The Thai Finance Ministry recently approved a scheme giving generous tax breaks on life insurance policies. The deductible amount was recently increased from 50,000 baht to 100,000 baht, and many people have taken the opportunity to provide life insurance for themselves. However, similar Thai laws have created confusion on many fronts. Parents buying life insurance for their children or dependant partners have sometimes been refused the tax deduction, despite deductions being in place for child to parent insurance policy 'gifts'. We take a law firm in Thailand's perspective of what is, and isn't allowed, under the new tax deduction scheme.

Te plan was created by the Finance Ministry late last year, in order to stimulate savings in Thailand, as well as bolster the slowing economy. It has worked to a large extent in Thailand, but also caused some confusion. Some parents have been asking Thai legal services about whether the tax incentive is applicable to policies they buy for their children, or their partners. In this case, unfortunately, the incentive is not available for policies bought for your dependants. This Thai law is set up so that the person that pays for the service must be the one that receives the benefit.

Of course, law firms in Thailand have identified various ways for children to receive the saving anyway. Older children who are working could be given the money for the policy as a gift, which they would pay for themselves, and then claim the saving on their own tax return. For children who are below the legal working age, the saving is not available.

Confusion regarding the new Thailand law has also arisen with regard to spousal life insurance policies. When it came to light that life insurance policies for dependants were not eligible for the tax breaks, legal services in Thailand handles quite a few inquiries asking whether a spouse had to file a tax return, and pay for their insurance from their own account, in order to claim the deduction. There are various issues at play here, and it would be wise to seek advice from a Thai law firm if you are in this situation.

Part of the reason that uncertainty originally arose, which is the existing Loot Katun Yoo, or 'grateful child' insurance policy tax break that exists. Under this scheme, children can pay personal accident coverage for their parents, and enjoy up to 15,000 baht in deductions for these payments. Many law firms in Thailand see this as an inconsistency, which children can claim deductions on tax breaks for their parents, but parents cannot do so for children. Obviously, many parents saw it that way also.

Problems have arisen in the past with the 'grateful child' scheme under Thai law, though, and would need to be addressed before the new tax exemption could be extended to life insurance policies paid for children. Insurance companies rarely include the ability to specify someone other than the person paying the insurance as the insured party, as their forms simply don't allow it. Thai legal services have seen these cause problems in the past for people trying to save money under the Loot Katun Yoo system, and may in the future if the new scheme is extended to children's life insurance.