By Rachanee Prasongprasit

Section 42 (27) of the Revenue Code has been one of the tax provisions that a number of well-off families explore in passing their wealth to their heirs in a tax efficient manner. A person will be exempted from personal income tax (“PIT”) on the outright gift that he/she receives from the parent, but only in part of the amount that does not exceed THB 20 million per calendar year.

This rule needs to be considered in conjunction with Section 42 (9), which exempts PIT for the subsequent sale of movable property that is “acquired through inheritance, or acquired with no commercial, nor profits making, intention”.

Recently, the Revenue Department issued Ruling No. Gor.Kor. 0702/972 dated 19 February 2025, in which a father purchased shares in a non-listed company in 1979 at par of THB 100 per share. In 2024, the book value of the shares went up to THB 23,000 per share. The father sought confirmation on tax implications upon giving such shares to his child, and his child’s tax base upon on-selling the shares with gains in the future. The Revenue Department set out the rules as follows:

• No PIT to be imposed on the father, as he did not derive any income from the transfer of the shares as a gift to his child.
• Where the value of the shares on the date of receipt did not exceed THB 20 million per calendar year, his child would be exempted from PIT under Section 42 (27).
• When the child subsequently sold the shares, revenue from the sale was not exempted from PIT under Section 42 (9), as the shares were acquired (even as a gift) with commercial and profits seeking intention. Further, in computing tax base for such PIT, only the amount for which PIT has already been paid upon receiving the gift, if any, would be allowed as a cost.

For example, if the share value was THB 30 million when the father gifted them to the child, PIT in (ii) would be imposed on the excess of THB 10 million only. Consequently, when the child sold the shares at, say, THB 50 million, the child’s tax base for PIT under (iii) would be THB 40 million, since THB 10 million would be allowed as a tax-deductible cost in computing the gain.

15 April 2025