International Estate Planning Guide – Thailand 2021
International Estate Planning Guide
Individual Tax and Private Client Committee
I. Will and disability planning documents
A. Application law
In Thailand, the main governing law for will issues is Book 6 (Succession) in the Civil and Commercial Code of Thailand (CCC).
B. Legal capacity
a. Being a testator
Based on section 1654 of the CCC, the capacity of the testator must be considered only at the time when a will is made. If the will is made by a person with no civil capacity, such as an incompetent person, or with a limited civil capacity, the will is void. However, by virtue of the Supreme Court Judgment No 177/2528 (AD 1985), a quasi-incompetent person can make a will.
According to the CCC, the legal requirements for full civil capacity are as follows:
- any person who has attained 15 years of age can make a will;
- the mental status of this person is healthy.
b. Serving as a witness
Many types of wills require witnesses. In accordance with sections 1670 and 1653 of the CCC, the following persons cannot act as witnesses to attest a will:
- persons of unsound mind or persons adjudged quasi-incompetent;
- persons who are deaf, dumb or blind; and
- a beneficiary in the will and his or her spouse.
C. The formality of a will
Based on Book 6 on Succession in the CCC, there are five types of will as follows:
a. In writing
A will must be made in writing, stating the date at the time of making of the will, and including the signature of a testator before two witnesses who are present at the same time and their names certifying the signature of the testator.
No erasure, addition or other alternation in such will is valid unless made in the same way as stated above.
b. Handwritten will
A handwritten will is a will that is written entirely by the testator and stating the date and his or her signature. No erasure, addition or other alteration in such will is valid unless made by the testator’s own hand and signed by him or her.
c. Will by public document
A will by public document is a will that the testator must declare testamentary intention before a district office chief before at least two witnesses. In this approach the following steps must be complied with:
- step 1 – the testator must declare to the district office chief before at least two other persons as witnesses present at the same time what dispositions he or she wishes to be included in this will;
- step 2 – the district office chief must note down such declaration of the testator and read it to the testator and to the witnesses;
- step 3 – the testator and the witnesses must sign their names after having ascertained that the statement noted down by the district office chief corresponds with the declaration made by the testator; and
- step 4 – the statement noted down by the district office chief shall be dated and signed by such official who shall certify under his hand and seal that the will has been made in compliance with the foregoing steps 1 to 3.
No erasure, addition or other alternation in such will is valid unless signed by the testator, the witnesses and the district office chief.
d. Will by secret document
A testator can also make a will by secret document. The requirements for a will by secret document are as follows:
- the testator must sign his or her name on the document;
- the testator must close up the documents and sign his or her name on the document;
- the testator must produce the closed document before the district officer chief and at least two other persons as witnesses and declare to all of them that it contains the testamentary dispositions of the testator, and if the testator has not written with his own hand the whole text of the document, he must state the name and domicile of the writer;
- after the district office chief has noted down upon the cover of the document the declaration of the testator and the date of the production and has affixed his seal thereupon, the district office chief, the testator and the witness must sign their names thereon; and
- no erasure, addition or other alternation in such will is valid unless signed by the testator.
e. Oral will
An oral will is a will made under an exceptional situation, such as imminent danger of death, or during an epidemic or war.
For this purpose, the testator must declare his intention regarding the dispositions of the will before at least two witnesses present at the same time. After that, such witnesses must without delay appear before the district office chief and state before him or her the dispositions which the testator has declared to them orally, as well as the date, place and exceptional circumstances under which the will was made. Then, the district office chief shall note down the statement of the witnesses and such two witnesses shall sign the statement or, failing that, may make an equivalent to signature only by affixing a fingerprint certified by the signatures of two witnesses.
II. Estate administration
A. Overview of administration procedures
After a decedent’s death, someone must initiate administration of the estate. Where a decedent has left a valid will naming an executor or a person nominated for the purpose in the will, such person will be the person in charge of the administration of the estate. Under the CCC, a testator may appoint one or more person to be administrators of the estate.
If the decedent has not named an executor or person nominated for the purpose in the will, the heirs, stakeholders, or public prosecutor may apply to the court to appoint an administrator of the estate.
B. Intestate succession and forced heirship
Under section 1629 of the CCC, there are only six classes of statutory heir, as follows:
(3) brothers and sisters of full blood;
(4) brothers and sisters of half-blood;
(5) grandparents; and
(6) uncles and aunts.
The surviving spouse of a decedent is always an heir and entitled to the same share as an heir in the degree of descendants.
It should be noted that if any heir of the higher class survives or represents in a class as specified above, the heir of the lower class has no right at all to the estate of the deceased.
C. Marital property
According to section 1474 of the CCC, marital property consists of: (i) property acquired during marriage; (ii) property acquired by either spouse during marriage by a will or a gift made in writing if it is declared by such will or document of gift to be marital property; and (iii) interest of the separate property.
However, under section 1471 of the CCC, property owned by a husband or wife before marriage, property for personal use, property acquired by either spouse during marriage through a will or gift, and traditional Thai engagement gifts are not the marital property.
III. Trust and other planning structures
A. Domestic trusts
According to section 1686 of the CCC, trusts cannot be created by will or by any juristic act unless by virtue of provisions of law of a trust creation, however, a trust can be created under the Trust for Transaction in Capital Market Act B.E.2550 (A.D.2007).
The following provisions of the Trust for Transaction in Capital Market Act B.E.2550 (A.D.2007) states clearly that the only a trust created under Thai law are the trusts set up for the benefit of some capital market transactions and they must be set up by a juristic person.
Trusts created whether directly or indirectly by will or by any juristic act producing effect during lifetime or after death shall have no effect whatever, and are not effective, unless by virtue of the provisions of the law of trust creation.
