Thai Inheritance Tax - How Might It Work?

[AyG]

Given that a new Inheritance Tax has been proposed, and with no effective opposition to the military junta, it's quite probable in my opinion that it will be introduced. However, I was wondering how it might affect expats. How does it work in other countries?

In the UK, inheritance tax is levied according to one's domicile (a complex concept, but basically where you and your parents were born). Consequently, most British expats will be taxed by the UK on their worldwide assets upon death. However, I understand that the concept of domicile is very much an English law peculiarity and other countries do it differently.

What is Thailand likely to do? Tax only its own citizens? Tax those with PR? Tax all resident expats?

Is there a possibility of a British citizen being taxed on death both by the UK and by Thailand? (Do double taxation agreements even cover death duties?) That would be particularly a concern since the UK taxes worldwide assets, and the Thai proposals cover taxing offshore investments (though not property).

Of course, at this stage any thoughts about how it might work remain speculation, but I'm curious how it might impact me.

[wordchild]

From reading the press it seems to have been pushed back to the finance ministry and they have been told to work up a proposal to put to the future civilian government. Thais I have spoken to about this have said that this kind of thing has been floated by the finance ministry in the past but, in the end, nothing has become law. The situation is obviously different now, so who knows.

I think there were some clues as to how it would operate in a recent interview given by the head of the ministry, FWIW this is what I interpreted him as suggesting. Not a piece I can link to sadly.

1)the level would be between 5 and 30%

2)only Thai assets would be in scope not overseas assets, I presume because of the difficulties involved.

3)unlike the UK say,this would be a tax on the beneficiaries rather than on the estate. so yes someone inheriting Thai based assets from a foreigner would be subject to the tax.

4)the tax will be levied only on those assets that need documentation/registration eg shares, property, cars, cash in bank accounts etc but not watches jewellery etc. I would guess that this means they would levy the tax at the point of transfer as this would give them some control through the relevant government agency. eg if you want to transfer the car you have just inherited into your name then you need to first pay the tax owed.

5)given the way the tax is to operate I would assume they would have to include lifetime gifting or there would be massive scope for avoidance.

Obviously this is just my interpretation of what he said and also much could have changed by the time it becomes law (if it ever does) but that seems to be the way they are thinking at the moment. It was not clear if foreigners inheriting Thai assets would have to pay it but my guess would be , given the way it is going to operate, non Thais would also be subject to tax.

As far as UK IHT is concerned, as this tax would be operated in a different way (on the beneficiary rather than the estate) there would be scope for double taxation if the deceased had been a UK domicile. There are though, provisions within UK inheritance tax that try to make allowance in cases where an estate could be subject to two lots of tax. How they could work here too early to say.

would be good to get other thoughts on this as this will become an important issue for many expats (and their families) in Thailand.

Edited August 21, 2014 by wordchild

[AyG]

From reading the press it seems to have been pushed back to the finance ministry and they have been told to work up a proposal to put to the future civilian government.

According to a newspaper article, the NCPO has agreed in principle to the tax. A proposal is currently with the Council of State. It would then go to the Cabinet, then the Legislative Assembly. Hadn't heard of its being pushed back to the Finance Ministry. If the NCPO is serious, then it would be ludicrous to wait for a future civilian government to implement it. No government of (fabulously wealthy) elected politicians is going to vote it through.

2)only Thai assets would be in scope not overseas assets, I presume because of the difficulties involved.

The Director General of Revenue Department has been quoted as saying "cash and securities along with profits must be transferred back to Thailand" - presumably to be taxed, so some overseas assets appear to be included. (They'd have to be, otherwise there'd be a massive loophole. That said, there's still a massive loophole with the exclusion of foreign property. Buy a rental property offshore. Bingo, no inheritance tax.)

3)unlike the UK say,this would be a tax on the beneficiaries rather than on the estate.

So if the beneficiary were someone non-Thai, living outside Thailand, how could Thailand enforce tax collection? And if so, what would stop me leaving everything to someone offshore on the understanding that they'll immediately gift all my worldly wealth to someone Thai?

[wordchild]

the latest I saw was that the NCPO had agreed in principal but had stated that it would be best if it was decided/implemented by a civilian government (I don't think they mean the next elected one just the next one) and they had asked the finance ministry to prepare for that. Obviously this is all speculation and some reports are contradictory so its hard to know exactly whats going on. FWIW a very well connected Thai said to me that it will never happen. I tend to agree with your point however and from a reading of the reports it looks pretty serious this time.

