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Phuket Business: US tax regime – Comply or else…

Legacy Phuket Gazette

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Phuket Business: US tax regime – Comply or else… | The Thaiger

PHUKET: At a US tax seminar held last month at the Holiday Inn, Patong, by the American Chamber of Commerce (AMCHAM) Phuket Chapter, American income earners and business operators were given a comprehensive update about the US tax regime’s reporting requirements and regulations.

Two previous articles about the seminar – published in the Business section of the Phuket Gazette on March 23 and 30 (click here) – covered the Foreign Earned Income (FEI) exclusion, foreign tax credits and other related reporting requirements such as the Foreign Bank Account Reporting (FBAR).

This article will cover the reporting requirements for foreign held assets, as well as investments in foreign corporations.

The seminar’s keynote speaker, John Andes, a US CPA and Thai-American partner with the Bangkok-based accounting firm KPMG Phoomchai Tax Ltd, covered a number of forms that Americans living or investing abroad should be aware of.

“Form 8938 must be filed by US persons with any interest in a Specified Foreign Financial Assets (SFFA), if the aggregate value of such SFFA exceeds certain thresholds,” he said.

For single persons, or those married but filing separately, the SFFA threshold is at least US$200,000 aggregate at year’s end or at least $300,00 any time during the year.

For married persons filing jointly, the thresholds are double. In addition to this, certain US persons who are shareholders, officers or director of a foreign corporation (any juristic entity) may be required to file form 5471, which covers ‘Investment in Certain Foreign Corporations’.

He said that there are four categories required to file this form, but generally, this is required to be filed by any US citizen or resident that is a director or officer of a non-US company, which has at least one US shareholder, who has at least 10% ownership in the value or voting rights of the company.

Form 5471 is required for any shareholder of a non-US company who acquires or disposes of a significant amounts of shares in the non-US company. Also, form 5471 is required where, under certain circumstances, American shareholders control more than 50% of a non-US company’s shares, either by value or voting rights.

Failure to file forms 8938 and 5471 can carry a penalty of $10,000 per incident, and in the case of form 5471, also pose potential loss of foreign tax credits.

Forms, forms and MORE forms

In addition to the 8938 and 5471 forms, American investors may also need to report other types of foreign investments such as a non-US partnership (form 8865) or disregarded entities (form 8858).

Moreover, US taxpayers must report if they are an owner of a foreign trust, as well as if they had any transactions with foreign trusts, ownership of foreign trusts and gifts or bequests from foreign individuals (form 3520 or 3520-A for owners).

Even investments in non-US companies that generate passive income may be subject to additional reporting. In some cases, where an American shareholder receives a dividend from a Passive Foreign Investment Company (PFIC), the shareholder may need to report his investment and income on form 8621.

A PFIC is determined by meeting one of two tests. The first test is met if at least 75% of the non-US company’s gross income is passive income, (interest, dividends, rent, royalty and/or capital gain income). The second test is met if at least 50% of the company’s assets have generated or are expected to generate passive income.

Cash (generating interest income), buildings and land held for lease (generating rental income), for example, would be considered passive assets.

The tax on dividends received from a PFIC, under certain circumstances, can be very costly to the shareholder. In addition to the normal income tax, there could be additional liabilities imposed on the taxpayer. The additional liabilities may be avoided by making certain elections. This is a very complex area of tax law, which may unknowingly affect many investors in Thailand, especially those who invest in companies that own and rent real estate.

Bank sanctions

Starting in 2014, as a result of the US Foreign Account Tax Compliance Act (FATCA), non-US banks, brokerages, mutual funds, asset managers and insurance providers will begin required reporting of information on many of their US account holders or else face stiff US withholding taxes on US-sourced income.

Financial institutions, if they elect to comply, must disclose information about accounts held by US persons, which have an aggregate value of at least $50,000 during the year.

Financial institutions that do not comply will be assessed a 30% withholding tax on dividend and interest income and on the proceeds from the sale of assets paid from the US.

The burden of FATCA is on the non-US financial institutions to comply. Indirectly, though, there may be a backlash to American investors and depositors if the financial institutions start to reject new accounts for Americans or ask existing American customers to discontinue their accounts.

