What are the Thailand Property & Land Taxes?
Taxes and fees is something that is not always thought of when buying a property and without the correct consultation you could get a shock a couple of months after making your purchase in the form of a hefty tax bill. Whenever a property in Thailand is purchased or sold there are four potential taxes/fees to be paid.
Whenever a property in Thailand is purchased or sold there are four potential taxes/fees to be paid. Which of these taxes/fees will be applicable depends on the details of the transaction, the seller and the duration of the seller’s ownership. It is also significant to note that most of the fees are calculated relative to the government’s “tax assessment value” of the property and this value is usually well below market value.
|
Category |
Sale of Freehold Land & Property |
Transfer of Leasehold Land |
Sale of Building |
Liability to Tax |
|
Transfer Fee |
2% |
N/A |
2% |
Seller/Buyer |
|
Lease Registration Fee |
N/A |
1% |
N/A |
Lessor/Lessee |
|
Specific Business Tax |
3.3% or N/A |
N/A |
3.3% or N/A |
Seller |
|
Stamp Duty |
0.5% or N/A |
0.1% |
0.5% or N/A |
Seller |
|
Withholding Tax |
1% or 5 – 37% |
N/A |
1% or 5 – 37% |
Seller |
Transfer Fee
This is based on the appraised value of the property and is normally shared equally between both buyer and seller, although this needs to be agreed by both parties.
Lease Registration Fee
This is based on the total rent payable over the lease term, and is normally shared equally between the lessor and lessee, although this must be agreed by both parties.
Specific Business Tax
Specific Business Tax (SBT) is payable by companies and individuals who have owned the property for less than five years. It is based on the official appraised value or the contracted price, whichever is highest.
An individual may be exempt from SBT if they have used the property as their principal residence and have had their name in the household registration certificate for at least one year.
Stamp Duty
Stamp Duty is only paid when SBT is not applicable and is based on the official appraised value or the contracted price, whichever is highest.
Withholding Tax (WHT)
If the seller is a company, the WHT on the sale of the property is calculated at 1% of the official appraised value or the contracted price, whichever is higher. If the seller is an individual, the WHT is based on the individual’s marginal tax rate (except that the first 100,000 baht is taxed at 5% rather than falling under the tax-free threshold) after deducting from the official appraisal price a standard deduction based on the number of years of ownership.
Property Taxes
Once you have acquired the property, there are 2 different types of tax levied on property in Thailand that you need to be aware of:
Land Tax
This is an annual tax levied on land ownership equivalent to just a few Baht per rai for properties held as private residences. For properties held by companies the tax can be significantly higher. Under current legislation the property owner is expected to pay at the local tessaban or local government office every year. However, there is no tax bill sent out and in practice it is rarely chased up. The problem of unpaid tax liability usually only surfaces when the property is being transferred, and no transfer can go ahead while there are unpaid taxes on the property.
There has also been ongoing parliamentary debates about resurrecting the land tax bill, which would introduce a more general tax on property that would apply to all land and/or any permanent structures built on the land with different tax rates for commercial property, private residences and agricultural land. Owners of undeveloped land will also come under the new taxation.
Structures Usage Tax
This only applies to properties used for commercial purposes or rental properties. This is applicable at the rate of 12.5% on the actual or assessed gross rental value of the property. However, this notional value is well below the commercial market rental value.
Notes
If the house is purchased through a company, you need to consider that corporate tax is higher than personal tax, and the cost of setting up the company has to be considered as part of the initial investment, even if this is relatively modest.
If you wish to purchase property in Thailand using Thai Baht, ensure that your funds are transferred to Thailand in foreign currency and converted to Thai Baht here. The receiving bank will issue a Foreign Exchange Transaction Form confirming the transaction for individual inward transfers exceeding 20,000 US$, which is one of the documents you may need in the future if you wish to repatriate funds without incurring tax penalties.
Repatriation of investment funds and repayment of overseas borrowing in foreign currency can be remitted freely upon submission of supporting evidence. One of these documents would be the Foreign Exchange Transaction Form mentioned above, or in respect of a foreign currency loan and the loan contract. Remittance of funds without proper documentation could be regarded as income and become liable for tax.