The Global Property Guide looks at inheritance from two angles: taxation, and what inheritance laws apply to foreigners leaving property in Thailand: what restrictions there are and whether making a will is advisable.

INHERITANCE TAX

Inheritance tax is levied at different rates, depending on the relationship between the heir and the deceased testator.

Inheritance tax is levied at a flat rate of 5% if the heir is a direct ascendant or descendant of the deceased. Inheritance of the spouse is exempt from inheritance tax.

Inheritance tax is levied at a flat rate of 10% for all other heirs.

But properties which are acquired as a gift or inheritance are subject to capital gains tax and are assessed separately. Capital gains tax is imposed at the standard income tax rates. If the property was acquired as a gift or by inheritance, 50% of the proceeds (selling price or market value) are deductible as expenses. The balance or 50% of the proceeds will be divided by the number of years the property was held, whereby the outcome is taxed at the appropriate tax rate. The resulting average tax liability will then be multiplied by the number of years the property was held to arrive at the final tax liability.

INHERITANCE LAW

Thanks to Kowit Somwaiya of LawPlus Ltd.

What inheritance laws apply in Thailand?

The Civil Code governs inheritance Book 6 (Succession) of the Civil and Commercial Code of Thailand applies to all inheritance issues related to a real property located in Thailand, regardless of the nationality or the domicile of its deceased owner.

If the owner of a real property lived and died outside Thailand and if a foreign court judgment is given in relation to his will and his real property located in Thailand, such judgment is not readily recognized in Thailand. His heir must file a new court case in Thailand and use such foreign judgment as evidence in the Thai Court to obtain a judgment of the Thai Court that will be recognized by the relevant parties, such as the Land Office and banks. A non-contested case in a Thai Court for recognition of a will confirmed by a foreign court judgment takes around 3 to 6 months to be final.

The Land Code of Thailand prohibits a foreigner from holding land ownership, with only a few exceptions. For example, if permission is given the Minister of Interior, a foreigner can own land for residential purpose up to one rai (1,600 square metres). But a foreigner can own condominium apartments, buildings, houses and any other structures built on land, subject to a few restrictions. A foreigner can also hold a long-term lease of land, up to 30 years.

A foreigner who inherits land as a statutory heir of a Thai national must dispose of the land within one year, unless a permission is given by the Interior Minister. Otherwise, the Director-General of the Land Department can dispose of the land and transfer the net proceeds from the disposal to the said statutory heir.

There is no reserved portion.

A property owner is free to will his property. There is no concept of a reserved portion. However, if the property is a common property, the property will first be divided equally between the two spouses and each spouse can then freely will his or her portion.

When a person dies without a will, there are 6 classes of statutory heirs.

In a person died without a will, his estate will be inherited by his statutory heirs in 6 classes under the following order: (1) descendants; (2) parents; (3) brothers and sisters of full blood; (4) brothers and sisters of half blood; (5) grandfathers and grandmothers; and (6) uncles and aunts.

The surviving spouse is a statutory heir of the same class as the descendants. The surviving statutory heirs in the higher class exclude all the heirs in the lower classes, except for the parents, who enjoy rights in the same order as the descendants.

It is advisable for a foreigner to make a will in Thailand.

In Thailand, it is normal to make a will, especially amongst the wealthy. It is advisable for a foreigner to make a Thai will for his property located in Thailand because it is easier and faster to enforce a Thai will than enforcing a will made under a foreign law. If a will is made under a foreign law for a property in Thailand, to enforce such will in Thailand, the heir of the deceased must prove the foreign law to satisfy the Thai Court. If the will is contested by any other heir in the Thai Court, recognition and enforcement of the will can be complicated and difficult.

A will must be made as a written document signed by the testator and at least 2 witnesses presenting at the same time. A holograph will can also be made in hand writing of the testator and signed by the testator himself.