Changes from 2013

The 2013 year introduced some changes to the taxation of American individual taxpayers.

Many of the “Bush tax cuts” stayed in effect after sunsetting in 2012, but there is now the addition of a 39.6% tax bracket for ordinary taxable income greater than $400,000 for single filers and $450,000 for joint filers. A 20% tax bracket was introduced in 2013 for long-term capital gains for these high income earners also.

In addition to these new tax brackets, FATCA imposes limitations on high income taxpayers in regards to certain itemized deductions, such as mortgage interest, state income tax, property tax and charitable donations. Deductions are lost at the rate of 3% of Adjusted Gross Income (AGI) in excess of $250,000 for single filers and $300,000 for joint filers. Also, medical expenses are deductible to the extent that they exceed 10% of AGI – previously 7.5%.

There will also be a phase-out of the personal exemption. Normally, the personal exemption is $3,900, but the exemption is reduced 2% for each $2,500 that your AGI
exceeds the AGI threshold for deductions.

There is now a 3.8% surtax on unearned (investment) income applicable to those taxpayers with modified AGI greater than $200,000 for single filers and $250,000 for joint filers.

Medicare taxes will also increase. For those subject to Medicare tax deductions, the tax rate will increase from 1.45% to 2.35% on wages over $200,000 for single filers and $250,000 for joint filers. There will also be a new 0.9% Medicare tax introduced for these higher income earners.

On a positive note, the estate and gift tax law changes were welcomed by many taxpayers. The estate tax rate was reduced from 55% to 40%, and the lifetime exclusion was adjusted to $5.12 million for 2013. The annual gift tax exclusion increased from $13,000 to $14,000 for 2013.

Conclusion

These developments, as well as those described in previous articles, only focus on US federal income tax. Some taxpayers living abroad may also be liable to state and local income taxes. Clearly, the US federal tax rules are ever-changing and as complex as ever. For most taxpayers living abroad, the reporting requirements are manageable, but for many, complex tax calculations, difficulty in reporting information and not being aware of changes to the existing tax laws will cause them to seek assistance either from professional tax advisors or from the IRS directly.

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Archiving articles from the Phuket Gazette circa 1998 - 2017. View the Phuket Gazette online archive and Digital Gazette PDF Prints.

Thailand

Facebook removes “information-influencing” pages linked to Thai military

Maya Taylor

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Facebook removes “information-influencing” pages linked to Thai military | The Thaiger
PHOTO: Facebook

Facebook has confirmed the removal of 185 accounts run by the Thai military and allegedly involved in information-influencing. The social media giant says the accounts were deleted for engaging in what it calls, “coordinated inauthentic behaviour”. In total, 77 accounts, 72 pages, and 18 groups have been removed from the platform, in addition to 18 Instagram accounts. It’s the first time Facebook has taken such action against accounts linked to the Thai government.

The accounts were associated with the Thai military and were targeting people in the southern provinces, Facebook said its regular report on coordinated inauthentic behavior. The south of the country has been the scene of decades-long conflict, with insurgent groups in the majority-Muslim, Malay-speaking region calling for independence. To date, around 7,000 people have died in the ongoing struggle.

Facebook says the deleted accounts were most active last year and used both fake and real accounts to manage pages and groups, both openly military pages and pages that hid their links to the military. Some of the fake profiles pretended to be people from the southern provinces.

The report mentioned a post by the now-removed account named “comprehending the operation” in Thai. The page posted the logo for Amnesty International Thailand and wrote “The NGO never cares about ordinary citizens because they have no role in society. Normal people are not famous. Any case is not big news. They are not worth the investment of foreigners so they will not do anything to help. This is why we don’t see anything from the NGO.”

Facebook removes “information-influencing” pages linked to Thai military | News by The Thaiger

Image overlay translates to “The NGO never cares about ordinary citizens because they have no role nor money.”

On another now-removed account, named “truth about my home Pattani” in Thai, a post said “Muslim leader declares southern border is a peace zone. The southern separatists started a movement by spreading the idea that Thailand is under control by different believers so that people would come and fight for their religion. This was declared that the action clearly violates Islam faith.”

Facebook removes “information-influencing” pages linked to Thai military | News by The Thaiger

Image overlay translates to “Southern border is not Jihad zone.”

