Reader question: Remittance Base, pension exemption from taxation paid out to Thai bank
Dear readers,
Remittance Base, it's been months since this topic was touched on. However, I am very curious if there is any further news on this subject? Just for those who may be wondering what this means, a brief explanation.
The tax agreement between the Netherlands and Thailand, which has existed for years, states, among other things, that the Dutch tax authorities can demand that pensions, etc., that are exempt from taxation must be paid directly to a Thai bank and not, as has often been customary until now, simply with an exemption to a Dutch bank. bank account. Existing exemptions will not be adjusted (was expected) but it would be adequately introduced for new tax exemptions to be granted.
My question is, does that actually happen? Are there people who are now indeed obliged to have their pension paid directly into a Thai bank account? The 'threat' was if you did not provide a Thai bank account to your paying pension insurer, it would simply have to withhold income tax again.
Who has practical experience with this or other information?
Thanks in advance for the info.
Regards,
Piet
Threat that? No, an exemption from payroll tax is granted on the condition that the paying agency pays directly to a Thai bank account and that per pension term (in baht or another currency, it doesn't matter). The paying body is wise enough to do so and if you do not provide a Thai bank account, they will deduct wage tax according to the rules.
Your question: does that really happen? Yes.
It just doesn't apply, I read that misunderstanding here in the blog, to income allocated to the Netherlands such as AOW, state pension and some other sources of income. You can safely leave it in the Netherlands until you need it.
Erik wrote: income that is taxed in the Netherlands, such as state pension and state pension, can safely be paid out in the Netherlands. May I carefully add: if you are cost-conscious, it is better to transfer it from your Dutch bank account to Thailand together in a few months. Otherwise, you will pay a hefty amount every month for every transfer to Thailand.! So it's just better for your wallet.
And where is that in the tax treaty? I don't think that's anywhere!
Peter in art 27 of the agreement
Greetings Pete
don't want to start a whole discussion but it is not in article 27 !! It only says it applies to money transferred to thailand! That's the requirement. The requirement is NOT that it is transferred by the payer (the pension fund).
There is an article in Thai tax law that also deals with this: foreign income is only taxed insofar as it has entered Thailand. Additional conditions must be met. That's all right. Let's not fuss about this too much. Leads to nothing. It's just fodder for lawyers. Am I by chance.
But John isn't that exactly the clue what it's all about… if I live in Thailand but my money is deposited in Ned.Bank, the Thai tax authorities cannot withhold tax because according to the treaty, it can only be withheld if the money is deposited to Thailand
Now we get an exemption in NL, but on the other hand, we have to pay tax on it in the country where we live… so the NL tax authorities can demand that the money be transferred to Thailand so that the Thai tax authorities can actually levy
Now we benefit from the exemption obtained in the Netherlands and Thailand cannot levy because the money remains in NL
I happen to not be a lawyer, but this seems logical to me
Indeed, that makes sense, you don't have to be a lawyer. We totally agree. If money is not brought into Thailand, there is nothing to tax for the Thai tax authorities.
It is also literally stated in Thai income tax law. Link:http://www.rd.go.th/publish/6045.0.html
Is Article 1 of the Thai Personal Income Tax Act:
Taxpayers are classified into “resident” and “non-resident”. “Resident” means any person residing in Thailand for a period or periods aggregating more than 180 days in any tax (calendar) year. A resident of Thailand is liable to pay tax on income from sources in Thailand as well as on the portion of income from foreign sources that is brought into Thailand. A non-resident is, however, subject to tax only on income from sources in Thailand.
The discussion is about whether the tax authorities may require that the pension fund transfer directly to your Thai bank account or whether you can simply receive the money into your Dutch bank account and then forward it yourself (for example once every three months). We use the word “remittancë” for that.
Indeed in both cases the money should eventually end up in Thailand, but if the tax authorities demand remittance, so directly from pension fund to Thai bank, the tax authorities are sure that it will enter Thailand. If you say: sort it into my nl bank account and I will forward it myself, the tax authorities should assume that this is happening or should they go after it again by, for example, asking to prove that you have forwarded it.
