It has long been mooted that there were plans to introduce inheritance tax in Thailand and these plans were finally passed in late May. The bill was comfortably passed with a 145-5 vote in favour of a threshold being set at THB100 million and a 5% tax rate charged on anything above that. This is a diluted version of what the NLA panel had proposed as they wanted the threshold to be set at THB50 million. The law will come into effect 180 days after being promulgated in the Royal Gazette.
The new law states that any inheritors of assets that are worth more than THB100 million will have to pay 10% tax on the value of any assets over and above that amount with this being halved to 5% (the figure mentioned above) if the assets are passed on to a direct descendant.
The Government has defined taxable assets as: (1) real estate; (2) securities as defined by the Securities and Exchange Act (treasury bills, bonds, bills, shares, debentures, investment units, etc); (3) deposits or similar types of instruments payable to owners at call; (4) registered vehicles (5) other financial assets to be defined by a royal decree.
There are naturally penalties for those failing to declare inherited assets and this will be a fine not exceeding THB500,000. Should anyone try and destroy, move or transfer any of the inherited assets they could face a fine of up to THB400,000 and up to 2 years in prison. Tax avoidance carries a penalty of a fine of up to THB200,000 and up to a 1 year prison term. It is intended that these penalties will be strictly enforced in order to discourage people from trying to get round the system.
There had previously been calls for farmland and residential property to be excluded but this was dismissed by the NLA Panel. The main reason for this was because it was believed that land worth THB100 million would not be used for farming and if it were to be worth over this sum of money it would mean that the owners were “rich”. Any property worth over THB100 million is also viewed as suggesting that any owners are indeed “rich”. This is believed to be in line with many aspects of Thai culture.
ACM Chana U-sathaporn, who is a member of the NLA Panel said that the higher rate had been agreed so that entrepreneurs were not discouraged from starting new business ventures and saw this as a way of promoting growth in Thailand. The Inheritance Tax bill has long been seen as a priority by the Junta in an attempt to close the income gaps between the rich and poor in Thailand. The law is applicable to both Thais and foreign nationals owning assets in Thailand.