Gift is one legal concept under Thai Civil and Commercial Code that might be different from other jurisdictions outside of Thailand. Although the gifting can be made without compensation, it may emerge other liabilities such as tax liability. H&P Thailand Tax Lawyers have prepared the following legal comments on gift tax and property law.
Legal Concept of Gift
Section 521 of Thai Civil and Commercial Code states that “A gift is a contract whereby a person. Called the donor, transfers gratuitously a property of his own to another person, called the receiver, and the receiver accepts such property.”
As it is pointed out by the regulator, gifting is one of the legal actions clearly stated in Thai civil and commercial code. This legal action must consist at least 2 parties, the donor, and the receiver, to form a legal action.
For example, a father gives a car to a daughter. In this circumstance, the father is the donor and the daughter is the receiver. The legal action cannot be completed with only one party.
Section 523 of Thai Civil and Commercial Code stated that “A gift is valid only on delivery of the property given.”
Moreover, the gift legal action will be valid when a gift is given to the receiver. As long as the receiver does not receive the property/asset, the legal action will not be considered as valid.
The donor must also be alive while the receiver receives such property. Otherwise, if the donor is not alive while gifting, such legal action will be considered as inheritance.
From section 521 and section 523 of Thai civil and commercial code, it shows the qualification of the gifting. We can examine the legal action of gift must contain all these elements. We do not need to point out that without one of these elements, the legal action will not be considered as gift.
- The donor must show the intention of gifting the property.
- The receiver must show the intention of receiving the property.
- The receiver must be existing in the gifting period.
This legal action differs from the inheritance. In gifting circumstance, the properties will be transferred to the receiver while both parties are alive. On the other hand, the donor must die first in the inheritance circumstance. If a property is transferred by inheritance, the outcome of the action such as the form of the action or the taxation can be different from the gifting. Hence, it is important to examine the circumstance thoroughly to examine whether it is a gifting or inheritance.
Thai Gift Tax
Gift tax is a personal income taxation made from the property that is given or received from a legal action of gifting before the donor passes away. Because gifting is a legal action that does not need any compensations from the receiver or the donor, the Thai regulator consider that there are many circumstances that the gift is made with the aim to avoid the taxation emerged from selling or purchasing. Hence, gift tax is collected to prevent inheritance taxation avoidance.
Although the gift tax is a taxation on gifting, not every gifting has to be taxed according to Thai Tax Law. The following is the criteria for gifting that will have to be taxed according to personal tax law.
- 5% of the exceeding value of 20 million Thai Baht in case the receiver is the spouse, parents, or descendants of the donor.
- 5% of the exceeding value of 10 million Thai Baht in case the receiver is other third party.
If the value of the property is less than 10 million or 20 million Thai Baht, the receiver does not have to pay the personal income tax for the received property.
In other words, gifting a property, which has a value not more than 10 million or 20 million Thai Baht, is not obliged to be taxed for 5% of the value of the property. Nonetheless, each circumstance is subjected to different tax regulation. Although the circumstance may not be taxed according to the gift tax regulation, it may be taxed by other sections of the law. Therefore, it is essential to examine case by case and consult Tax advisers in Thailand.
If you need to consult with a Tax lawyer in Thailand, please contact our Bangkok law firm at [email protected]