Rental and Offshore Buying
Rental Income in Thailand
If you plan on using your Thai condo as an investment, don't forget to factor in taxes on rental income. All rental properties are subject to a House and Land Tax, which is 12.5% of the annual rental income. On top of that, the rental income is taxable, and owners will have to pay Thai income taxes on the money. Thai income taxes are calculated using a progressive scale ranging from 0-37%.
The final issue is withholding tax. If you rent the property to a company, that company will deduct 5% of their rent and pay it directly to the government as prepayment of your income tax. This will apply if your developer offers a rental guarantee. If the rental income is being sent offshore, a 15% withholding tax will apply.
Some foreign condo buyers choose to set up an offshore corporation to own their condo. There are two major benefits to this.
When you sell the condo, you can avoid paying the transfer taxes. Instead of selling the condo, you will selling the shares of your company to the condo buyer. Because the company is incorporated outside of Thailand, the sale will not be subject to Thai taxation.
The property will be easier to pass on in the event of your death. If you own the property as an individual, you will need to write a Thai will to pass the property on to your heirs. Shares in an offshore company, on the other hand, are considered movable property and will be passed on according to your primary will.
Notable Drawback in Owning a Condo Through a Corporation
The condo will be subject to an annual House and Land tax. This will apply whether or not you rent out the property, and is calculated on 12.5% of the actual or estimated annual rental income, whichever is higher.
You will also have to pay corporate maintenance fees. Setting up a corporation isn't free, and you will have to pay taxes every year to keep it going, even if the company isn't making a profit.