I think what he meant by assets from overseas must be transferred back to Thailand was that eventually they must be if the proceeds are to be used in Thailand. There are fairly strict BOT rules which control how Thais can invest overseas and how they can bring that money back into country so the govt has an audit trail ,to an extent (for Thais). The govt could tighten up the BOT rules on overseas investment but I am pretty certain they are not talking about taxing overseas assets at this stage as that would be difficult. Elsewhere he has been quoted as saying that Thais who invest overseas anyway have to pay inheritance tax to other countries; eg a Thai who owned a UK property or even shares in the UK would be subject to UK IHT, as things stand, on those assets, on their death, if those assets were willed to someone other than a (non dom) wife.

I think the key is the focus on assets that require documentation and therefore some govt agency is usually involved (as would be the court) in the transfer eg if you willed your condo to someone overseas they would still need to transfer into their name at some point backed by the court enforcement of your will. This is the point at which the govt could step in for their slice.

As I said just my take

Edited August 21, 2014 by wordchild

[rickirs]

Another question comes to mind on how it would work. Will the Royal Family and all its familial relationships also be subjected to the inheritance tax? HRH King Bhumidol Adulyadej currently has a net worth of $30 billion, so a 5%-30% inheritance tax would be very meaningful.

[AyG]

Another question comes to mind on how it would work. Will the Royal Family and all its familial relationships also be subjected to the inheritance tax? HRH King Bhumidol Adulyadej currently has a net worth of $30 billion, so a 5%-30% inheritance tax would be very meaningful.

I rather suspect that the site censors will remove your comment (and this one). It's against the rules. However, in the meantime, be aware that there's a difference between His Majesty's personal wealth and that of the Crown Property Bureau.

[belg]

how can UK governement tax you when / if you can inherit here, for example a condo from your father, you have to bring it the same amount of money that the condo is worth ...

how is this inheritance ? never understand that crazy rule ... like if you own a condo 50/50 with your spouce, upon her death, you have to bring in again 50% of the value to "inhetit" what? you paid full pice by yourself !

[Krataiboy]

Another question comes to mind on how it would work. Will the Royal Family and all its familial relationships also be subjected to the inheritance tax? HRH King Bhumidol Adulyadej currently has a net worth of $30 billion, so a 5%-30% inheritance tax would be very meaningful.

You are sailing uncomfortably close to the wind, my friend.

[Chao Lao Beach]

Regarding expat owned condo's and investments in Thailand, they could easily make a rule like, if the owner spends 6 months a year here then they are considered or even as simple as if the owner of a Thai property.

All it will do is push money out of bank accounts and into assets like physical gold, silver and diamonds and homes will be owned by trust or companies and rented back !!!

[fletchsmile]

This is another issue that rears its head from time to time and tends to go nowhere. A lot of Thais I work with don't see much happening, and have got used to it coming up from time to time and going nowhere. I just wonder if this time might be different. The main difference this time is that it is being proposed under military rule, who seem to want to change (certain) things, hence it could increase the chances of something getting done.

On the other hand, it's hard to see the military government thoroughly evaluating this in a year, and then coming up with concrete proposals. You have to wonder whether they also want to be remembered for this or not, given their own wealth and connections, and you have to wonder how much is just rhetoric about creating a fairer Thailand.

Very complex issue, which I hope isn't rushed thru. Hard to evaluate what the repercussions will be without more concrete info, which at the moment is just speculation.

For me, it just puts it on the radar map as a possibility. I plan at the moment based on no inheritance tax in Thailand, and my Thai wife and I make full use of putting certain assets in my wife and children's name rather than mine, with IHT being one factor for doing so. Given UK levies IHT and Thailand doesn't at the moment there's some very simple solutions for us. If and when it comes to Thailand I guess we'd be making more use of offshore assets and other vehicles.

At the moment we have assets in UK, Thailand and offshore, so already have foundations in place to move as necessary. This is just a case of whether we might need to shift things round and add a few new things. i.e as always consider keeping things/assets in a mixture of where you expect to be (Thailand), where you came from (in case you go back don't burn bridges), and somewhere else to keep your options open just in case

Generally I also prefer liquid/ financial assets to things like property (except where we live) which makes it easier to move things around if need be. I'd be more concerned if I was someone with say large exposures to illiquid assets like property.

