signature on the deed (let you know who translate?) is from a notary and whether it can be properly certified by the court, home affairs and the Thai embassy. If one wants to be obstructive, then one is also obstructive.
Therein lies the problem. Please prove what money you transferred. Do you even know it yourself? You take it off the big pile. Apart from the ambiguities in the measure itself (see comments elsewhere), you get the suspicion of the tax official in addition to, for most farang, the language problem.
Thailand is quite an important trading partner for the Netherlands and every year around 200 to 500 thousand Dutch people are welcomed with a visa-free entry into Thailand to enjoy the country and its hospitality. Conversely, the bar is quite high for Thai nationals to go on holiday. go to the Netherlands.
Another Schengen country such as Spain requires a much lower daily allowance of, for example, 15 euros per day versus 55 euros for the Netherlands and no hotel reservation for the entire duration of the stay, only for the day of arrival, which is very reasonable.
Given the close relationship and friendship between the Netherlands and Thailand, I would consider a more flexible visa policy appropriate so that more ordinary Thais can simply take a short holiday and enjoy our beautiful homeland as any normal person would in the 20th century. should be able to.
Lammert de Haans' view that the treaty will enter into force on January 1, 2024 is at odds with all reliable sources.
-Council of State: Buza and Finance have not yet submitted the treaty with Thailand for advice to both chambers of the States General. This is only possible after signing by Thailand and the Netherlands.
– Confirmation from BUZA that after signing the treaty in the course of 2023, the treaty will not enter into force until January 1, 2024 at the earliest and not with retroactive effect.
– Confirmation in early November 2023 from the Ministry of Finance to the Dutch ambassador in Thailand that after signing in the course of 2024, it will now take effect on January 1, 2025 at the earliest and also not with retroactive effect.
That is clear and it is wise to close the discussion about whether or not to enter as of January 1, 2024, based on government sources, as implementation will not be possible until January 1, 2025 at the earliest.
Given the very long procedural times for recent treaties, it is not impossible that January 1, 2026 will come into the picture.
But let's wait and see and not speculate
Hans Bos, both of your sentences 'confirmation' were unknown to me until this morning; I read it in an article sent to me. Retroactive effect, on the other hand, has occurred, as you can read here. I have previously written that I believe retroactive effect is incorrect and contrary to legal certainty.
I think it would be better to close this subject, it is not in our power, and that we concentrate on the 2024 measure because it can have a huge impact.
Hans Bos, you write that my view is at odds with all reliable sources. The question, however, is whether you are asking the right questions to these reliable sources and whether you are able to correctly interpret the answers obtained. I have serious doubts about that!
For example, you apparently asked questions to BUZA and the Ministry of Finance regarding the retroactive entry into force of the Treaty. And according to these authorities, that is not possible. These authorities are completely on their side in this regard.
But where do you read in my response that I talk about “retroactive effect”? I don't read it anywhere.
This is where your lack of knowledge of tax law in general and international tax law in particular takes effect.
Instead of “retroactive effect” I talk about “entry into force” and “applicability” of a Treaty. These are essentially different concepts, which you must know how to interpret!
I will try to clarify this using some dates as an example.
On December 31, just before the end-of-year drinks, the Thai government will sign the Treaty. That should be easy because they have already had plenty of time to do it!
This implies that:
• the Treaty will apply from 1 January;
• the date of entry into force may be in March or April or much later, but in any case well after January 1 (after all, the necessary formalities still have to be completed);
• there is no “retroactive effect” but “applicable from January 1st”!
I refer again to the state of affairs regarding the current Treaty with Thailand:
• came into effect on 09-06-1976;
• applicable from 01-01-1976;
• here too there was no question of “retroactive effect” but of “applicability” as the Treaty had been agreed and signed before 1-1-1976, namely on 11-09-1975;
• the time between the date of signature and entry into force is around 9 months;
• this should have been a sufficient indication of how everything works!
I hope that this has made the concepts of "enactment", "applicable" and "retroactive effect" a little clearer. If not: questions are (still) free!
Lammert de Haan, tax lawyer (specialized in international tax law and social insurance)
Lammert, what's in a name someone once said...
My concern about any treaty is that sometime in June you will hear that from 1-1 of that year you already have to pay tax in country A instead of in country B. This will most likely be addressed in the new NL-TH treaty. . That means 'pay back' because the moment of withholding tax, in our case wage tax, has already passed (and the money has been spent...). Or is something known in the implementation sphere?
I don't know how that turned out in 1976; assume that the number of people with a Dutch income in TH was limited at the time. Now I read that the ambassador estimates that number today to be much higher and that leaves them all with a problem. That is my question and it concerns legal certainty. I don't think the name it has is that important for the taxpayer, although it is certainly legally correct.
But there is a bigger problem; the 2024 measure. The more I read and receive, the more I get the impression that I have ended up in a Wild West story. Uncertainty abounds, so it is high time that the Thai government hits the nail on the head and finally lets the consultancy world (and emigrants and seconded workers) know the ins and outs. Otherwise, it will be exciting in the spring of 2025 when those people have to file their 2024 tax return in Thailand...
Erik, you know the clincher as well as I know it: “Every Dutch person………… etc.”
I think your last comment (“the 2024 measure”) refers to the Departmental Instruction no. 161/2566 of September 15 to the Thai tax officials, whereby the remittance base provision is abandoned, without any amendment to section 41 of the Thailand Revenue Code. By the way, this is not something special as far as Thailand is concerned. For example, the important changes in Thai tax law with effect from 2017 were also implemented at KB, without changing the law. And this Departmental Instruction may one day be replaced by a Royal Decree.
However, under the new Treaty with Thailand and in which a source state tax has been stipulated, “the 2024 measure” is not important for Dutch people living in Thailand.
Lammert, that's good news! Then the new treaty cannot come quickly enough.