Following the examples of many countries in the world, Thai legislators have now passed a new law introducing inheritance tax in Thailand.
The new Inheritance Tax Act B.E. 2558 (2015) (“ITA”) was published in the Royal Gazette on 5th of August 2015 and will take effect on 1st of February 2016.
Please see the following information on the new stipulations below:
1.Tax Base (Section 12, ITA):
The inheritance tax base shall be calculated on the basis of the value of the estate that an heir receives by way of inheritance, whether it is one inheritance or many. The tax-free threshold is 100 Million THB, any exceeding amount is subject to inheritance tax according to the stipulations detailed below.
The tax is levied on heirs who are:
(a) Thai individuals or Thai juristic persons or foreign individuals who are resident in Thailand according to the immigration law, which are inheriting assets located in Thailand and/or outside the country.
Residency in Thailand:
Based on the verbal information we have obtained from the Revenue Department and Immigration Department, foreigners who are resident in Thailand means aliens who are allowed to take residence in the Kingdom by the Immigration Commission and by the Approval of the Minister according to Chapter 5, Immigration Act B.E. 2522. Such foreigner shall receive a “Residence Certificate” which is of permanent validity (so-called “Permanent Residency”). The foreigners who are granted to stay temporarily (non-immigrant visa, tourist visa, visa exemption and other temporary permissions of stay) are not deemed as Thai resident according to the Immigration Act.
(b) Foreign individuals or foreign juristic persons, which are inheriting assets located or situated in Thailand (Section 11, ITA).
The spouse of the deceased is exempted from inheritance tax (Section 3(2), ITA).
The inheritance tax applies to registered assets, including residential properties, land, vehicles, bonds, equities, and deposits at financial institutions (Section 14, ITA).
2. Tax Rate (Section 16, ITA):
The tax rates are:
5% of the Tax Base, for inheritors who are descendant or ascendant
10% of the Tax Base, for inheritors who are not descendant or ascendant
3. Inheritance Tax Return:
The taxable person shall file an “Inheritance Tax Return (Filing)” within 150 days commencing from the date of receiving the inheritance in a total amount of exceeding 100 million THB (Section 17, ITA).
Whoever fails to file a tax return regarding the inheritance of assets without good reason shall be liable to a fine not exceeding 500,000 THB (Section 33, ITA).
Whoever destroys, moves or transfers any of the inherited assets, shall be liable to imprisonment for not exceeding 2 years and a fine of up to 400,000 THB (Section 35, ITA).
Whoever file or report a false information or avoid or try to avoid the tax payment shall be liable to imprisonment for not exceeding one year or a fine of not exceeding 200,000 THB or both. (Section 37 (1), (2), ITA)
5. Gift Tax
To counter possible avoidance of the new inheritance tax, the gift tax was also introduced by way of amending the types of tax-exempt income in the Thai Revenue Code and will be effective on the same date as the Inheritance Tax Act.
For gifts, the tax rate is 5% of the portion above 20 Million THB per tax year when the beneficiaries are descendants. For non-descendant beneficiaries, the tax rate is 5% of the portion above 10 million THB per tax year.
With the new laws on inheritance taxation, the previously military and now civilian Thai government holds true to its promise to take steps to increase wealth equality by redistributing income from the rich to the poor.
It will be interesting to assess the effectiveness of the new law once it comes into force early next year.