Cheers

Fletch:)

Edited August 21, 2014 by fletchsmile

[givenall]

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the latest I saw was that the NCPO had agreed in principal but had stated that it would be best if it was decided/implemented by a civilian government (I don't think they mean the next elected one just the next one) and they had asked the finance ministry to prepare for that. Obviously this is all speculation and some reports are contradictory so its hard to know exactly whats going on. FWIW a very well connected Thai said to me that it will never happen. I tend to agree with your point however and from a reading of the reports it looks pretty serious this time.

I think what he meant by assets from overseas must be transferred back to Thailand was that eventually they must be if the proceeds are to be used in Thailand. There are fairly strict BOT rules which control how Thais can invest overseas and how they can bring that money back into country so the govt has an audit trail ,to an extent (for Thais). The govt could tighten up the BOT rules on overseas investment but I am pretty certain they are not talking about taxing overseas assets at this stage as that would be difficult. Elsewhere he has been quoted as saying that Thais who invest overseas anyway have to pay inheritance tax to other countries; eg a Thai who owned a UK property or even shares in the UK would be subject to UK IHT, as things stand, on those assets, on their death, if those assets were willed to someone other than a (non dom) wife.

I think the key is the focus on assets that require documentation and therefore some govt agency is usually involved (as would be the court) in the transfer eg if you willed your condo to someone overseas they would still need to transfer into their name at some point backed by the court enforcement of your will. This is the point at which the govt could step in for their slice.

As I said just my take

In my opinion, a legislature run by wealthy will never act on this, so it will never become law since Thai legislature is always run by wealthy

[chickenslegs]

Another question comes to mind on how it would work. Will the Royal Family and all its familial relationships also be subjected to the inheritance tax? HRH King Bhumidol Adulyadej currently has a net worth of $30 billion, so a 5%-30% inheritance tax would be very meaningful.

In the UK the estate of the Monarch is not subject to Inheritance tax. Also, property inherited by the Monarch is not subject to this tax.

I would expect a similar exemption to apply here.

[ableguy]

From reading the press it seems to have been pushed back to the finance ministry and they have been told to work up a proposal to put to the future civilian government. Thais I have spoken to about this have said that this kind of thing has been floated by the finance ministry in the past but, in the end, nothing has become law. The situation is obviously different now, so who knows.

I think there were some clues as to how it would operate in a recent interview given by the head of the ministry, FWIW this is what I interpreted him as suggesting. Not a piece I can link to sadly.

1)the level would be between 5 and 30%

2)only Thai assets would be in scope not overseas assets, I presume because of the difficulties involved.

3)unlike the UK say,this would be a tax on the beneficiaries rather than on the estate. so yes someone inheriting Thai based assets from a foreigner would be subject to the tax.

4)the tax will be levied only on those assets that need documentation/registration eg shares, property, cars, cash in bank accounts etc but not watches jewellery etc. I would guess that this means they would levy the tax at the point of transfer as this would give them some control through the relevant government agency. eg if you want to transfer the car you have just inherited into your name then you need to first pay the tax owed.

5)given the way the tax is to operate I would assume they would have to include lifetime gifting or there would be massive scope for avoidance.

Obviously this is just my interpretation of what he said and also much could have changed by the time it becomes law (if it ever does) but that seems to be the way they are thinking at the moment. It was not clear if foreigners inheriting Thai assets would have to pay it but my guess would be , given the way it is going to operate, non Thais would also be subject to tax.

As far as UK IHT is concerned, as this tax would be operated in a different way (on the beneficiary rather than the estate) there would be scope for double taxation if the deceased had been a UK domicile. There are though, provisions within UK inheritance tax that try to make allowance in cases where an estate could be subject to two lots of tax. How they could work here too early to say.

would be good to get other thoughts on this as this will become an important issue for many expats (and their families) in Thailand.

Intelligent reply

[rgs2001uk]

This is another issue that rears its head from time to time and tends to go nowhere. A lot of Thais I work with don't see much happening, and have got used to it coming up from time to time and going nowhere. I just wonder if this time might be different. The main difference this time is that it is being proposed under military rule, who seem to want to change (certain) things, hence it could increase the chances of something getting done.

On the other hand, it's hard to see the military government thoroughly evaluating this in a year, and then coming up with concrete proposals. You have to wonder whether they also want to be remembered for this or not, given their own wealth and connections, and you have to wonder how much is just rhetoric about creating a fairer Thailand.