Hi Pete,
Article 27: If a provision of this Agreement requires a reduction of tax on certain income to be granted in one of the States and under the laws of the other State a person is not liable for the full amount of tax in respect of that income subject, but only to the extent that such income is remitted to or received in that other State, the deduction to be made by the first-mentioned State under this Agreement shall apply only to that part of the income remitted to or received in the other State. received.
This article does not apply to paid pensions because, except for government pensions, these are always taxed in Thailand under the Convention if the recipient is resident in Thailand. It does not matter whether these pensions are transferred to a Thai Dutch, Afghan etc. bank account.
regards,
Peter.
That's right.
I have been receiving a small (Pre) pension for a few months (No AOW or ABP) and the condition of the Tax Authorities is indeed that it is transferred directly to, in my case, a Thai bank account.
I even had to send a form with the account details of my bank account in Thailand.
Of course I had already done this to the pension insurer.
New for me was that the state pension, which I will receive much later, can simply be paid into a Dutch bank account. (Erik Kuijpers 10:31)
Given the discussion dated 26-09-2016 that bank accounts may be canceled from Dutch people who have been deregistered from NL, the AOW benefit may be more or less obliged to have it transferred to Thailand via a detour.
Not because of the condition of the tax authorities, but because of the fact that you CAN no longer have a bank account as a deregistered Dutch citizen.
a treaty is always an agreement on the important subjects. Each country has to fill in the details themselves.
So remittance: no, it is not stated in the treaty, but is determined by the tax authorities, apparently having learned from past events. You can comment on that, but it is like many things in life “swallow or …”. It's not really unreasonable either!
Here it is, the 2016 treaty, article 27, "limitation of relief".
And yes, it is maintained.
Dear Corret
Exemption is not guaranteed permanent, if only because the tax authorities want to check every now and then that nothing has changed.
AOW may simply be paid to a Dutch bank or Thai bank, that is your choice.
Your Rabobank indeed has nothing to do with Remittance base, which is accountable to your pension payer who has had a copy of the tax exemption
Talk to your accountant again
Groet
Piet
I recently received my tax exemption for my company pension. To my surprise, the letter, which is also sent to the pension provider, does not mention anything about Remittance Base, ie that the pension must be paid into a Thai bank account.
Incidentally, I will now have my pension paid into my Thai account, so that the Thai tax authorities
can easily check that the specified pension corresponds to the amount paid by the pension provider. And in anticipation of the possible introduction of the remittance base.
DIRECT transfer is not in Article 27 of the Convention; I have my doubts about whether it is a correct requirement and I have had a lot of fun with Lammert de Haan, who has put together the tax file with me. I have an exemption until I turn 75 (that's another 5 years care-free….) and if I still live in Thailand and feel fit I could start the procedure, but whoever lives then takes care of it. Perhaps the treaty has changed.
Just ring the bell, refuse to give a Thai bank account for ONE MONTH, transfer it to Thailand within the calendar year, have the payroll tax withheld, object in time and then Heerlen must take a stand and with its buttocks naked, knowing that this will end up in court. But litigation is not free, you owe court fees, the adviser does not work for the cat's tail and the outcome after x years of waiting and possibly 'the nerves' is uncertain.
I know several people who have their pension allocated to Thailand transferred directly to a Thai euro account and only convert it when necessary or when the exchange rate is attractive.
Jan
Totally agree with corret
Don't be fooled, I did by people who think they know it all and the wildest
Placing stories on thaiblok. Have been living in Thailand for 13 years, and have enjoyed the exemption for 12 years
From wage tax. The exemption ran until 1 Jan 2017 from Heerlen received the advice for Oct 2016
To make a new application and sent in September, already within the exemption for 5 years.
Pack of my heart, was quite upset by a series of messages that came to me.
The advice DON'T BE CRAZY is in place
GR Jan v
That's the problem Jan, one gets extra requirements and the other doesn't. Heerlen does not keep a fixed line.
