Tax Reform – September 2014 Update

The Revenue Department is slated to present its tax reform proposal to the Finance Ministry. The package will cover inheritance and gift tax, land and buildings tax, the restructuring of VAT and personal income tax and measures for preventing international tax evasion.

Keywords: Mazars, Thailand, Tax, Revenue Department, Inheritance Tax, Land and Buildings Tax, VAT, Personal Income Tax

07 October 2014

Introducing New Taxes

i. Inheritance and gift tax

The inheritance tax will likely be focused on the receiver, who will be taxed when inheriting an estate and when he has been transferred assets two years before the giver dies.

The rates will likely be progressive. For inheritance, the rate is 0% for assets worth not more than 50m Baht or the first 50m Baht of the estate; 10% for the portion between 50-200m Baht and 20% for the portion that exceeds 200m Baht.

For gifts, the rate is 0% for assets worth not more than 10m Baht or the first 10m Baht of the assets, 10% for the portion between 10-40m Baht and 20% for the portion exceeding 40m Baht.

ii. Land and buildings tax

The annual property tax rates will likely be based on appraised value of the property at a maximum rate of 0.5% for commercial-use properties, as much as 0.1% for private residences and no more than 0.05% on land used for agriculture.

Restructuring Existing Taxes

i. VAT rate is proposed to be increased from 7% to 10% from October 2015.

However, it is likely that the VAT rate will be gradually increased. The rate will likely be increased to 8% late next year.

ii. Personal income tax reform

  • Certain businesses which are currently exempt from personal income tax (e.g. tutoring schools, sale of stock on the Stock Exchange of Thailand) will likely be taxed.
  • Standard tax deduction on assessable income under Section 40 (5) – (8) will be cut by 50%.
  • Standard deduction of Baht 30,000 will be granted to taxpayers who can provide proper evidence for such deductions.
  • LTF allowances will not be renewed when it expires in 2016.
  • Various tax deductions and allowances will be capped at not exceeding 1m Baht.

Measure for Preventing International Tax Evasion

The following measures will be implemented to prevent international tax evasion

i. Thin capitalization rule

ii. Transfer pricing rule

iii. General measure for preventing tax evasion

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