Interest rate

by **Ray.Charles** » March 30, 2011, 10:51 am

Several banks are offering fixed deposit plans where the interest rate increases in steps. For simplicity, assume that you have 1,000,000 baht in the K-bank plan.
Months 1-4, annual interest rate 1.75%:
interest earned during that period = 5,833 baht, net after 15% tax withholding = 4,958 baht.
Months 5-8, annual interest rate 2.25%:
interest earned during that period = 7,500 baht, net after 15% tax withholding = 6,375 baht.
Months 9-12, annual interest rate 3.75%:
interest earned during that period = 12,500 baht, net after 15% tax withholding = 10,625 baht.
Months 13-16, annual interest rate 6.0%:
interest earned during that period = 20,000 baht, net after 15% tax withholding = 17,000 baht.
TOTAL interest in 16 months after tax withholding = 38,958 baht. Effective interest rate = 2.92% per year.
A quicker way to get to the same number is (1.75 + 2.25 + 3.75 + 6.0)/4 = 3.44. After 15% tax withholding, 3.44% X .85 = 2.92%
Two questions:
1. Would you report this Thailand after tax income to the uncle in the U.S.?
2. In the U.S., withholding rate depends on the type of income, but the tax you pay depends on your total income from all sources, and therefore the tax withheld may be less or more than your tax due. Also, in the U.S., the interest and dividend paid to you are reported by the financial institution to you and the IRS; if you do not include that in your tax filing, you are automatically red-flagged by the computer. Do you know what the tax rules are that affect us in Thailand? Are you required to file if you have any interest income?

by **WhoUrDaddy** » March 30, 2011, 11:22 am

ANY INCOME, from any source or country must be reported to IRS.......... :-(

by **Prenders88** » March 30, 2011, 11:57 am

Do the banks here, offer these accounts to Johnny Foreigner?

by **gudtymchuk** » March 30, 2011, 1:58 pm

Prenders88 wrote:Do the banks here, offer these accounts to Johnny Foreigner?

If such interest rates are available to a farang I might re-think how I show income for my retirement extension.

by **Ray.Charles** » March 30, 2011, 3:26 pm

Yes, it is available to anyone that is to anyone allowed to open an account in a Thai bank. Bring the usual items needed to open an account, passport, etc. But, I believe that the window closes soon. I went to the immigration in Udon to ask if that kind of account will satisfy their requirement for the money in a Thai bank; no problem-- the very polite and knowledgeable boss man at the Udon office assured me by coming over to see me even when he was on his lunch break..incredible service.

by **parrot** » March 30, 2011, 7:31 pm

I'm gonna step on my crank with this one, but here goes:
The US has a treaty with Thailand that in effect says:
If you pay taxes on income in Thailand, you don't have to pay taxes on the same income in the US. The same goes for income of a Thai who pays taxes on income made in the US.
Since Thai banks deduct taxes on interest automatically, you don't have to pay any US taxes on the same interest.

This does not relieve you of your responsibility to report all foreign bank accounts to the treasury department each year.

Nuts and bolts can be found on google.....I'd suggest you check it out yourself.

by **Ray.Charles** » March 31, 2011, 10:42 am

Thanks, I have now gotten what I needed from the irs.gov website.
As you know, in the U.S. you are required to file even if you do not owe any taxes. Are there any similar reporting requiremnts in Thailand, even though tax on the interest is colllected at the source?

by **maaka** » March 31, 2011, 11:19 am

are you saying that you have to pay a 15% witholding tax, and then IRS will tax you again on the interest you earned..
oyiiiiiiiii a double wammy..

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