Indonesia, Philippines, Thailand: foreign heirs must sell inherited land within one year
Knowledge Article · Inheritance & Estate Planning
Indonesia, Philippines, Thailand: foreign heirs must sell the land within one year
Three of Southeast Asia’s most popular expat destinations share a rule almost no estate plan addresses: foreign nationals cannot own land, and on inheriting it they must sell within one year.
Bali, Phuket, Cebu, Chiang Mai — some of the most sought-after property destinations for expatriates and retirees globally. The three countries they are in — Indonesia, Philippines, and Thailand — all prohibit foreign land ownership. On inheriting, foreign heirs face a forced sale under legal time pressure, typically at below-market value, while simultaneously managing the grief of a recent bereavement and navigating an unfamiliar foreign legal system.
Principle 01 — Indonesia: Hak Pakai and the 1-year divestment rule
Indonesian succession additionally operates under three parallel legal frameworks depending on the deceased’s religion and regional background:
- Civil Code (KUHPerdata): applies to non-Muslim deceased
- Compilation of Islamic Law (KHI): applies to Muslim deceased — testamentary freedom limited to 1/3; 2/3 follows fixed Quranic faraid shares
- Adat customary law: regional customary law in some areas
A foreign will (Australian, British, French) must be apostilled, officially translated, and registered with Indonesia’s Central Will Registry to have any effect on Indonesian assets — it does not automatically govern Indonesian property.
Principle 02 — Philippines: constitutional land prohibition and RA 9225
The critical planning tool for Filipino-Australian, Filipino-American, and Filipino-British families: RA 9225 (Citizenship Retention and Re-acquisition Act). Former Filipino nationals who naturalised abroad can reacquire Philippine citizenship without renouncing their foreign citizenship. RA 9225 dual citizenship restores the right to own Philippine land — eliminating the forced divestment requirement entirely for that heir.
Principle 03 — Thailand: Land Code s.93 and the condo solution
Principle 04 — The Australian CGT problem on top
For Australian tax residents with property in any of these three countries, there is an additional layer: Australian CGT crystallises on death when assets pass to foreign-resident beneficiaries. The sequence:
- Australian deceased dies with Indonesian/Philippine/Thai property
- Australian CGT assessed on deceased’s date-of-death return at market value (if beneficiary is foreign-resident)
- Foreign-resident heir inherits — must then divest within 1 year under the local land law
- Sale proceeds — after forced sale at below-market value — are subject to further tax in both the asset country and potentially the heir’s country
The combination of immediate Australian CGT crystallisation and a 1-year forced sale deadline creates a severe cash flow and timing problem that is almost never addressed in Australian estate plans involving Southeast Asian property.
The only solution that avoids the forced sale is planning before death. Options include: holding property through a local company structure (shares transfer rather than property title); for Philippine property, ensuring heirs have or can acquire RA 9225 dual citizenship; for Indonesian property, structuring through a PMA (foreign-owned) company where shares can transfer; for Thai property, using a leasehold rather than freehold structure. All of these require specialist local legal advice before the property is acquired or restructured.
Planning triggers — you should be reviewing this if…
- You own property in Indonesia, Philippines, or Thailand and any of your heirs is a foreign national
- You are a Filipino national living abroad — consider whether RA 9225 dual citizenship applies to you or your heirs
- You are an Australian with Southeast Asian property and foreign-resident beneficiaries
- Your property in these countries is held in your personal name rather than through a local company structure
- Your estate plan was drafted in Australia, UK, or France without any specialist input from local lawyers in Indonesia, Philippines, or Thailand
Frequently Asked Questions
Is there inheritance tax in Indonesia?
No — Indonesia does not impose an inheritance or estate tax. However, BPHTB (Bea Perolehan Hak atas Tanah dan Bangunan — property acquisition tax) applies to the transfer of property title to heirs at approximately 5% of assessed value (often reduced to 2.5% for inheritance transfers in many regions). This is a title transfer cost rather than an inheritance tax, but must be paid before property title can be re-registered. Foreign heirs without an Indonesian residence permit must additionally divest Hak Pakai (Right to Use) title property within one year.
Do permanent residents pay inheritance tax in Indonesia?
Indonesia has no inheritance tax. KITAS (temporary residence permit) and KITAP (permanent residence permit) holders do not pay Indonesian inheritance tax as no such tax exists. However, the 1-year Hak Pakai divestment rule for foreign heirs who inherit Indonesian property does not apply to KITAP holders — KITAP holders can retain Hak Pakai title. BPHTB property transfer duty (approximately 2.5–5%) still applies regardless of residency status.
Can foreigners inherit property in the Philippines?
Foreign nationals who are not Filipino citizens (including RA 9225 dual citizens) cannot hold title to Philippine land. A foreign heir who inherits Philippine real estate must sell it to an eligible Filipino party. However, former Filipino nationals who naturalised abroad can reacquire Philippine citizenship under RA 9225 without renouncing their foreign citizenship — this dual citizenship restores the right to own Philippine land and eliminates the forced sale requirement for that heir.
Is there inheritance tax in the Philippines?
Yes — Philippine estate tax at 6% flat rate (TRAIN Law, RA 10963 of 2018) applies to the net estate. For non-resident alien deceased, only Philippine-situs assets are in scope. For Philippine citizens or RA 9225 dual citizens who are Philippine residents, the worldwide estate is in scope. A standard deduction of PHP 5 million applies. BIR (Bureau of Internal Revenue) clearance (Certificate Authorising Registration) is required before any asset transfer and must be filed within one year of death.
Can foreigners inherit land in Thailand?
No — under Thailand’s Land Code s.93, foreign nationals cannot own Thai land and must divest within one year of inheriting. Thai condominiums (subject to 49% foreign ownership building quota) can be held by foreign heirs. Leasehold interests pass contractually. Thai freehold property inherited by a foreign national must be sold within one year — a forced sale that typically results in below-market proceeds.
Is there inheritance tax in Thailand?
Thailand has a narrow inheritance tax (Inheritance Tax Act 2015) that applies to heirs above certain thresholds: above THB 100 million for lineal heirs and spouses; above THB 50 million for other heirs. The tax is 5% above these thresholds and is assessed on the heir (not the estate). Most expatriate estates fall below these thresholds — but high-value Thai portfolios (property, business interests) can exceed them. No estate or inheritance tax bilateral treaties exist between Thailand and most countries.
FAQs for educational purposes only. Not legal, tax or financial advice.
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