You have an exemption for 5 years? Good for you, but I have one for 10 years…
At one they demand a remittance base, the other cycles through it.
At one they keep nagging about registration with the Thai tax authorities, at the other they don't.
But that does not mean that the rules are different as written above. That provision is there and you can read it yourself in the treaty.
Hi Khun
Does the Ned. tax authorities do not require a Thai tax number. They do that with me and the Thai service does not want to give me a number because I have no income from Thailand.
BertH
When I read all these stories, I only come to one conclusion and that is, “you are at the mercy of the tax officer on duty who is handling your case”. We (my wife and I) have been arguing with the Tax Authorities in Heerlen since 2014 (when we came to live in Thailand).
What they keep asking for is a tax number from the Thai tax authorities and that we have to prove that we pay tax here. But just like Bert H. on Sept. 29. writes : you don't get that because we have no income in Thailand. I think it's great of those who did get an exemption, only here again why measure with double standards? one 5 years the other 10 years and the other permanent.
I know of a number of people that they have been imposed a remittance base, I have seen the decisions, and they have opened a euro account in Thailand.
I do not advise anyone to litigate for tenners because, as I have already written, that costs time and a lot of money.
Erik Kuijpers writes on 28 September at 16:23 oa
“DIRECT transfer is not in article 27 of the treaty; I have my doubts about whether it is a correct requirement and I have had a lot of fun with Lammert de Haan, who has put together the tax file with me.”
Since my name is mentioned in this answer I am taking the liberty of responding to this. In this I casually include the answer from John (who claims to be a lawyer), which was also posted on September 28 at 12:49. Both answers do not show sufficient knowledge of or insight into the Dutch tax system.
The first question to ask is: “What is the exemption for?” There is only one answer to this, namely: for the withholding of wage tax (and more specifically wage tax) on amounts that fall under the Wage Tax Act 1964 (Wet 27b). The Dutch wage tax falls under the scope of the tax treaty concluded between the Netherlands and Thailand. Article XNUMX of the Treaty therefore applies to this.
Unlike income tax, wage tax is not a period tax. Each payment subject to the Law lb must be assessed for compliance with the entry into Thailand of this payment, which entitles Thailand to levy income tax on it. Whether or not she does so is irrelevant. If Thailand refuses to levy income tax on this, the right to levy will not return to the Netherlands!
In this light, the requirement of the Tax and Customs Administration to have the payment transferred directly by the pension provider to a Thai bank account before granting an exemption from payroll tax is fully legitimate and arises solely from the application of Article 27 of the Treaty, in combination with Thai tax law: at the time of payment, the contribution in Thailand is fulfilled. Incidentally, as can be read in some answers, Office Abroad does not have a clear policy on this point.
Another requirement that the Foreign Office makes with a request for exemption, namely proof of being registered as a taxable person with the Thai tax authorities, is debatable. After all, if the Thai tax authorities refuse such a registration, the right to levy will not return to the Netherlands and you can demonstrate by other means that you are indeed a tax resident of Thailand. After all, it is not a matter of whether Thailand has a levy, but whether Thailand is allowed to levy! Until now, Office Abroad still goes along with the additional evidence that I provide in such a situation, when it comes to my Thai clients for income tax purposes.
To be clear: Thailand only levies on income that has actually been contributed to Thailand in the year of enjoyment. If you can get by on your AOW benefit in Thailand without using your company pension paid into a Dutch bank account for one or more months and you only transfer that company pension to Thailand in the year after enjoying it, then Thailand will not levy any is Article 27 of the Treaty (the remittance base) correctly applied!
Lammert de Haan (tax specialist, specialized in international tax law)
With all due respect Lammert, but what you say (even if you call yourself a specialist) about direct transfer is not correct. See the relevant ruling of the Supreme Court on this. The levy on private (ie not government) pensions has been allocated to Thailand without any restriction. Whether or not the pension is transferred directly to Thailand is NOT relevant.
(I'm also a tax expert (and tax advisor) and, in all modesty, I think I know something about it.)
