I hold dual US and Thai citizenship. I have been working in Thailand for the last 15 years and almost all of my investments and savings are Thailand-based. I would like to tap into US-based investments (more choices, better transparency and cheaper fees). I am concerned about taxes on capital gains that US investors pay. Do you have any suggestions on how to invest outside of Thailand with minimal tax liabilities?
ANSWERED BY... Teera Phutrakul, CFP, Chairman, TFPA I hope you realise Uncle Sam is flat broke right now and the US Internal Revenue Service (IRS) will track you down wherever you are in the world.
Worse still, if you are a member of the Tea Party movement, they may harass you even more. According to the letter of the law, US citizens have to declare all their global income. It does not matter whether you live and work in Thailand or the US.
This is a shame because the core injustice in America's tax policy is that it is based on citizenship rather than residency. Six million US citizens live outside the US, and I am sure many of them have not heard or are aware of the Foreign Account Tax Compliance Act (Fatca). Dual citizens such as yourself are required to file taxable income in both Thailand and the US.
Even more alarming, Fatca seeks to require foreign financial institutions to report US citizens holding accounts with them, and if they do not these institutions face a 30% withholding tax on securities transactions that originate in the US.
When you invest in Thailand, I am assuming you use only your Thai ID card to open bank accounts or investment accounts _ that is, no US ID is ever used _ so you may be able to avoid filing your taxes in the US. Financial institutions in the US typically send you a 1099 form telling you what dividends were paid and the numbers to report on your tax return. If you were caught and said you never received a 1099 form from a Thai financial institution and hence forgot to report it as an oversight, then you may get away with just a small penalty if the monetary amount is small.
The bottom line is that when you invest outside of Thailand, you need to decide whether to use your Thai or US identity. If you use your Thai ID it is less complicated. You need to seek the Bank of Thailand's approval to remit money offshore for investment purposes, and if you are investing for the long term _ that is, more than one year _ then you will not be subject to any capital gains taxes when you remit gains back to Thailand. But if you use your US ID, then you will definitely need to file US taxes.
Alternatively, you can always give up your US citizenship if all this hide and seek with the IRS is proving too much of a hassle. Many Thais with US green cards or dual citizenships such as yourself either keep quiet about their heritage or spend potentially thousands of dollars a year to prove they owe no US taxes. And increasingly, it forces them to give up their US citizenship altogether.
My grandparents are willing to support me with seed money to set up my own business. But instead of lending me money, they are considering it an early inheritance option. Some friends warned me about taxes and implications from inheritance. I wonder if it will cost me more than if I simply borrow the money. Is this true? Which option is better for me?
ANSWERED BY... Teera Phutrakul, CFP, Chairman, TFPA It all depends on the amount and whether you want to do the right thing or not. If your grandparents give you 10 million baht as seed capital for you to start your own business, then technically you have to declare this as your income and it shall be subject to income taxes. But if the amount were small, say 100,000 baht, most people would just keep quiet about it.
Even if the amount is large, you may be able to ask to receive the money in smaller instalments _ that is, less than 2 million baht at a time. In this way, you don't have to explain to the bank manager where the money came from when you deposit the funds.
A loan from your grandparents is not a bad idea to consider. At least your integrity will still be intact when you pay back the loan plus interest. If your venture is successful, you can look back and be proud of the fact that you made it on your own and not because grannies gave you a leg up.
The Thai Financial Planners Association is the Certified Financial Planner (CFP) trademark licensing authority in Thailand. It is a self-regulated, non-profit group of financial advisers and experts from various organisations set up to give advice to investors. Questions can be submitted through email@example.com or the TFPA webboard, www.tfpa.or.th
About the author
Writer: Thai Financial Planners Association