Thailand’s recently appointed Prime Minister and head of the National Council for Peace and Order (NCPO) General Prayuth Chan-Ocha has recently announced plans to reform Thailand’s tax system. As part of the reforms, the PM has proposed an inheritance and property tax. The new taxes are expected to address the income disparity gap between Thailand’s rich and poor.
Thailand in 1933 had initiated a scheme for the collection of inheritance taxes, however, due to opposition the scheme was scrapped in 1944. Since then many similar proposals to incorporate inheritance tax into Thailand’s tax system have been considered, only to be shot down due to the additional burden.
The current version of the proposed bill called the “Draft Bill on Inheritance and Gift Taxes” has been approved by the NCPO and has been forwarded to the Council of States for their review and approval. Should the bill be passed by the Council of States, it will then be submitted to the National Legislative Assembly (NLA) for ratification.
What can we expect from the Draft Bill on Inheritance and Gift Taxes?
It is expected that successful implementation of inheritance taxes into Thailand’s tax system could generate significant tax revenues. Despite the proposed inheritance tax rate being a closely guarded secret, some experts believe that progressive rates are likely to be implemented on domestic assets that are passed to heirs, such as land, houses, buildings, bonds, shares, securities, monies in savings accounts and vehicles. At this point it is unknown what assets, if any, will be exempted from the inheritance tax. It is however, expected that a list will be provided via a Royal Decree upon the implementation of the inheritance tax.
From what is understood thus far, the draft bill proposes that an individual who receive assets via disposition by will or intestacy with a net value under THB 50 million will be exempt from inheritance tax. Assets exceeding a net value THB 50 million but below THB 200 million will be subject to 10%. And individuals who inherit assets with a net value exceeding THB 200 million will be subject to a rate of 20%. It is not clear how the assets will be valued and if any additional relief will be granted.
The inheritance tax proposals if successful could result in Thailand’s rich seeking to realize assets or transferring assets before the law becomes effective. Only time will tell if the draft bill makes it into Thai law, but for now, it seems that the NCPO are insistent on bringing reform to the country. If successful, it is likely that the inheritance tax will be implemented in 2015.