Very complex issue, which I hope isn't rushed thru. Hard to evaluate what the repercussions will be without more concrete info, which at the moment is just speculation.

For me, it just puts it on the radar map as a possibility. I plan at the moment based on no inheritance tax in Thailand, and my Thai wife and I make full use of putting certain assets in my wife and children's name rather than mine, with IHT being one factor for doing so. Given UK levies IHT and Thailand doesn't at the moment there's some very simple solutions for us. If and when it comes to Thailand I guess we'd be making more use of offshore assets and other vehicles.

At the moment we have assets in UK, Thailand and offshore, so already have foundations in place to move as necessary. This is just a case of whether we might need to shift things round and add a few new things. i.e as always consider keeping things/assets in a mixture of where you expect to be (Thailand), where you came from (in case you go back don't burn bridges), and somewhere else to keep your options open just in case

Generally I also prefer liquid/ financial assets to things like property (except where we live) which makes it easier to move things around if need be. I'd be more concerned if I was someone with say large exposures to illiquid assets like property.

Cheers

Fletch:)

What will screw them is Thailand doesnt have trust funds.

[fletchsmile]

What will screw them is Thailand doesnt have trust funds.

I guess that s where maids and drivers come in again

[rgs2001uk]

What will screw them is Thailand doesnt have trust funds.

I guess that s where maids and drivers come in again

Tres drole mon ami, cant wait to explain to my mair baan/kon chai that she has been upgraded to a kon kap rot, must be better than being a mia farang LOL.

Also told her her the funds in the UK (left in someone elses name, eg not the wifes) wont be subject to Thai tax law, sort that one out Mr Junta.

Pretty much like Obama, dont ask, dont tell.

[Eneukman]

The OP's understanding of domicile in its simplest form is correct. It is, as he suggests, a lot more complicated. When you are born you acquire a domicle of origin from your father if your parents were married or from your mother if they weren't. Note that this may not necessarily be the same as the country in which you were born.

You retain your domicile of origin until you make a conscious decision to give it up and obtain a domicile of choice in another country. Retaining a home in your home country in which you can live on home visits would, generally, rule out the acquisition of a domicile of choice elsewhere. Also, if you lived in another country for many years and then left that country to live elsewhere you would automatically revert to your domicile of origin.

As regards inheritance tax, if you your domicile at the time of your death is the UK (strictly speaking it would be either England and Wales, Scotland or Northern Ireland) your worldwide estate would be liable to UK inheritance tax though you would be able to offset any foreign tax paid against the UK liability, If the tax abroad was charged at more than 40% (the rate chargeable in the UK) the deduction would be limited to 40%. If your beneficiaries can show that you died domiciled outside the UK, only your estate in the UK would be liable to UK inheritance tax.

The UK definition of domicile is, as already stated, not the same as in other countries and in some cases is very different which can lead to all sorts of confusion.

Alan

[SantiSuk]

What will screw them is Thailand doesnt have trust funds.

I guess that s where maids and drivers come in again

There have been hints that the HMRC in the UK is going down the road of attacking trusts where the clear intent is to avoid taxation. UK domiciled individuals who seek to shelter an IHT liability should seek competent tax advice before setting up trusts with the aim of avoiding IHT. Those who are relying on them already might like to keep their eye on this or do some more research.

Don't be concerned about UK IHT if you expect your estate to have less than £325,000. Don't be concerned at all if you expect to bequeath it all to a UK-domiciled spouse.

Edited August 22, 2014 by SantiSuk

[mccw]

Today BK post quoting a 10% figure as the proposed amount which is now under consideration. Along with some non detailed "property taxes"

[mccw]

I wonder if ones wife owns land and house with a view to pass on to kids- they should maybe put kids names on the Chanort now? Before the gift tax introduced.

I wonder if adding a name counts as a gift of x % or not- since it is not wholly given as mother still owner too; or if on death the kids are already owners do they are not inheriting , it's just one name coming off the Chanort which is already on thier name.

Maybe mother 1 ; adds 2 kids = 2 thirds gifted value?

Or on mother death each kid has to pay tax on the share of the remaining third passing to them?

