Tax Loopholes Issues Personal Income Tax from Foreign Sources of Income

Abstract

          Investing abroad is one strategy that investors use to diversify risk. However, under the previous tax law, there were gaps that made it impossible for the Thai government to collect personal income tax on certain foreign-sourced income, leading to fiscal losses. In response, the Revenue Department issued Orders No. P.161/2566 and P.162/2566 in an attempt to close these legal loopholes. This academic article aims to examine the relevant legal principles, compare the differences between the old and new interpretations, and present key legal loopholes concerning the collection of personal income tax in Thailand from foreign sources. The study finds that legal loopholes exist due to: (1) income exemptions under Sections 42(27) and 42(28) of the Revenue Code; (2) inheritance transfers within exempted value limits; (3) gift transfers made legally during the giver’s lifetime; (4) using life insurance policies to reduce inheritance tax burdens; and (5) other mechanisms such as not remitting funds to Thailand, staying less than 180 days in a tax year, or spending income entirely abroad. Policy recommendations include: clarifying the law, improving communication of tax procedures, involving stakeholders in the legislative process, and aligning tax policies with international standards to promote investment and long-term tax transparency.