Inheritance and estate taxes (sometimes referred to as ‘death taxes’) can have a significant financial effect upon your assets if you are not ready for their imposition. While ASEAN is working to standardize many financial regulations throughout the economic community, inheritance and estate taxes are still imposed differently depending on the country. Dezan Shira and Associates provides a snapshot into the current and future regulations relating to these types of taxes in the ASEAN member nations
An estate tax collects tax calculated on the net value of the deceased’s overall property, while an inheritance tax is calculated on the inheritance received by individuals.
Singapore
Before 2008, Singapore levied a tax called the Estate Duty, however, this was removed in order to encourage more local and overseas investors to hold their assets in the city-state.
Before the abolition of the Estate Duty, immovable property, bank accounts, publicly listed shares and items in a safe deposit box were all taxable.
The Philippines
Currently, the Philippines have an estate tax in place. After deducting all expenses, losses, debts and taxes related to the property, the taxable inheritance amount is arrived at.
Non-resident foreigners are only liable to estate tax for property located within the territory of the Philippines. The following deductions are available for citizens and resident foreigners, before arriving at the taxable threshold:
• PHP 1 million (US$22,500) ‘standard’ deduction
• PHP 1 million for the family home
• PHP 200,000 (US$4,500) for expenses relating to the funeral
• PHP 500,000 (US$11,260) for medical expenses that occurred in the year before the deceased’s death
|
P to PHP 200,000 (US$ 4,500) |
0% |
|
PHP 200,000 – 500,000 (US$ 11,260) |
5% of the excess over PHP 200,000 |
|
PHP 500,000 – 2 million(UG$ 45,000) |
8% of the excess over PHP 500,000 |
|
PHP 2 million – 5 million (US$112,600) |
11% of the excess over PHP 2,000,000 |
|
PHP 5 million – 10 million (US$225,200) |
15% of the excess over PHP 5,000,000 |
|
Over PHP 10 million |
20% of the excess over PHP 10,000,000
|
Similar to Vietnam, there are ‘compulsory heirs’ in the Philippines. Depending on the heirs’ relationship to the deceased person, at least one half of the hereditary estate is reserved for distribution between the heirs. The hereditary estate is the difference between the assets and the liabilities of the deceased.
All property, which the deceased gifted during his lifetime will be regarded as an advance from his estate - and labelled collation. The value of that property will be included in the hereditary estate. Even if the property was gifted upon birth of the heirs, the law will still regard that as collation. Of course, this will only apply to gifts of great value (real estate, cars, stocks, jewellery, etc).
The ‘compulsory heir rule’ does not apply to foreigners. However, in some cases (eg foreigners owning property in the Philippines) inheritance issues of expatriates might become subject to renvoi, meaning that these issues are referred back to the Philippines.
Indonesia
Indonesia does not levy inheritance tax. As long as there is no business or employment relationship, there is also no gift tax. However, if real estate is transferred after the death of a proprietary, a real estate transfer tax can be levied.
Vietnam
Any inherited property exceeding VND 10 million (US$460,000) is taxed at a flat rate of 10 per cent. However, exemptions from inheritance tax are made if the income is generated from the inheritance of real property as long as one of the following relationships is applicable to the heir and the deceased person - husband and wife, parent and child, including adopted children and foster parents, mother and father-in-law, stepchild, grandparent and grandchild and sibling.
Since in the Socialist Republic of Vietnam land belongs to the Vietnamese people as a whole, real estate property cannot be inherited, but the right to use these lands can be. Only Vietnamese nationals can be legal owners of immovable property, meaning that immovable property must be sold and foreign beneficiaries can only inherit the amount equal to the value of the property.
Certain persons (ex convicts, persons breaching their duty to support the deceased and persons forcing the deceased to include them in their will) are not allowed to inherit. In Vietnam, the rule of compulsory heirs is also applicable, meaning that minor children, fathers, mothers, spouses and adult children who are incapable of working will inherit shares of the bequeathed property, regardless of the content of will.
Malaysia
Inheritance tax in Malaysia was abolished in 1991. Until then, net worth exceeding MYR 2 million (US$543,000) was taxed at five per cent and a rate of 10 per cent was imposed on net worth exceeding MYR 4 million.
Thailand
In August 2014, the head of Thailand’s National Council for Peace and Order (NCPO), General Prayuth Chan-ocha approved plans to reform the tax system, which included the creation of an inheritance tax. The 10 per cent tax will be levied on values over the amount of US$ 1.5 million, effectively making this a wealth distribution tax.
Brunei
In the Sultanate, estate duty is payable and applied to all immovable property located in Brunei and movable property outside of the country, exceeding the accumulated amount of B$ 2 million (US$1.4 million). The tax rate is currently set at three per cent.
Cambodia
No inheritance or estate tax is levied in Cambodia. Legally speaking, foreigners are not allowed to inherit in Cambodia and must first apply for citizenship if they want to qualify. However, one strategy to circumvent this problem is by holding the property through a resident company.
Lao PDR and Myanmar
Neither Laos nor Myanmar levies inheritance taxes. However, in the case of Myanmar, inheritances and gifts are subject to stamp duty.
This article was first published on ASEAN Briefing. Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile fullservice consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States. For further details or to contact the firm, please email info@dezshira.com or visit www.dezshira.com..
