Inheritance tax in Thailand is governed by the Inheritance Tax Act B.E. 2558 (A.D. 2015), which became effective on February 1, 2016. This legislation was introduced with the intention of creating a more equitable tax system, targeting the wealth inherited from deceased individuals to ensure fairness between high and low-income earners.
Key Provisions and Liabilities
The Inheritance Tax Act imposes liability on both natural and juristic persons who receive inheritance, irrespective of their nationality. The law applies to:
✓ Thai nationals
✓ Non-Thai nationals domiciled in Thailand
✓ Non-Thai nationals inheriting assets located in Thailand
✓ Juristic persons registered in Thailand or established under Thai law, including those where Thai shareholders hold more than 50% of the registered and paid-up capital.
The inheritance tax is applicable to several categories of assets, including:
1. Immovable property
2. Securities as defined under securities law
3. Bank deposits and similar financial assets
4. Registered vehicles
5. Other financial assets prescribed by Royal Decrees
Figure. Property Subject to Inheritance Tax.
Exemptions from Inheritance Tax
Certain inheritances are exempt from taxation:
✓ Inheritances valued at 100 million THB or less
✓ Assets inherited by the legal spouse of the deceased
✓ Inheritances received from individuals who died before the enforcement date of the Act
✓ Inheritances received by government agencies or entities for educational, religious, or public purposes
✓ Assets inherited by persons or organizations under agreements between Thailand and the United Nations, international laws, or reciprocal arrangements with other countries
Tax Rates and Filing Requirements
The standard inheritance tax rate is 10% on the value of the inheritance that exceeds 100 million THB. However, a reduced rate of 5% applies to inheritances received by direct descendants or ascendants of the deceased.
The value of the taxable inheritance is calculated by deducting any liabilities from the total value of the inherited assets. Beneficiaries are required to file a tax return and pay the due tax within 150 days of receiving an inheritance exceeding the 100 million THB threshold.
Policy Intent and Implementation Challenges
The introduction of inheritance tax in Thailand was not aimed at generating significant revenue but rather at promoting a fairer distribution of wealth. The government sought to address income disparity and ensure that those who gain wealth through inheritance contribute to societal equity.
However, the practical implementation of this tax poses challenges. There are concerns about potential abuses and the difficulties in effectively enforcing the tax. The intention to alleviate the tax burden on low-income earners is evident through exemptions, such as those for heirs of poor farmers, who might otherwise struggle to pay taxes on inherited land.
Remarks
Inheritance tax in Thailand represents a significant policy effort to promote fairness in wealth distribution. By imposing a tax on substantial inheritances while providing exemptions for smaller inheritances and those received by spouses and specific organizations, the Thai government aims to balance the tax burden across different segments of society. Nevertheless, effective implementation and enforcement remain crucial to achieving the intended equity and fairness of the inheritance tax system.