Thailand Divorce Personal Tax Planning
On 24 December 2012, Revenue Code Amendment Decree (No 18) BE 2555 was issued, permitting, from and including the 2012 personal income tax year, husbands and wives to file their own tax returns for their own incomes, no longer requiring husbands to include their wives incomes in their tax returns, and thereby, ending the divorce tax planning scheme.
The Tax Planning Scheme
The Thailand personal income tax law prescribes, in the case of a husband and wife being married for an entire year, the husband shall include the income of his wife in his personal income tax return (except for the employment income of his wife, for which his wife can opt to file a separate personal income tax return in her own name).
Proponents of the divorce personal tax planning scheme exploit the words in the law "being married for an entire year". That is, in the case of a husband and wife not being married for an entire year, a husband does not have to include the income of his wife in his tax return.
And thus evolved the divorce personal tax planning scheme, particularly among husbands with wealthy wives, whereby husbands with wealthy wives avoided payment of tax for their wealthy wives incomes, simply by divorcing their wealthy wives a few days before the end of a tax year and then re-marrying their wealthy wives a few days after the beginning of the next tax year ... which enables the divorcing and re-marrying husband to avoid payment of tax for both the year of divorce and for the year of re-marriage, because for both years, they were not married for the entire year.
This Tax Insight is general information only. It should not be used to determine any particular matter without consulting with an experienced Thailand tax advisor.