Gentlemen, we're waiting for the person who rings the bell about the remittance base. Start litigating but be aware of the costs and the waiting time. However, tax advisors like you can save yourself the external fee.
I confirm Lammert's comment that Heerlen does not apply a fixed line in the requirement for remittance, and now I am again confronted with the requirement for registration with the Thai tax authorities. This is what they write in Heerlen: "You apply for an exemption. This exemption is based on... This treaty applies to you if you are considered a tax resident.' I can't find it in the treaty, I don't think you can either, So that means writing and gathering arguments again.
Eric, you will indeed not find the requirement set by the Tax Authorities regarding registration with the Thai Tax Authorities in the Treaty. I therefore have serious doubts about the validity of this claim. Or let me put it more clearly: it lacks any legal basis. See also my post at 15:12 PM.
What is deemed to be your tax residence can be found in Article 4 of the Convention.
If you are both a resident of the Netherlands (registered here because you are in the Netherlands for a longer period of time for a holiday/family visit) and of Thailand, the rules from the Convention determine where you are deemed to be a (fiscal) resident (and also in this order !):
a. you are deemed to be a resident of the State where you have a permanent home available to you; if you have a permanent home available to you in both States, you are deemed to be a resident of the State with which your personal and economic relations are closest (center of vital interests);
b. if the State in which you have your center of vital interests cannot be determined, or if you do not have a permanent home available to you in either State, you shall be deemed to be a resident of the State in which you have an habitual abode;
c. if you have an habitual abode in both States or in neither of them, you shall be deemed to be a resident of the State of which you are a national;
d. if you are a national of both States or of neither of them, the competent authorities of the States shall settle the matter by mutual agreement.
For my Thai customers (without registration with the Thai tax authorities) I prove the tax residence by proof of registration with the municipality, sending the rental contract of their Thai home, proof of payment of the rent, energy bills, etc.
This demonstrates that they have a sustainable home at their disposal in Thailand. A holiday home somewhere in the Veluwe cannot be regarded as a sustainable home. You must leave this house clean on Saturday before 10 am. The temporary address of your brother or sister (when visiting family) cannot be regarded as such either.
In addition, I will include the relevant provisions from Thai tax law. So far this has been accepted by the Tax Authorities.
Also see the tax file.
PLEASE NOTE: you can only have tax residence in one country!
Of course I know the rulings of the Supreme Court, Joop. However, no judgment has yet been rendered by the Supreme Court regarding the remittance base (Article 27) of the Netherlands-Thailand Tax Treaty. There is only one statement on this point. This dates from 1998 (ECLI:NL:PHR:1998:AA2563) and concerned the tax treaty concluded with the United Kingdom. The case failed for the Tax and Customs Administration because of the chosen wording in the Treaty.
Your comment that the 'tax has been allocated to Thailand without restriction' is completely incorrect. Just read the Treaty (art. 27), in combination with Thai tax law! The Netherlands has concluded a tax treaty with 9 other countries that also includes a remittance base.
And because the entire question concerns exemption from withholding wage tax (time tax instead of period tax, such as income tax), you do not meet the condition of contribution in Thailand when your pension is paid into a Dutch bank account and therefore no exemption for the wage tax are granted: at the time of payment you do not meet the condition of contribution in Thailand.
And whether you can straighten this out later with the income tax return is very much the question. After all, Thailand does not levy income tax on your pension that you have not contributed to Thailand in the year you enjoyed it. And then you show that the amounts you have transferred from your Dutch bank account to Thailand are actually income received in that year and not savings. I give it to you to do and I wouldn't start it myself. The burden of proof is on the taxpayer! If you only transfer your December pension to Thailand in January, the Thai Tax and Customs Administration will not levy any income tax on it and Article 27 will then come into effect. But then we are no longer talking about exemption from wage tax withholding as time tax: at the time of payment you simply do not meet the conditions.
'Treaty knowledge', Joop. That is the key word that every tax specialist has to deal with and that in combination with knowledge of the tax legislation of both countries!