- Section 4 provides that a trust may be created for the benefit of transactions in the capital market as specified in the notification of the Securities and Exchange Act (SEC) in relation to any of the following transactions:
(1) the issuance of securities under the SEC;
(2) the securitisation under the Emergency Decree on Special Purpose Juristic Persons for Securitization; and
(3) other transactions which are supportive or beneficial to capital market development.
- Section 12 provides that a settlor shall be any of the following juristic persons:
(1) a company issuing securities under the Securities and Exchange Act;
(2) an originator under the Royal Enactment on Special Purpose Juristic Persons for Securitization; and
(3) a juristic person having the qualifications specified in the notification of the SEC.
B. Foreign Trusts
According to the Act on Conflict of Laws, B.E. 2481 (AD 1938), a testator may make a will according to the form prescribed by the law of nationality or the law of the country where the will is made. The effects and interpretations of a will are governed by the law of domicile of the testator at the time of testator’s death.
Therefore, if the law of domicile of the testator at the time of the testator’s death allows an individual to create a trust, the will that creates the trust can be recognised and effected in Thailand (Supreme Court Judgment No 6524/2561).
A. Inheritance tax
The Inheritance Tax Act B.E. 2558 (AD 2015) was enacted to govern inheritance tax in Thailand. According to section 11 of the Inheritance Tax Act, the following persons who have received an inheritance shall be liable to pay inheritance tax:
- a person of Thai nationality;
- a natural person of non-Thai nationality but having a domicile in Thailand according to the law on immigration;
- a person of non-Thai nationality but receiving an inheritance which is situated in Thailand.
In the case of a juristic person, the juristic person that is registered in Thailand, or established under Thai laws, or more than 50 per cent of its registered capital is held by a person(s) of Thai nationality, or more than half of its person(s) with managerial power are Thais, shall be considered as a person of Thai nationality under this Act.
1. Tax base
According to section 12 of the Inheritance Tax Act, it provides that if the aggregate value of inheritance which is deducted by the amount of liabilities assumed from such inheritance received by a receiver from each deceased receiver is more than 100mThai Baht, such receiver shall pay tax on the inheritance in the excess of 100m Baht.
In addition, according to section 15 of the Inheritance Tax Act, the calculation of the value of the assets shall be based on the price or the value receivable on the date of receipt of such assets through inheritance.
2. Tax rates
According to section 16 of the Inheritance Tax Act, the inheritance tax rate is ten per cent on the excess of the aggregate value of inheritance. However, if a person receiving an inheritance is an ascendant or a descendant, the inheritance tax rate is five per cent.
B. Gift tax
In 2015, the Revenue Code was amended with the provisions of gift tax. The gifts that are subjected to tax under the Revenue Code can be divided into two main types which are the gift of movable properties and the gift of immovable properties.
Gift of movable properties
Gifts of movable properties are divided into two main types, which are the persons receiving a gift of movable properties from their parent or their descendant or their spouse and the persons receiving gift of movable properties from other people who are not their parent or their descendant or their spouse.
- The tax rate for a gift of movable properties from a parent or descendant or spouse shall be five per cent on the portion of the aggregate gift’s value that exceeds 20m Baht of each tax year.
- The tax rate for a gift of movable properties from other people who are not the taxpayer’s parent or descendant or spouse shall be five per cent on the portion of the aggregate gift’s value that exceeds 10m Baht of each tax year.
Gift of immovable properties
The only taxpayer under this type of gift tax is the parent who transfers the ownership or the possessory right of the immovable properties to his or her child, excluding an adopted child.
The tax rate for the gift of immovable properties shall be five percent on the portion of the aggregate gift’s value that exceeds 20m Baht.
C. Tax and fee for real estate transfer
According to Thailand’s Land Code, any transfer of a real estate shall be subject to a transfer fee at the rate of two per cent of the appraised price. In the case there is no agreement on whether each of the seller or the buyer shall be responsible for the transfer fee, section 457 of the CCC shall be taken into consideration that the cost of transfer fee shall be equally borne by the seller and the buyer.
2. Specific business tax
According to section 91/1 and 91/2(6) of the Revenue Code of Thailand, a sale of a real estate shall be subject to a special business tax at the rate of 3.3 per cent of the appraised price or the sale price, whichever is higher.
3. Stamp duty
A transfer of a real estate shall be subject to a stamp duty at the rate of 0.5 per cent of the appraised price or the sale price, whichever is higher, which is borne by a seller. Nevertheless, in the case that the specific business tax is paid, the stamp duty for the sale of such condominium unit is exempted.
4. Withholding tax
Capital gains derived from the sale of a real estate are considered the accessible income under section 40(8) of the Revenue Code of Thailand, therefore such capital gains shall be withheld by the Land Department at the time of the registration of the sale or the transfer of ownership of the real estate.
With regard to personal income tax, the withholding tax is calculated and based on the period of the real estate holding and personal income tax rates in accordance with provisions of the Revenue Code of Thailand.
D. Land and building tax
1. Tax base
The calculation of tax shall be based on the total assessed value of land or building and shall be in accordance with the provisions stipulated in the ministerial regulation.
The assessed value of land or building shall be based on the assessed value stipulated by the Department of Land.
2. Tax rate
Tax rates can be classified by the types of uses, that is, agricultural use, residential use, commercial use and no use of property.
Land or building is owned by an individual:
Land or building is owned by a juristic person:
Both land and building are owned by an individual and such individual’s name appears in the house registration:
Building only is owned by an individual and such individual’s name appears in the house registration:
Land or building is used for residence. For example, the second home where the owner’s name does not appear in the house registration:
Other kinds of use of land other than agricultural and residence use:
International Estate Planning Guide – Thailand 2021
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