By
Dezan Shira and Associates
Inheritance and estate taxes (sometimes referred to as ‘death taxes’) can have a significant financial effect upon your assets if you are not ready for their imposition. While ASEAN is working to standardize many financial regulations throughout the economic community, inheritance and estate taxes are still imposed differently depending on the country. Dezan Shira and Associates provides a snapshot into the current and future regulations relating to these types of taxes in the ASEAN member nations
An estate tax collects tax calculated on the net value of the deceased’s overall property, while an inheritance tax is calculated on the inheritance received by individuals.
Singapore
Before 2008, Singapore levied a tax called the Estate Duty, however, this was removed in order to encourage more local and overseas investors to hold their assets in the city-state.
Before the abolition of the Estate Duty, immovable property, bank accounts, publicly listed shares and items in a safe deposit box were all taxable.
The Philippines
Currently, the Philippines have an estate tax in place. After deducting all expenses, losses, debts and taxes related to the property, the taxable inheritance amount is arrived at.
Non-resident foreigners are only liable to estate tax for property located within the territory of the Philippines. The following deductions are available for citizens and resident foreigners, before arriving at the taxable threshold:
• PHP 1 million (US$22,500) ‘standard’ deduction
• PHP 1 million for the family home
• PHP 200,000 (US$4,500) for expenses relating to the funeral
• PHP 500,000 (US$11,260) for medical expenses that occurred in the year before the deceased’s death
|
P to PHP 200,000 (US$ 4,500) |
0% |
|
PHP 200,000 – 500,000 (US$ 11,260) |
5% of the excess over PHP 200,000 |
|
PHP 500,000 – 2 million(UG$ 45,000) |
8% of the excess over PHP 500,000 |
|
PHP 2 million – 5 million (US$112,600) |
11% of the excess over PHP 2,000,000 |
|
PHP 5 million – 10 million (US$225,200) |
15% of the excess over PHP 5,000,000 |
|
Over PHP 10 million |
20% of the excess over PHP 10,000,000
|
Similar to Vietnam, there are ‘compulsory heirs’ in the Philippines. Depending on the heirs’ relationship to the deceased person, at least one half of the hereditary estate is reserved for distribution between the heirs. The hereditary estate is the difference between the assets and the liabilities of the deceased.
All property, which the deceased gifted during his lifetime will be regarded as an advance from his estate - and labelled collation. The value of that property will be included in the hereditary estate. Even if the property was gifted upon birth of the heirs, the law will still regard that as collation. Of course, this will only apply to gifts of great value (real estate, cars, stocks, jewellery, etc).
The ‘compulsory heir rule’ does not apply to foreigners. However, in some cases (eg foreigners owning property in the Philippines) inheritance issues of expatriates might become subject to renvoi, meaning that these issues are referred back to the Philippines.
Indonesia
Indonesia does not levy inheritance tax. As long as there is no business or employment relationship, there is also no gift tax. However, if real estate is transferred after the death of a proprietary, a real estate transfer tax can be levied.
Vietnam
Any inherited property exceeding VND 10 million (US$460,000) is taxed at a flat rate of 10 per cent. However, exemptions from inheritance tax are made if the income is generated from the inheritance of real property as long as one of the following relationships is applicable to the heir and the deceased person - husband and wife, parent and child, including adopted children and foster parents, mother and father-in-law, stepchild, grandparent and grandchild and sibling.
Since in the Socialist Republic of Vietnam land belongs to the Vietnamese people as a whole, real estate property cannot be inherited, but the right to use these lands can be. Only Vietnamese nationals can be legal owners of immovable property, meaning that immovable property must be sold and foreign beneficiaries can only inherit the amount equal to the value of the property.
Certain persons (ex convicts, persons breaching their duty to support the deceased and persons forcing the deceased to include them in their will) are not allowed to inherit. In Vietnam, the rule of compulsory heirs is also applicable, meaning that minor children, fathers, mothers, spouses and adult children who are incapable of working will inherit shares of the bequeathed property, regardless of the content of will.
Malaysia
Inheritance tax in Malaysia was abolished in 1991. Until then, net worth exceeding MYR 2 million (US$543,000) was taxed at five per cent and a rate of 10 per cent was imposed on net worth exceeding MYR 4 million.
Thailand
In August 2014, the head of Thailand’s National Council for Peace and Order (NCPO), General Prayuth Chan-ocha approved plans to reform the tax system, which included the creation of an inheritance tax. The 10 per cent tax will be levied on values over the amount of US$ 1.5 million, effectively making this a wealth distribution tax.
Brunei
In the Sultanate, estate duty is payable and applied to all immovable property located in Brunei and movable property outside of the country, exceeding the accumulated amount of B$ 2 million (US$1.4 million). The tax rate is currently set at three per cent.
Cambodia
No inheritance or estate tax is levied in Cambodia. Legally speaking, foreigners are not allowed to inherit in Cambodia and must first apply for citizenship if they want to qualify. However, one strategy to circumvent this problem is by holding the property through a resident company.
Lao PDR and Myanmar
Neither Laos nor Myanmar levies inheritance taxes. However, in the case of Myanmar, inheritances and gifts are subject to stamp duty.
This article was first published on ASEAN Briefing. Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile fullservice consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States. For further details or to contact the firm, please email info@dezshira.com or visit www.dezshira.com..
By
Dezan Shira and Associates