When contacted by Reuters, the military had no comment on the removal of the Facebook accounts, with a spokesman saying the organisation does not comment outside of official press conferences.

The head of Cybersecurity Policy at Facebook, Nathaniel Gleicher, has confirmed the reasons behind the platform’s decision.

“This is the first time that we’ve attributed one of our takedowns to links to the Thai military. We found clear links between this operation and the Internal Security Operations Command. We can see that all of these accounts and groups are tied together as part of this operation.”

He adds that the accounts had spent around US$350 on advertising on both Facebook and Instagram. One or more of the pages had about 700,000 followers and at least one of the groups had 100,000 members. Gleicher says the accounts were removed because of their misleading behaviour and not because of the content being posted. The content included support for the military and the monarchy, with allegations of violence and criticism of insurgent groups in the south.

It’s not the first time accounts linked to the Thai military have been removed by a social media platform. In October, Twitter removed 926 accounts it says had links to the army and posted pro-military and pro-government content. The Thai army has denied any involvement with the accounts in question. In November, Twitter also suspended an account posting pro-monarchy content that was found to have links to the palace and to thousands of other accounts posting similar content.

To read the February 2021 Coordinated Inauthentic Behavior Report, click HERE.

SOURCES: Reuters| Facebook

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Central Thailand

Airline executive arrested for failure to pay wages of 150 workers

Maya Taylor

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Airline executive arrested for failure to pay wages of 150 workers | The Thaiger
PHOTO: Wikimedia

An airline executive has been arrested in the central province of Samut Songkhram, after complaints from150 employees that they had not been paid. Chawengsak Noiprasan, who had a court warrant issued against him in October, was taken to Don Muang police station from a property in the Bang Khan Take sub-district. He is a board member of Siam Air Transport.

The airline began operations in October 2014 with services out of Don Mueang to Hong Kong, using 2 Boeing 737-300s. 2 Boeing 737-800s were added to its fleet in late 2015. It expanded by adding Zhengzhou and Guangzhou in China to its network in early 2015. In late 2015, the airline launched flights to Macau and Singapore. In 2017, the airline ceased all operations.

But according to an article in the Bangkok Post, the carrier operates a number of scheduled and charter flights from Bangkok’s Don Mueang Airport. The Post reports that, as Chawengsak signs the company’s legal paperwork, all legal matters concerning the airline fall to him.

The Metropolitan Police Bureau says the executive has admitted to ignoring a 30 day notice issued by the labour inspector and ordering the payment of wages to 150 workers. It’s understood he is also wanted in relation to 7 other cases.

The authorities sought Chawengsak’s arrest following complaints from employees who say they haven’t received their wages for 2 months. It’s understood the airline had previously deferred salary payments for over 8 months. 150 workers filed an official complaint with Don Mueang police and also approached media outlets, asking them to pressure the airline into paying the money owed.

SOURCE: Bangkok Post

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Business

Governments & old media versus social media – who will win? | VIDEO

The Thaiger

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Governments & old media versus social media – who will win? | VIDEO | The Thaiger

We look at the recent changes made by the Australian and Indian governments to except control over the world’s biggest social media platforms. India has issued strict new rules for Facebook, Twitter and other social media platforms just weeks after the Indian government attempted to pressure Twitter to take down social media accounts it deemed, well, anti social. There is now an open battle between the rise of social media platforms and the governments and ‘old’ media that have been able to maintain a certain level of control over the ‘message’ for the last century. Who will win?

The rules require any social media company to create three roles within India… a “compliance officer” who ensures they follow local laws; a “grievance officer” who addresses complaints from Indian social media users; and a “contact person” who can actually be contacted by lawyers and other aggrieved Indian parties… 24/7.

The democratisation of the news model, with social media as its catalyst, will continue to baffle traditional media and governments who used to enjoy a level of control over what stories get told. The battles of Google and Facebook, with the governments of India and Australia will be followed in plenty of other countries as well.

At the root of all discussions will be the difference between what governments THINK social media is all about and the reality about how quickly the media landscape has changed. You’ll get to read about it first, on a social media platform… probably on the screen you’re watching this news story right now.

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