Gifting the Spouse

[NoDisplayName]

Gifting is a little complicated, with two tax regimes and international transfers.  But this is what I think I understand so far.

 

Thailand:  Gifts may be taxable events for both parties.  A spouse may receive up to 20 million baht as a gift every year free of tax.  Excess is levied a gift tax of 5%.  There doesn't seem to be a filing requirement unless tax is due, but I'm not certain of that.

 

The donor can gift funds from within Thailand with no tax implications to self.  Funds sent from outside of Thailand are remittances, and are subject to the standard tax regulations.  Irrelevant if the purpose is a gift.  Two separate events.  Tax on the remitted funds is based on assessability and donor's TEDA, with excess taxed as personal income at rates up to 35%.  No tax is levied on the donor for giving the gift.

 

USA:  Receiving the gift within exclusion limits is tax-free for the donee.  Any gift tax is paid by the donor.  Gifts to spouses are generally tax-free, up to a lifetime limit of $13,600,000.  Gifts to foreign spouses is capped at an annual tax-free limit of $185,000.  IRS Form 709 is used to declare and pay gift tax.  Form is not filed if no tax due.  A null filing might be useful as documentation for future Thai filing questions.

 

The solution would seem to be setting up an individual brokerage account in the spouses name outside of Thailand.

 

Let's say I gift my wife 1 million baht annually, currently about US$29,000.  I sell funds in MY individual account and pay the capital gains taxes if any, and transfer $29K into her individual account as a gift.

 

There is no US gift tax, as I am under the $185K annual threshold.  She has cash in her account without worrying about cost basis had I transferred shares previously owned.   Form 709 is not required, but a null form may be filed for documentary purposes.

 

There is no Thai income tax for me, as no money has been remitted into Thailand.

 

There is no Thai gift tax for the spouse, as we are under the 20 million baht annual limit.

 

I can do this every year, and when I eventually expire, she will have more than enough funds to live on until the IRS provides the Transfer Certification, which can take up to a year.

 

She should be able to remit the funds herself at any time, either by SWIFT or wise, as non-assessable prior gifts.

 

She can keep the funds indefinitely in her US-based individual brokerage account, we will invest in ETF's and start earning more than the pitiful 1.5% she could get if brought in to Thailand.  That will require a W8-BEN withholding form for the brokerage, and she'll also have to start filing US tax returns.  If she can get an ITIN, I'll have the option of filing Married filing Joint.  Or perhaps keep it simple, and she can file herself to keep her gifted funds separate from mine.

 

Any comments, constructive or otherwise?

 

 

[sometimewoodworker]

5 hours ago, NoDisplayName said:

Thailand:  Gifts may be taxable events for both parties. 

Yes

 

5 hours ago, NoDisplayName said:

A spouse may receive up to 20 million baht as a gift every year free of tax.

The 20 million is from one person (spouse) it does not limit the amount that can be received tax free, just the amount from a single donee.

 

5 hours ago, NoDisplayName said:

There doesn't seem to be a filing requirement unless tax is due, but I'm not certain of that.

As the gifts are not assessable the is no filing requirement but there is a gift contract requirement that maybe checked by the TRD as proof that it is a gift.

 

5 hours ago, NoDisplayName said:

Any comments, constructive or otherwise?

You need advice from a competent dual country accountant.

If the gift is within or into Thailand there is no tax due with that scenario .

 

However just because you give funds to your wife outside Thailand very probably has no relevance to the TRD. Once she remits those funds to Thailand they are very probably taxable as at that point she is remitting her money.

 

My understanding is that the Thai gift regulations are relevant In Thailand and only in Thailand.

 

You need the advice of either the TRD or a Thai tax accountant 

With the amounts you are referring to you can certainly afford, and need to afford, professional advice, I suspect that your scheme will not be seen a valid tax avoidance one.

Edited 2 hours ago by sometimewoodworker

[Yumthai]

10 minutes ago, sometimewoodworker said:

As the gifts are not assessable the is no filing requirement but there is a gift contract requirement that maybe checked by the TRD as proof that it is a gift.

Please quote the law article.

[anrcaccount]

Good post.

 

IMO- If any enforcement of the foreign income remittance actually occurs (by no means a certainty) , the gifting provisions will be relied on extensively, by anyone who takes good professional advice. 

 

Generally you seem spot on with everything, a couple of comments below:

 

5 hours ago, NoDisplayName said:

Let's say I gift my wife 1 million baht annually, currently about US$29,000.  I sell funds in MY individual account and pay the capital gains taxes if any, and transfer $29K into her individual account as a gift.

 

2 comments on this. 

 

1 - There's no need for it to be a brokerage account, it could be any foreign bank account anywhere outside Thailand, and you could fund it by using any means. Selling your funds to do this is one example, but it could be anything.

2- Assuming 'her individual account ' = a foreign account. Yes, this is conservatively 'safer' than you directly remitting the gift to a Thai bank account. It appears, it is 'safer' for the donee/recipient/giftee to be the one who remits the funds to Thailand.

 

5 hours ago, NoDisplayName said:

There is no Thai gift tax for the spouse, as we are under the 20 million baht annual limit.