Lammert,
Indeed, it is about treaty knowledge. Whether or not Thailand charges is NOT relevant.
The misunderstanding with you concerns the aspect that payment in Thailand is NOT relevant.
One should not be intimidated by “Heerlen”. In addition, the unequal treatment that various people complain about is a textbook example of improper management.
Joe,
Whether Thailand does or does not levy is indeed irrelevant. As I indicated earlier, the right to levy will not return to the Netherlands if Thailand does not want to levy income tax from you.
Direct transfer of your company pension to a Thai bank account IS relevant because of the time tax: the payroll tax.
I can go a long way with your comment about 'improper management'. Within general administrative law we know the concept of 'tax discrimination'. This should also include 'unequal treatment of equal cases'. And if that is done by one and the same tax office, then you can indeed speak of 'tax discrimination'. If two different tax offices are involved, this flyer will unfortunately not work.
For the Administrative Court, 'unequal treatment of equal cases', in addition to the concept of 'generated confidence', is almost mortal sin No. 1.
I still have a binding decision from a tax inspector on my desk about that 'created confidence'.
In this binding decision, the inspector indicated that the surrender of an annuity by a Thai customer of mine was not taxed in the Netherlands, but in Thailand (art. 18, paragraph 1 of the Convention). The (correct) statement was involved in the settlement of his declaration that the surrender of an annuity is not regulated in the Treaty concluded with Thailand, with the result that the National (Dutch) law applies.
Obviously, I do not agree with this changed attitude of the Tax and Customs Administration. My client was confident that the Netherlands would not levy any tax on the surrender. Although the Inspector's binding decision was completely contrary to the Convention, I will nevertheless hold him to this with an appeal to a 'generous confidence'.
for the enthusiast: click and you will get the story of the Supreme Court in plain Dutch. Supreme Court ruling dates from 1977!
Retirement in Thailand? Note the remittance principle!
A number of countries levy income tax according to the so-called remittance principle. Remittance means transfer, money transfer. The principle means that these countries only start charging tax when the relevant income has been received in that country. The tax authorities have recently changed their stance on pensions for residents of Thailand. Read here what impact this can have.
An example
Mr. X lives in country A and owns shares in a company based in country B. The company pays dividends and this is credited to a bank account in country B.
In a country with a remittance base tax law, this dividend does not constitute income and is therefore not taxed for Mr. A.
No double taxation due to treaties with other countries
The Netherlands has concluded a very extensive system of tax treaties to prevent double taxation. Double taxation is prevented by allocating certain income, as defined in tax treaties, to one of the countries.
For example, Dutch pensions that are paid to people who have emigrated to Thailand are allocated to Thailand for tax purposes.
According to the Netherlands, it cannot be the case that income is allocated to the other treaty country, which then does not levy because tax is levied in that country on the basis of the remittance principle. A separate arrangement is made for this in tax treaties.
Countries that levy according to the remittance principle include Great Britain, Ireland, Malta, Singapore and Thailand.
Thailand: a new situation
The Netherlands has had a tax treaty with Thailand since 1976 and this treaty also contains a remittance provision. Until recently, this remittance provision was not applied, but that has now changed due to a change of position by the tax authorities.
This is especially noticeable when applying for exemptions from withholding payroll tax on Dutch pension benefits to residents of Thailand. The tax authorities will refuse this if the income is not transferred directly to Thailand.
The position of the tax authorities is not in accordance with a judgment of the Supreme Court, which decided in 1977 that a remittance base provision cannot apply if the country of residence is assigned the exclusive taxing rights. This is mentioned in the tax treaty between the Netherlands and Thailand with regard to pensions.
The annoying thing is that there is no possibility to object to an exemption statement from the tax authorities. This means that if the exemption is not granted, only objection and appeal is possible against the withholding of wage tax or against the income tax assessment. Needless to say, this may come at a hefty cost.
Do you have any questions about the above. Please feel free to contact me. You can reach me on 06 54 631 850.
mr Ralf Ramakers
http://www.mradviseurs.nl/blog/nieuwe-blog-post-5/