Your property in Thailand can be a source of your income. Even if not, there are real estate regulations in Thailand that can obligate you to pay taxes for the same. You may earn by selling your property, or, gain from the rent you receive from them. Based on the type of your tax entity in Thailand, you are liable to pay property tax in Thailand.
Irrespective of the fact whether you are a Thai or Foreigner in Thailand, these property or real estate tax laws are applicable to all. Read through this guide to check whether you will have to pay property tax in Thailand this fiscal or not.
Property Acquisitions Via Company Takeover
The firm that owns the property in question remains the same whenever a property transaction involves the acquisition of a company (which could be a Thai company or an overseas company). No ownership of the property has really changed, and no real estate-related taxes or fees are due. Instead, you have to make a share transfer.
The government charges a 0.1% stamp duty on the value of the shares when a Thai company acquires a property. Additionally, personal income tax is applicable to the capital gains of the share seller (see the section on Capital Gains below). Whereas, the acquisition of a foreign firm is not a taxable event in Thailand. However, for such transactions outside Thailand, taxes may be due in that respective country, but, there is no Thai tax obligation.
Property Acquisitions Without a Company Takeover
There is a real transfer of property ownership on purchase in Thailand without taking over a business. Every such real estate transaction is subject to payment of government fees and taxes. These can make up as much as 6% of the contract’s cost.
Depending on whether the ownership is leasehold or freehold, different taxes, and fees apply.
Leasehold Ownership
Parties need to pay both stamp duty and a lease registration fee when acquiring a lease of land or a building. The stamp duty is 0.1%, and the lease registration fee is 1%. Note that, the calculation of the duties and taxes are on the basis of the total value of the lease, i.e., total rental during the course of the lease. The stamp duty and lease registration fee often hold a 50/50 share in Thailand between the buyer and the seller. Irrespective of the involvement of a person or a business, the fees remain the same.
Freehold Ownership
You have to consider the following taxes/fees if the transaction involves freehold property, such as land or a freehold condominium in Thailand:
- Transfer Registration Fees;
- Withholding Tax; and,
- Either Specific Business Tax or Stamp Duty.
Registration of the property must be in a corporate name or have personal individual ownership for less than five years. Henceforth, it gains the identity of a commercial transaction. Otherwise, stamp duty will be applicable.
Transfer registration cost is 2% of the land value, after evaluation from the office.
This is what the land office values the property at and is the assessed value of the property. This is typically much less than the agreed-upon purchase price or the real market value.
If the seller is a business, the withholding tax is 1% of the value exceeding the purchase price or the land office’s appraised value. However, this is applicable if the sale takes into account the appraised value, the period of ownership, and the progressive tax rate.
Specific Business Tax is 3.3% of the office appraised value or the purchase price, whichever higher.
Stamp duty is 0.5% of the value exceeding the purchase price or the land office appraised value.
Consequently, how are these taxes and fees split between the buyer and the seller? The seller is responsible for the withholding tax, specific company tax, or stamp duty. However, both two parties share the transfer registration charge in a 50:50 ratio. Moreover, in many transactions, there is consent that the buyer and seller will split all taxes and transfer costs evenly.
Property Taxes on Capital Gains
Any capital gain is taxable on the sale of leasehold or freehold property and shares of a Thai corporation. Any capital gain is liable to income tax (rates range from 10 to 37%) if the seller is a person. Instead, corporation tax (rates of 15 to 30%) is applicable if the seller is a Thai firm. If the sale is a foreign corporation, it has to pay a 15% withholding tax.
Note that foreign buyers of Thai real estate must make sure they have proof of foreign remittance to Thailand. The Foreign Exchange Transfer (FET) Form is the official document provided for transfers worth more than 20,000 USD. Instead of Thai baht, the money remittance to Thailand must be in foreign currency.
The FET formally attests to the transfer of foreign funds into Thailand and their subsequent conversion into Thai baht once there. The seller can then repatriate the same amount of money that they put in tax-free. However, only the capital gain is subject to income tax. This is applicable only if they have the necessary documentation to prove that the remittance of the foreign currency to Thailand is for the purchase.
Personal Income Tax
Foreign nationals must submit a personal income tax return if they receive revenue from Thai real estate held in their own name. After subtracting permissible expenses, there is a progressive tax computation. Progressive rates are between 5 and 35%.
Corporate Income Tax (CIT)
On their yearly net profit, Thai limited enterprises must pay Corporate Income Tax in Thailand. This naturally covers the scenario in which a business owns real estate—which could be land or a building or structure—and sells the real estate for a profit. The tax treatment of this capital gain is the same as that of all other business income.
Progressive CIT rates of up to 20% are applicable to businesses with paid-up capital of up to 5 million baht as follows:
Property Taxes on Rental Income
Thai income tax is applicable on revenue income from renting out real estate in Thailand. Depending on the ownership of the property, i.e., it is in a person’s name, a Thai corporation, or a foreign firm, the tax rates are applicable.
Tax on Property Registered in Person’s Name
Regardless of nationality or whether the receipt of the revenue is in Thailand or abroad, Thai personal income tax is applicable to rental income received by foreigners who own Thai property in their own names. Thus, they have to submit a personal income tax return to Thailand.
Progressive rates of 5 to 35% apply to the rental revenue (see rates table above for personal income tax). Based on net income after deductions for costs and allowances. No questions asked, a 30% deduction is applicable for rental income.
Note that there is a subtraction of 5% withholding tax from the rental payment if the property has been rented to a Thai firm. In other words, there is a 5% deduction at source, and appears as a tax credit on the taxpayer’s individual tax return.
Tax on Property Registered in Thai Company Name
The rental revenue (after deducting business expenses) is liable to corporate income tax at progressive rates ranging from 15 to 20% if the real estate holds Thai company ownership (see rates table above for corporate income tax).
Tax on Property Registered in a Foreign Company Name
Whether or not a foreign company conducts business in Thailand, that is, if it has a branch, office, or staff there will determine the tax rates that apply to rental revenue income from property in name of the firm. In this case, the firm will be liable to pay property tax in Thailand.
Rental revenue from Thai property is subject to a flat 15% withholding tax for foreign businesses that are not conducting business in Thailand. The rental income is liable to Thai corporate income tax for international corporations conducting business in Thailand, the same as Thai enterprises.
Building and Land Tax
The local government where the property is located collects this tax. This is actually a commercial rental tax that applies to commercial premises on rent or lease. Depending on which is higher, computation is at a rate of 12.5% on the annual lease value or the assessed-value by the local authority.
Local Land Tax
The local authority collects a very tiny tax on undeveloped land in this case. The cost is influenced by a number of variables, such as location, size, and assessed value. Since it is so little, it is frequently not collected in practice.
Do you still have any questions about your eligibility to pay property tax in Thailand? Or are you not sure about the process of doing so? In both or any of these cases, feel free to reach out to Konrad Legal at [email protected].