 

AND there is no Thai Income tax for the spouse regarding these funds, as they have not remitted any assessable income.

 

5 hours ago, NoDisplayName said:

She should be able to remit the funds herself at any time, either by SWIFT or wise, as non-assessable prior gifts.

 

Agree, as above. 

[Yumthai]

23 minutes ago, Yumthai said:

34 minutes ago, sometimewoodworker said:

As the gifts are not assessable the is no filing requirement but there is a gift contract requirement that maybe checked by the TRD as proof that it is a gift.

Please quote the law article.

 

Don't bother, I'll reply.

 

https://www.thailandlawonline.com/civil-and-commercial-code/521-536-gift-is-a-contract

 

Section 521. A gift is a contract whereby a person, called the donor, transfers gratuitously a property of his own to another person, called the donee, and the donee accepts such property.

 

A gift is a contract by itself.

 

Section 525. The gift of a property the sale of which must be made in writing and registered by such competent official is valid only when so made and registered by the competent official. In such case it is valid without delivery.

 

Section 526. If a gift or a promise for a gift has been made in writing and registered by the competent official and the donor does not deliver to the donee the property given, the donee is entitled to claim the delivery of it or its value, but he is not entitled to any additional compensation.

 

Both sections 525 and 526 imply gift has not to be necessarily made in writing, granted that a bigger stack of papers could ease things if audited.

 

Edited 1 hour ago by Yumthai

[NoDisplayName]

3 minutes ago, anrcaccount said:

2 comments on this. 

 

1 - There's no need for it to be a brokerage account, it could be any foreign bank account anywhere outside Thailand, and you could fund it by using any means. Selling your funds to do this is one example, but it could be anything.

2- Assuming 'her individual account ' = a foreign account. Yes, this is conservatively 'safer' than you directly remitting the gift to a Thai bank account. It appears, it is 'safer' for the donee/recipient/giftee to be the one who remits the funds to Thailand.

 

I sell funds for LTCG to take advantage of the 0% tax bracket, and repurchase the same shares to reset the cost basis.  As needed, I could transfer some cash to her account, with no unrealized capital gains for her to worry about.  When done at year end, well, merry Christmas, honey!

 

I'm thinking brokerage account as I was speaking with a Fidelity rep about the wife as beneficiary.  When the time comes she can open an account to keep the funds in an income earning higher returns that what she can get here.  But then I thought why not do it now?  She could have a broker account to hold the gifts, and a separate cash account for other transfers.

 

The rep told us they'll open an account for a Thai national now, so why not.  No guarantee that will be possible in the future.  It would just be so goshdarned convenient.  And she can earn overseas, unremitted and not taxed by Thailand (yet), and potentially not taxed by Uncle Sam.

 

Of course, I'll have to research the points that @sometimewoodworker brought up above.

[NoDisplayName]

2 minutes ago, Yumthai said:

 

Don't bother, I'll reply.

 

https://www.thailandlawonline.com/civil-and-commercial-code/521-536-gift-is-a-contract

 

Section 521. A gift is a contract whereby a person, called the donor, transfers gratuitously a property of his own to another person, called the donee, and the donee accepts such property.

 

A gift is a contract by itself.

 

Section 525. The gift of a property the sale of which must be made in writing and registered by such competent official is valid only when so made and registered by the competent official. In such case it is valid without delivery.

 

Section 526. If a gift or a promise for a gift has been made in writing and registered by the competent official and the donor does not deliver to the donee the property given, the donee is entitled to claim the delivery of it or its value, but he is not entitled to any additional compensation.

 

Both sections 525 and 526 imply gift has not be necessarily made in writing, granted that a stack of papers could ease things if audited.

 

 

A stack of IRS Form 709's declaring a gift, but no tax due as below the threshold.

 

https://www.irs.gov/pub/irs-pdf/f709.pdf

United States Gift (and Generation-Skipping Transfer) Tax Return

[anrcaccount]

37 minutes ago, sometimewoodworker said:

However just because you give funds to your wife outside Thailand very probably has no relevance to the TRD. Once she remits those funds to Thailand they are very probably taxable as at that point she is remitting her money.

 

Disagree, it's not 'very probably taxable' . 

 

How would she declare these remitted funds? Certainly, not Thai PIT, they are not income, it's a gift. The exemptions apply.

 

For context , consider an example of a  larger gift:

 

• 100M THB received from a spouse.
• A Thai taxpayer can choose to exclude the excess above the exemption (100M-20M exempt = net 80M THB ) from their PIT and pay a flat 5% tax on this.
• That way, they pay 4M THB tax rather than paying much more if this was included in PIT progressive rates.
• Gifts in excess of the exempt threshold "will not need to be included together with other income when computing the annual PIT liability."
• Ergo, Gifts below the exemption threshold,  do not need to be included in any PIT calculation.
• How could there be any other possible interpretation of the funds remitted by this spouse? 

 

37 minutes ago, sometimewoodworker said:

 

My understanding is that the Thai gift regulations are relevant In Thailand and only in Thailand.

 

Not sure what you mean by this.

 

Do you believe it then would be be 'safer' to make the gift from the donor, directly to a Thai account?  Or do you believe the gift regulations don't apply, to any remittances from a foreign account?