Property Transfer Taxes
Thailand Property Taxation
Thai real estate is taxed in three separate ways.
Local Property Taxes are assessed on land and buildings. The tax rates vary, but these taxes are so minimal that tax authorities let the tax accumulate for a few years before enough taxes are due to justify sending a bill.
Transfer Taxes are paid at the Land Department when a deed is transferred. It is up to the buyer and the seller to decide which party will pay these taxes. It is better for both parties if the buyer pays. If the seller pays the taxes, the asking price will be higher. The higher the price, the higher the transfer taxes. If the buyer pays the transfer taxes, the purchase price will be lower, and therefore the total transfer taxes will be lower.
Rental Income Taxes: Individual property owners have to pay taxes on any rental income their property generates. Corporate property owners have to pay annual taxes on all of their real estate holdings in Thailand whether they rent out their property to third parties or occupy the property themselves.
Stamp Duty and Special Business Tax
The Special Business Tax is a 3.3% tax assessed on the sale price of a property. This tax only applies if the property is sold within the first five years of ownership. If the property is sold after five years of ownership, a Stamp Duty will be assessed instead . The Stamp Duty is 0.5% of the sale price. When a developer sells a property, the sales contract will normally require the developer to pay the Special Business Tax.
The Land Department imposes a transfer duty when a property's ownership is transferred. This tax is calculated as 2% of the property's official assessed value.
Income from the sale of property is subject to Thai income taxation. The Withholding Tax is a prepayment of the property seller's income tax. When the property seller is a company, the Withholding Tax is 1% of the sales price or 1% of the assessed value, whichever is higher. After the sale, the company selling the property will need to report the income from the sale on their income tax return.
When the property seller is an individual, the Withholding Tax is calculated on a progressive income tax scale. The seller has the option of not declaring the sales income on their income tax return, or declaring the sales income and deducting the Withholding Tax that has already been paid. Calculating the Withholding Tax for individual sellers is a two step process.
Calculating Withholding Tax Step 1:
The first step is calculating the seller's taxable income per year of ownership. This is can be calculated by multiplying the property's assessed value by a deduction factor and then dividing the result by the years of ownership. The deduction factor depends on the number of years the seller owned the property.
|Years of Ownership||Deduction Factor|
|Under 2 Years||0.08|
EXAMPLE: Individual seller owned a condo for 5 years. At the time of sale the property is assessed at 12,500,000 Baht
12,500,000 BAHT X 0.35 (Deduction Factor) / 5 YEARS = 875,000 BAHT/YEAR
In this example the seller's net taxable income is 875,000 Baht per year of ownership.
Calculating Withholding Tax Step 2:
The second step is calculating the total Withholding Tax owed. First calculate the taxes owed per year of ownership by applying the progressive income tax scale to the sellers annual net taxable income, which we calculated in step 1. Then calculate the total Withholding Tax owed by multiplying the annual taxes by the seller's years of ownership.
|Tax Bracket||Tax Rate||Maximum Tax for Tax Bracket|
|0 - 100,000 Baht||5%||5,000 Baht|
|100,001 - 500,000 Baht||10%||40,000 Baht|
|500,001 - 1,000,000 Baht||20%||100,000 Baht|
|1,000,000 - 4,000,000 Baht||30%||9,000,000 Baht|
|More than 4,000,000 Baht||37%|
EXAMPLE: Our individual seller owned a condo for 5 years. The condo is assessed at 12,500,000 Baht. In step 1 we determined that the the seller's net taxable income is 875,000 Baht per year of ownership.
Applying the progressive tax scale, we calculate that the seller taxes are:
- 100,000 BAHT X 0.05 = 5,000 BAHT on the first 100,000 Baht per year
- 400,000 BAHT X 0.10 = 40,000 BAHT for income from 100,001 - 500,000 Baht per year
- 375,000 BAHT X 0.20 = 75,000 BAHT for income from 500,001 - 875,000 Baht per year
Our seller owes 120,000 Baht per year of ownership based on 875,000 Baht of annual net taxable income. The final step is to multiply the taxes owed per year of ownership by the years of ownership.120,000 BAHT/YEAR X 5 YEARS = 600,000 BAHT
The total Withholding Tax due in this example is 600,000 Baht.
Taxes on Rental Income
The House and Land Tax taxes owners of land or buildings. The tax is due if the property is rented or put to commercial use. If a property is owned by the individual(s) who occupy it, the tax does not apply. If the property is owned by a company, the tax always applies because this is considered commercial use. The tax is assessed at 12.5% of the property's actual or estimated annual rental value, whichever is greater.
One way to reduce the House and Land Tax is to divide the total rent into rental for the property and rent for furniture and/or services. Property owners do not have to pay House and Land Taxes on rental income on furniture and services. Corporate property owners that are registered for the Value Added Tax (VAT) will have to pay a 7% tax on the furniture and service income.
Income from Thai rental properties is considered taxable income. Actual and presumed costs are deductible. Individual property owners will pay income taxes according to the progressive income tax scale. Most corporate entities will pay the 30% corporate income tax rate on rental income.
Withholding Tax from Rental Income
When the renting tenant is a company, the company is required by law to deduct 5% from the rent they owe their landlord and pay it directly to the government as prepayment of the landlord's income taxes. This applies whether the landlord is an individual or a company. If you lease property to a corporate entity, be aware that you will only receive 95% of the agreed upon rent.