Property taxes differ across the world. It is important to keep abreast of regulations to factor these into the cost of purchasing and owning a property. In Thailand, there are a few taxes that you should be aware of.
It is worth noting that all taxes in Thailand are self-declared. Anyone owning a property, whether that is an individual or company, must declare the taxes to the local government. The local government will do spot checks on occasion and chase arrears. They aren’t shy about issuing fines to those who are not complying with tax regulations.
It pays to be honest to avoid investigations from the local government into how a property is owned and the way into which a company is structured should the property be owned through this means. For example, if a foreigner owns a property through a Thai company and attempts to dodge the taxes, then the local government will make their own assessment on the annual rent and issue a tax demand alongside a hefty fine.
Property Transfer Tax
The most common tax found when investing in property in Thailand is the Property Transfer Tax. This tax is payable when the ownership of the property is changed at the Land Office. As it is not set who is responsible for this tax, the cost regularly forms part of the negotiation process of purchasing a property between the buyer and seller.
Building or Housing and Land Tax
Once an investment in property has been made, the next tax to be aware of is the Building or Housing and Land Tax. This annual tax is payable by the end of February each year. It is set at 12.5% of the total yearly rent or the assessed value as calculated by the local authority. The higher amount being the taxable one. The local government where the property is located in collects this tax. The local jurisdiction can adjust the rates if they feel that the amount declared is too low, so it best to be honest.
The Building or House and Land Tax is not applicable to owner-occupiers, but should an individual own more than one property, the tax is levied against these. To be tax efficient foreigners should look carefully at the ownership structure. It is advisable only to lease the land and not both the land and the house itself. Likewise, should the house been owned through a company then the land and house should be divided with the land being held as an asset.
As foreigners are not permitted to own land in Thailand, non-Thai citizens will need to purchase a property through a Thai company. Hence the Thai Companies and Building and Land Tax. This tax is applicable to any property that is owned by a Thai company which is either the home of a director of the company, a holiday home or even if it is rented out. Regardless of whether the property generates any income, this tax still applies. Similarly, the tax is levied if the company fails to operate suggesting that it was formed for the sole purpose of the property purchase. Finally, if a foreigner residing in the property aren’t not classed an owner-occupier, so the tax is still due.
Most of the taxes we have spoken about relate to landed houses. However, the Condo Apartments and Building and Land Tax ensures that anyone leasing out a condo unit or leasehold apartment are also subject to local taxes. New owners of such property naturally inherit these taxes upon transfer.
Condo Transfer Tax
Condominium transactions are subject to several fees and taxes. These are all due upon transfer of ownership at the local Land Department and are set by the Thai Government.
The first tax is a Transfer Fee (like the Property Transfer Fee already discussed). Set at 2% of the agreed sale cost of the property, the seller or the purchaser must negotiate who pays this before a deal can be completed.
However, if the property being sold is not completed and is an off-plan sale, then the purchaser of the unit can only be charged half of the 2% transfer fee. By law the developer is liable for all other fees.
The seller is then liable for either the Specific Business Tax of 3.3% or the Stamp Duty set at 0.5%. The tax that is chosen will depend on the length of ownership of the property being transacted. To deter property speculators, the seller is liable to Specific Business Tax should ownership be less than 5 years. If it is over five years, then the Stamp Duty is due. Lastly Withholding Tax is calculated on the seller’s overall income that may be charged at 1% or at a progressive rate.
Income tax on rentals
A foreigner in Thailand is subject to income tax on assessable income from Thai sources regardless of payment location. Thailand Revenue Department enforces regulations that see all rental income from a tenancy subjected to personal income tax.
This means any income received by a foreign owner that is generated from the leasing of a property is subject to Rental Income Tax. The amount will vary depending on whether there is any other income that needs to be declared plus their own personal income allowance. It is advised to check with the Thailand Revenue Department for current rates.