Thailand Real Estate: Is There a property Tax?

Thailand does not have a real property tax principles and, for the time being, there are two local taxes applicable to population who own immovable property.

The first tax is the Local improvement Tax imposed upon population who whether own or possess land. This tax rate varies agreeing to the estimated land value as appraised by the local authorities. Allowances may be granted if the owner utilizes the land for personal dwellings, animal husbandry and/or the cultivation of crops. The extent of these allowances depends upon the location of the land. It is said that the rates are so low that officials don't usually bother to derive on a yearly basis. This tax is also levied on houses, structure or any other improvements built on the land.

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Then there is the House and Land Tax, which applies to the owner of a house, building, structure or land that is whether rented or put to market use. Taxable property under the House and Land Tax includes houses not busy by the owner, market and market structure and land used in association therewith. The tax rate is 12.5% of the estimated yearly rental value of the property or the actual rental value, whichever is the highest. Owner busy residences are exempt from this tax. Note, however, that this exemption applies only to individuals, not to juristic persons, because juristic persons are deemed to use their property commercially. In other words, a enterprise that purchases an office has to pay the tax, even if the enterprise uses the premises to serve its own offices. There is a project to replace the House and Land Tax with a real property tax within 2 years, wherein the rate would be from 0.01% up to 1% of the estimated value of the property, depending upon the property type. The rate would be 0.01% on agricultural land, 0.1% on personal residences; 0.5% on market structure and 1% on undeveloped land.

Note that it is inherent to mitigate the cost of the House and Land Tax. If, for example, you rent condominium in Pattaya fully furnished, you may choose to execute two agreements with your lessee. The first bargain will be for the rental of the condominium unit and the second bargain will be for the rental of the furniture and/or additional services (if any are provided). This will reduce the cost of the House and Land tax because the tax only applies to the yearly rent received from renting out the property, but not on the rental wage received from renting out the furniture, etc.

If the rental agreements are executed between two individuals, there is no Vat applicable on the furniture or aid agreements. If, however, the owner of the condominium is a enterprise and if the enterprise is registered for the Vat, then the Vat will apply at 7% on the furniture or aid agreements executed between the lessor and the lessee.

For example, if you rent out condominium in Pattaya fully furnished for a rental fee of The 60,000 per month and only make one bargain with your Lessee, then you'll have to pay a yearly House and Land Tax as follows: 60,000 x 12 x 12.5% = The 90,000. You can save on taxes legally by plainly breaking the rental fee down into two agreements. For example, the rental fees may be The 35,000 per month for renting out the condominium and The 25,000 for renting out the furniture. If you break the rent down in this way, the Land and House Tax will be only The 35,000 x 12 x 12.5%= The 52,500. If, however, the owner of the condominium is a enterprise registered for Vat, then it will have to apply the Vat to the furniture lease agreement. Even so, the enterprise owning the property will save money on taxes, because the Lessee supports the cost of the Vat.

The matter of the withholding tax also applies when renting out. If an personel leases a property to another personel in Thailand, the cost of the rent is not field to withholding taxes. However, when a enterprise is renting a property, then the enterprise will have to deduct a withholding tax from the amount of the rent paid to the owner (whether an personel or a company). The amount withheld must be paid to the tax supervision on behalf of the owner who will use the withholding tax as a tax prestige against the yearly wage tax. The rate of the withholding tax is 5% in Thailand. Note that when a rental fee is paid outside Thailand, the amount of the tax to be withheld from the cost is 15%. Furthermore, if you are a non-resident offered a rental warrant by a developer, never forget to take the withholding tax into catalogue when calculating your inherent income.

Thailand Real Estate: Is There a property Tax?

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