Taxes and fees, transferring real property ownership from one party to another
The taxes and fees imposed and collected by the land office (land department) upon transfer of ownership of a real property (condominium apartment, land, house, land and house) in Thailand are: transfer fee, specific business tax (if applicable), stamp duty (if applicable), income withholding tax.
The transfer fee is not a tax but a government fee (like stamp duty) on the sale and transfer of ownership of real property and collected by the local land office upon transfer of ownership. The fee is imposed at the rate of 2% over the appraised value of the property. The appraised value or government assessed value is not the sale price but an assessed value of the real property based on a calculation method by the Land Department and the Treasury Department and is used by the land office to determine the amount of tax that must be paid. The registered sale value is the actual registered sale price between the parties. The appraised value used by the land office value is often pretty much lower than the actual sale price.
Specific Business Tax
This transfer tax is generally charged if the seller is a company (specific exemptions applied) or if the seller is a natural person and sells the property within five years of the purchase registration date. Specific business tax is an assessment tax on the transfer of real property calculated over the registered sale value or the government appraised value of the real property, whichever is higher. This tax is imposed at a rate of 3% plus a municipal tax of 10% assessed on the amount of the specific business tax bringing the total tax rate to 3.3%.
The transfer of real property would not be subject to the specific business tax if the seller is an individual and meets the following conditions:
- The seller has possessed the property more than five years before the transfer and used it as his residential home (it was the seller's domicile starting not later than one year from the date of purchase).
- The seller transfers the real property to the legal heir or an heir by a will.
- The seller transfers the real property to a legitimate child, but not including an adopted child.
- The seller transfers the real property without consideration to government agencies.
- The seller transfers the real property without consideration to temples, churches or mosques. The exemption is limited to the transferred portion which does not make the total area of the estate acquired by temples, churches or mosques exceed than 80,000 square meters.
- The transferred real property has been used as the principal place of residence, and the seller’s name appeared in the house register for not less than one year from the date of acquiring such property.
- The property transferred was acquired through inheritance, etc.
Specific business tax is an assesment tax, check the relevant section in the Thailand Revenue Code
Stamp duty is charged at a rate of 0.5% over the registered or appraised value, whichever is higher. The obligation of payment of stamp duty depends if the seller is also subject to specific business tax or not. When specific business tax is applicable the seller is exempt from the payment of the stamp duty, however, if stamp duty in this case has been paid the seller has the right to claim for the refund of stamp duty in full within 6 months after the payment.
Income Withholding Tax
Personal Income Withholding Tax
When you are a foreigner (e.g. selling your apartment) you must make a tax withholding payment collected by the local land office. The payment must be made at the time of transfer of ownership but before the transfer is recorded on the deed. Income withholding tax for natural persons is calculated at a progressive rate based on the appraised value of the property with a deduction depending on the number of years of possession (exemptions are applied in certain specific situations but ussually do not apply to foreigners). When you sell your condo apartment the land office will issue a tax receipt that you will need to transfer the proceeds of the sale out of Thailand.
Corporate Income Withholding tax
When the seller is a company then withholding tax is fixed at 1 % over the registered or sale price or government assessed value of the property (whichever is higher).
Sample tax calculation
Simple sample tax calculation (what to pay at the land office) of the total cost applicable for the transfer of a condominium unit with a 5 million baht value and 3 year ownership by a private owner:
- Transfer fee of 2% over 5,000,000 THB 100,000 THB
- Specific Business Tax 3.3% 165,000 THB
- Income Withholding Tax approx 100,000 THB
- Other application small fees and others approx. 300 THB
Capital gain tax on the sale of property
The proceeds derived from the sale of property in Thailand are taxed as ordinary income, withheld from the sale amount by the land office at the time of transfer of ownership.
Inheritance tax and transfer of ownership
Transfer ownership of real estate by inheritance. Thailand does not have introduced a special 'inheritance tax', but a general IHT has been proposed in 2006 but the new government did not see any reason to implement such tax at this time. Transfer of ownership real estate is however subject to income tax when the property is sold, and when gifted transfer tax and stamp duty must be paid.
Who pays tax and transfer fees (seller or buyer)
In a normal sale of real property in Thailand there is no standard fixed rule for who pays the transfer fee, stamp duty, specific business tax or even personal withholding income tax associated with the transfer of ownership. This us usually a subject the seller and the buyer must agree upon in the sale and purchase agreement. The recommended schedule is:
- Transfer fee: shared by the seller and the buyer
- Specific business tax: the seller's duty
- Stamp duty: the seller's duty
- Withholding tax: the seller's duty
Only in a new build government licensed housing or condominium development the law specifies that only up to half of the 2% transfer fee may be transferred to the buyer by the developer. All other transfer costs are by law the responsibility of the developer.
Other taxes: when owning a real property in Thailand there are no general property taxes (reforms have been proposed in 2010). Real properties put to commercial use (residential houses not 'owner occupied' and commercial buildings) must under the Building and Land Tax Act pay a 'rental' tax at a rate of 12,5 % of the annual rental value. For undeveloped land there is a very small annual local land development tax depending in the size and use of the land - (building and land tax).