How Are International Inheritances Taxed Between Germany and Thailand?

1. Introduction
International inheritances can involve complex tax implications, particularly for Thai beneficiaries inheriting assets from Germany. Understanding the tax obligations in both countries and the role of double taxation agreements is essential to avoid unnecessary financial burdens. This article explains how international inheritances are taxed between Germany and Thailand, focusing on cross-border rules, exemptions, and practical considerations.

 
2. Taxation in Germany
2.1 Germany imposes inheritance tax on both residents and non-residents if the deceased or the inherited assets are connected to Germany. This includes real estate, bank accounts, and business interests located in Germany.

2.2 The tax rate depends on the heir’s relationship to the deceased, categorized into three tax classes:

Tax Class I (close relatives, such as spouses and children): 7–30%.
Tax Class II (distant relatives): 15–43%.
Tax Class III (non-relatives, including Thai girlfriends): 30–50%.
2.3 Exemptions are available, with thresholds based on the heir’s relationship to the deceased:

Spouses: €500,000.
Children: €400,000.
Distant relatives and non-relatives: €20,000.
2.4 German law requires the tax to be calculated based on the worldwide estate if the deceased was a German resident. For non-resident deceased persons, only assets located in Germany are taxed.

 
3. Taxation in Thailand
3.1 Thailand does not impose inheritance tax on international inheritances under most circumstances, simplifying the process for Thai beneficiaries receiving assets from abroad.

3.2 Thai tax authorities may inquire about large asset transfers to ensure compliance with money-laundering or tax evasion regulations. Documentation proving the inheritance’s legitimacy is usually sufficient.

3.3 Any income generated from inherited assets, such as rental income from German real estate, may be subject to Thai income tax if the heir is a tax resident of Thailand.

 
4. Double Taxation Agreement Between Germany and Thailand
4.1 Germany and Thailand have a double taxation agreement to prevent heirs from being taxed twice on the same inheritance.

4.2 Under the agreement, inheritance tax is generally paid in the country where the assets are located. For example, German real estate is taxed in Germany, even if the heir resides in Thailand.

4.3 If Thai authorities impose taxes on income derived from the inheritance, such as rental income, the taxes paid in Germany may be credited against the Thai tax liability, depending on the agreement’s provisions.

 
5. Common Scenarios
5.1 Scenario 1: Thai Woman Inheriting German Real Estate

The property is taxed in Germany based on its value and the heir’s relationship to the deceased.
If the property is rented, the rental income may be taxed in both Germany and Thailand, with tax credits available to avoid double taxation.
5.2 Scenario 2: Thai Woman Inheriting Financial Assets in Germany

German financial assets, such as bank accounts, are taxed in Germany.
If the assets generate interest or dividends, those earnings may be subject to income tax in Thailand.
 
6. Steps to Ensure Compliance
6.1 Obtain Documentation
Ensure all required documents, such as the Certificate of Inheritance (Erbschein) and bank statements, are properly translated and certified for use in both Germany and Thailand.

6.2 Declare Inheritance in Both Countries
Notify the German tax office (Finanzamt) of the inheritance within three months of acceptance. Thai tax authorities may require proof of inheritance for large asset transfers.

6.3 Engage Tax Advisors
Consult tax professionals in both Germany and Thailand to ensure compliance with local laws and maximize tax benefits under the double taxation agreement.

 
7. Practical Example
7.1 A Thai woman inherits €300,000 in German assets, including real estate and savings.
7.2 Tax in Germany:

Exemption: €20,000 (Tax Class III).
Taxable amount: €280,000.
Tax rate: 30%.
Tax due: €84,000.
7.3 Tax in Thailand:
No inheritance tax, but rental income from the property is subject to Thai income tax.
Tax credits may apply for taxes paid in Germany.
 
8. Key Considerations
8.1 Asset Location
The country where the assets are located typically determines the primary tax liability. German real estate is always subject to German inheritance tax.

8.2 Income Tax on Derived Assets
Income generated from inherited assets, such as rent or dividends, may create additional tax obligations in both countries.

8.3 Timelines
German inheritance taxes must be declared and paid within three months. Ensure timely communication with both German and Thai tax authorities to avoid penalties.

 
9. Conclusion
Thai beneficiaries inheriting assets from Germany must navigate inheritance tax obligations in both countries, but the double taxation agreement provides mechanisms to avoid paying taxes twice. Understanding the tax rules, seeking professional advice, and maintaining proper documentation ensures compliance and minimizes financial burdens. By taking a proactive approach, Thai heirs can manage international inheritances effectively and with confidence.