Inheritance Tax in Thailand

The Inheritance Tax Act was signed into law in 2015 and went into force in 2016. Although it may seem like a recent development, Thailand implemented a similar tax bill in 1933, which was ultimately abolished. The government collects inheritance tax in an attempt to minimize the wealth gap and use the funds to improve the standard of living for its citizens.

TAXABLE ASSETS
According to Thailand's Civil and Commercial Code, the primary inheritance law, only assets held by a deceased at the time of death are regarded as forming part of an estate. Any property that was not held before that date does not constitute an estate, but rather is owned jointly by the heirs. Therefore, life insurance or employment benefits payable upon death are not included in a deceased's estate. Heirs or beneficiaries who inherit the following types of property are subject to inheritance tax:

• Immovable assets, including land and buildings

• Securities like equities and bonds. However, cryptocurrencies are not securities because they are "digital assets" governed by digital asset law and are therefore exempt from inheritance tax

• Financial institution deposits capable of being withdrawn or claimed

• Registered vehicles. In addition to automobiles and motorcycles, yachts and jets are also included

• Other financial assets specified by royal decree. No such royal decree has been issued as of the time of writing

Clearly, the intent of this law is to levy tax only on properties with registration papers, which make it feasible to determine ownership and acquisition date. It would be extremely difficult, if not impossible, to trace jewels, cash, or other hand-transferred items.

WHO PAYS TAXES?
The Act provides that the following individuals are subject to inheritance tax:

(1) Thai individuals

(2) Non-Thai individuals who reside in Thailand in accordance with the immigration law. The term 'resident' in the Act refers to the permanent residence status awarded to 100 individuals per nationality per year.

(3) Non-Thai individuals who inherit property located in Thailand while not having the status of permanent resident.

Notably, taxpayers under (1) and (3) include juristic individuals, therefore corporations or LLPs incorporated or registered under Thai law are also required to pay inheritance tax.

A notable element of the Act is that it does not apply to an inheritance received by a legally married spouse of the deceased, regardless of whether the inheritance was left by will or by intestacy. Therefore, if the deceased bequeathed a substantial estate to his or her spouse, he or she is exempt from paying inheritance tax. The Act however does apply to blood relatives and other bequest recipients.

The Act also exempts certain individuals from paying inheritance tax, such as an inheritor who obtains an inheritance for religious, educational, or public causes. A juristic entity established for charitable purposes, such as a foundation or an association, is also exempt from inheritance tax.

RATE AND CALCULATION OF TAXES
Unlike many other types of taxation in Thailand, inheritance tax is imposed at a flat rate. If the value of a bequest exceeds THB 100 million (whether received once or multiple times from a single decedent), the excess is taxed at predetermined rates.

Each inheritor category is subject to a unique tax rate. If the inheritor is an ascendant (i.e., the deceased's father or mother, grandparents, or great-grandparents) or descendant (i.e., the deceased's children), the inheritance will be taxed at a rate of 5%. If the inheritor is neither an ascendant nor a descendant, a 10% tax rate applies.

An appraisal value determines the value of an inherited asset. The applicable appraisal value is determined at the moment any person inherits the asset, less the amount of any liabilities to which the bequest is subject (e.g., property under mortgage). Moreover, if the inheritance is an immovable property, its value is additionally reduced by registered encumbrances. For example, on the basis a servitude is recorded against inherited land, granting a third party the power to exercise some form of right over the land generally decreases its value.

Mr. A, for example, received from his father, Mr. B, a parcel of land in central Bangkok with an appraised value of THB 150 million and a mortgage debt of THB 40 million. The inheritance value of this piece of land is THB 110 million after deducting the amount of the debt. Mr. A must pay 5% inheritance tax on the amount that exceeds the exemption threshold. So, 5% x 10 million equals 500,000. Mr. A must therefore pay inheritance tax of THB 500,000.

Notably, although an inheritance received by an individual is considered to be taxable income under the Revenue Code, inheritance income is exempt from any personal income tax calculation.

TAX PAYMENT
If the value of the assets received after deductions exceeds THB 100 million, a tax return must be filed and any tax due paid within 150 days of receiving an inheritance that exceeds the tax-exempt level. The date of transfer determines the date of receipt. After receiving the tax return, the Department of Revenue will determine the tax liability. Tax assessments by the Department of Revenue may be appealed.

PENALTIES
Failure to file a tax return incurs a penalty equal to the amount of tax owed and a maximum fine of THB 500,000. In addition, failure to pay inheritance tax or partial payment will result in a monthly fee of 1.5% of the tax due.

Please contact us if you need advice or assistance with any issues relating to inheritance tax.