CGT UK DTA

[Advice4DTA]

Hello,

I am a Thailand Tax resident, I have a property in the UK which is rented out and I am non resident in the UK, looking at the tax implication if I was to sell the property in the future.

I think I understand what is due in the UK using HMRCs calculator, what I am not understanding fully is my position in Thailand. Thailand does not have CGT tax but instead gains are taxed as income. I have read lots of contrasting opinions.

The most reliable source I have contacted is an International Tax Lawyer of a large company based in Thailand and has told me this would not be subject to Thailand tax laws.

Article 14 (1) of the UK Thailand DTA states:
"1 Capital gains from the alienation of immovable property, as defined in paragraph (2) of
Article 7, may be taxed in the Contracting State in which such property is situated. "

The tax lawyer has said when you see the words "may be taxed" these do not have the usual laymans meaning but instead the legal words mean that because the UK has CGT then the immovable property is subject to UK CGT and not subject to Thailand tax.

Now this advice is from a well qualified reliable source, but I don't understand why the DTA does not use "can only be taxed in" to make it clearer, and as I have read other opinions although from less reliable sources I'm looking for more confirmation of the intention of the use of "may be taxed"

Thanks.

[someone]

The question you have is a Thailand tax question.

The "may" in this sentence can be read with the normal English meaning. "may be taxed" gives the UK the first option to tax gains on property situated in the UK. I believe that UK situs property was not subject to UK CGT in the past for non tax residents.

Your tax lawyer is almost certainly correct about Thai tax on the gains but an alternative would be "also taxed in Thailand" - when there's a DTA the normal thing is to offset the tax paid in the first country against the tax that would otherwise be due in the second country in order to avoid being taxed twice. The DTA sets out who gets first dibs.

Unfortunately, tax law when you're (potentially) taxed in multiple countries is extremely difficult to understand, it's "dangerous" to rely on what the various laws would mean when read in "plain English" and pretty much your only option is to rely on an expert.

A disposal of a UK situs property will definitely be covered under the UK CGT rules - and you will pay that tax regardless of any tax due in Thailand. Whether it's also taxed in Thailand, if so, if you get a credit for the tax due in the UK, is exclusively a matter for Thai law.