Hmm

[mccw]

Bk post quoting a 50million bht starting threshold too btw

[icare999]

UK domicile rules are indeed complex but not tied to where your parents were born at all. I wish it was. Basically if you are a UK citizen to be non resident is easy just leave and inform them and thats it. To be don domiciled on your death you need to haves severed all ties with UK have nowhere to live in UK (except investment property better my tax consultant told me 15 years ago not acquired once you've left) and ideally given your passport (but not necessarily and I was advised since i could not get a Thai passport this would still be OK for non domiciled status. And whatever you do do not get buried in UK.

IT can only be argued on your death since IR will while confirming non resident status never confirm non domiciled at least not until death.

To be sure I over years transferred most of my assets to my Thai wife and our children and made sure my UK estate was well below threshold. In any case harpy possible even if i had assets here in my name UK tax people would know or check.

[wordchild]

UK domicile rules are indeed complex but not tied to where your parents were born at all. I wish it was. Basically if you are a UK citizen to be non resident is easy just leave and inform them and thats it. To be don domiciled on your death you need to haves severed all ties with UK have nowhere to live in UK (except investment property better my tax consultant told me 15 years ago not acquired once you've left) and ideally given your passport (but not necessarily and I was advised since i could not get a Thai passport this would still be OK for non domiciled status. And whatever you do do not get buried in UK.

IT can only be argued on your death since IR will while confirming non resident status never confirm non domiciled at least not until death.

To be sure I over years transferred most of my assets to my Thai wife and our children and made sure my UK estate was well below threshold. In any case harpy possible even if i had assets here in my name UK tax people would know or check.

This is not true, there is a link to where your father was born in the sense that at your birth you inherit the domicile of your father eg if you were born in the UK to a father born say in France, who had not fully settled in the UK at the time of your birth, then your domicile of origin would be French (even if you never lived there). If you contiued to live in the UK as an adult then it is likely that you would be considered to have then adopted a domicile of choice in the UK. Under UK (common) law your domicile of origin never changes but your domicile of choice can do eg if you live in Thailand for many years and cut your ties with the UK then you are likely to now have a domicile of choice in Thailand, however if you move to Cambodia for a period your domicile would revert to your domicile of origin (French) until such time as you could be considered fully settled and therefore domiciled in Cambodia. As far as the UK is concerned it is fairly easy to lose your domicile of choice but HMRC sets a higher bar when you (or your estate) claims that your domicile of origin has been replaced by a new domicile of choice. Having said that it is not as difficult as many suggest and my view would be that many expats who have lived in Thailand for say 4/5 years plus and cut most of their ties with the UK eg sold their property etc would have a strong claim to have adopted Thai domicile especially those who have started families here..

Edited August 24, 2014 by wordchild

[jayceenik]

Three weeks ago I wrote a Last Will in Singapore to bequeath my bank account there to my Pattaya TGF at my death.

Domicile notion was of importance to me as a Last Will drafted in SIN by a non Singaporean must also be legal according to the "Domicile" of the person making the Will.

I am a Belgian citizen expat living in LOS and am thus "domiciled" in LOS as far as the Belgian govt is concerned and not subject to Belgium's Inheritance Law.

Here is what the Belgian Law says about "Domicile" :

Domicile

Under Belgian law, domicile is the place where a person has their principal residence. It is the place where the centre of their family and economic interests lies, and where they are normally to be found. Belgium defines domicile in terms of residence at a specific address; Anglosaxon countries see a person’s domicile as their homeland. Belgium does not have a notion of domicile of origin

[wordchild]

Three weeks ago I wrote a Last Will in Singapore to bequeath my bank account there to my Pattaya TGF at my death.

Domicile notion was of importance to me as a Last Will drafted in SIN by a non Singaporean must also be legal according to the "Domicile" of the person making the Will.

I am a Belgian citizen expat living in LOS and am thus "domiciled" in LOS as far as the Belgian govt is concerned and not subject to Belgium's Inheritance Law.

Here is what the Belgian Law says about "Domicile" :

Domicile

Under Belgian law, domicile is the place where a person has their principal residence. It is the place where the centre of their family and economic interests lies, and where they are normally to be found. Belgium defines domicile in terms of residence at a specific address; Anglosaxon countries see a person’s domicile as their homeland. Belgium does not have a notion of domicile of origin

I suppose that you could, in theory, have a situation where an individual born of a Belgian father living in the UK (but not fully settled there) is regarded by Belgium as having a UK domicile and regarded by the UK as having a Belgiun domicile.

Edited August 24, 2014 by wordchild