How to retire to Thailand – and navigate its tricky expat property rules

With its warm climate, affordable cost of living and rich culture, Thailand could be a tempting retirement choice for those who want to live somewhere warm that offers something a little different to the usual pensioner hotspots in Europe.

Known for excellent standards of healthcare, stunning beaches and natural scenery, Thailand also boasts a sizable community of British expats and fellow pensioners who can help new arrivals settle in.

Some of the most popular destinations are Bangkok, Phuket and Chiang Mai.

Making the move isn’t always straightforward, however, and it’s important to make appropriate financial arrangements before you relocate – from taxes and visas, to pensions and property prices.

Here, Telegraph Money explains everything you need to know before you take the leap.

How much money do you need to retire in Thailand?

If you’re classed as a “wealthy pensioner” under the Thai visa system, you may be able to get a 10-year Long Term Residents (LTR) visa, but you’ll need to apply for an additional five-year stay after your first five years are up.

Only over-50s can qualify, and you must have an annual pension or stable passive income of at least $80,000 a year at the time of application – around £65,600. Eligible income sources can include your pension, capital gains, rental income and dividend income – salary income is not included.

If your income is less than this, but more than $40,000, you may qualify on the proviso you invest at least $250,000 in Thai property, Thai government bonds or foreign direct investment. You’ll also need a high level of private health insurance – more on this later.

Alternatively, you can apply for a Non-Immigrant O-A visa, which initially grants you a one-year stay. You will need to be at least 50 to be eligible, according to the Thai embassy in London, and employment is strictly prohibited. Each year, you’ll need to apply for a further year’s stay.

You will need financial evidence showing monthly income of not less than 65,000 baht, or a balance of at least 800,000 baht. This means you’ll need to have income of £1,650 per month, or a savings balance of at least £20,000.

Acceptable evidence includes copies of pension statements, three months’ worth of bank statements and income certificates.

What happens to your pension?

If you move to Thailand and you’ve got a British pension, it will be taxed in the UK when you take money out of it. Under normal circumstances, this is the standard tax position.

Philip Teague, executive director at Cross Border Financial Planning, said: “There’s no option of having [your UK pension] taxed or paid out gross, or taxed locally in Thailand. The double taxation treaty means that any pension income, should it be private pensions or state pension, is taxed locally in the UK.”

However, one thing expats can do is use something called a “qualifying recognised overseas pension scheme” (QROPS) to move their pension outside the UK and have Thai tax applied.

However, this involves an “overseas transfer charge” of 25pc of the entire pension, applied for as long as you live in Thailand. Mr Teague says this move is typically not worthwhile, and it’s better to leave your pension in Britain.

He recommends keeping a UK bank account open while you’re abroad, because it can be difficult to get pension providers to pay into an overseas account. If they do, a common issue is for pension funds to refuse to do monthly payments, and instead they’ll only make payments quarterly or every six months.

Most big banks offer expat accounts that can be used by expat pensioners – for example, HSBC has one based in Jersey.

For state pension claimants, note that Thailand does not appear on the list of countries where an annual increase to the state pension is paid, meaning your payments will be fixed for the duration you live there. 

As prices rise, this will make your state pension payments increasingly less valuable. We’ve recently heard from expats in Canada who have experienced this problem.

How you will be taxed in Thailand

Thailand isn’t specifically a low-tax jurisdiction, but until recently there was a gap in the remittance rules, meaning that earnings from a previous year weren’t taxed if brought into Thailand in a later year.

Peter Ferrigno, director of Tax Services at Henley & Partners, said this rule is changing to bring it into line with other countries, so “it isn’t totally clear what the exact position will be”.

He said: “The tax change applies to remittances not earnings, and so with the cost of living being relatively low, and tax rates being progressive, the net tax cost to sustain a certain lifestyle may still be low.

“Thai tax residency only applies if someone is in the country for over 180 days in the tax year, so someone being there part of the year without locally sourced income wouldn’t have any Thai tax to worry about.”

After a personal allowance of 60,000 baht (£1,400), the top rates cut in at quite a high level compared to the cost of living. 

Income below 1m baht (£22,800) is taxed on a sliding scale up to 20pc. You pay 25pc up to 2m baht (£45,600), and 30pc above that. The top rate of 35pc is charged on income above 5m baht (£114,000).

Savings interest and dividends are taxable, but at a lower rate if the income is from Thai sources.

Mr Ferrigno said capital gains are also taxable, but with an exemption for locally listed shares and securities. 

As for inheritance tax, anyone who comes into the scope can expect to pay a significantly lower rate than they would in Britain. Mr Ferrigno said: “Inheritance tax rates are low (10pc, 5pc for direct descendants, and exempt between spouses), but for someone who remains UK domiciled that won’t necessarily be a benefit as there isn’t a significant nil-rate band.”

How to buy Thai property 

If you’re thinking about buying property in Thailand before moving there you should be aware of its strict restrictions for non-residents.

Non-residents can buy condos and apartments, but can’t make up more than 40pc of the building’s total unit owners, according to the bank Wise.

Foreigners are not allowed to directly purchase land on which buildings are built – and the only way around this is to set up a private limited company that is partly owned by a local. The company can then be used to buy properties, but you’ll likely need a lawyer to help set this up in a way that follows the rules.

Alternatively, you can lease land on a long-term lease – for example, 30 years – and build a home on it, you just won’t be the owner of the land itself.

If you decide to use a Thai estate agent to help you find a property, note that there’s no regulation or training requirements to enter the profession. If possible, choose an agent based on personal recommendation, and do as much research into their background as you can.

Getting private health insurance in Thailand

Retirees must have a comprehensive health insurance policy in place in order to be granted a Thai visa, so it’s important to sort this well before you plan to move.

The “wealthy pensioner” LTR visa requires coverage of at least $50,000, or at least $100,000 deposit available to cover treatments.

To get the Non-Immigrant O-A visa you will need to show evidence of health insurance issued by a Thai or foreign insurer for general illnesses, with the insured sum of no less than $100,000.

The good news is, there are lots of insurance brokers in Thailand, and many of them speak English.

If you’re applying from the UK, you should be able to enter a few details online to get a quote. It’s best to do this with a range of providers, so you can gauge which offer the best value.

However, don’t automatically go for the cheapest; you’ll need to make sure it offers the cover required for your visa, and it’s a good idea to delve into the terms to make sure there are no spurious clauses that might deny a payout when you need it.

Your duration of stay permit in Thailand (within the validity of your visa) will correspond with the duration of your health insurance.