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Thailand: First Inheritance Tax in Decades Comes into Force

(Feb. 5, 2016) On February 1, 2016, an inheritance tax came into effect in Thailand for the first time in 72 years. The purpose of the law is to increase the tax base to generate revenue. The government has announced it expects to reap the equivalent of US$28 to $56 million from the new tax each year, with the ultimate goal of increasing social equality by collecting funds from heirs of the wealthy to “develop the country and upgrade the living of underprivileged people.” (Thailand’s 1st Inheritance Tax in Decades Enters into Effect, KYODO WORLD SERVICE (Feb.1, 2016), Open Source Center online subscription database, Doc. No. JPR2016020157595259.)

The new tax is imposed on inheritances that are over 100 million baht (about US$2.8 million) in value. Lineal descendants and ascendants will have to pay 5% of what they inherit, while other heirs will be assessed 10%. (Id.)

Background

The plan to adopt an inheritance tax was announced in November 2014. At that time, the Prime Minister of Thailand, Prayuth Chanocha, announced a new economic policy, including the introduction of both property and inheritance taxes, when speaking to the National Legislative Assembly. (Don Sornumpol, Inheritance Tax in Thailand (Nov. 12, 2014), SIAM LEGAL.)

The Thai Official Gazette published the Inheritance Tax Act and Gift Tax Regulations on August 5, 2015. The legislation included an exemption from inheritance tax when the beneficiary is a spouse or a charitable organization. The gift tax is imposed on gifts other than those from parents, spouses, or children that are worth more than THB10 million (about US$279,000) in a single year; for gifts from family members, the tax is not imposed unless the value is twice that amount. (Rachel Saw, Thailand: Inheritance and Gift Taxes – Regulations Published, TAX NEWS SERVICE (Aug. 19, 2015), International Bureau Of Fiscal Documentation  online subscription database.)

Reaction to the Law

According to Nonarit Bisonyabut of the Thailand Development Research Institute Foundation, the new law is mainly a symbolic move, as the current military government tries to establish itself as attempting to eliminate inequality in the country. Bisonyabut noted that fewer than 10,000 individuals are likely to feel any impact from the law and stated, “[t]he law will mostly distress (members of) the upper middle-class who does [sic] not have knowledge or financial planners to look after their assets like the billionaire families do.” (Thailand’s 1st Inheritance Tax in Decades Enters into Effect, supra.)