Taxes and Government Fees for Buying and Selling Property
Property Acquisitions Via Company TakeoverIf a property transaction occurs by taking over a company (this could be a Thai company or an offshore company), then the owner of the property in question is still the same company. No transfer of property ownership has in fact occurred and no taxes or fees applicable to real estate transfers need to be paid. Instead, the transaction involved is a share transfer.
In the case where the company being taken over is Thai, the government fees for the transaction are 0.1% stamp duty on the value of the shares. The seller of the shares also has to pay personal income tax on any capital gains (see section on Capital Gains below). In the case where the company being taken over is foreign, no taxable event has occurred in Thailand. As this transaction is offshore, there is no liability for Thai tax, though taxes may be applicable in another jurisdiction.
Property Acquisitions Without a Company TakeoverWhere a property is acquired without taking over a company then there is an actual transfer of property ownership. A real estate transaction has occurred and government fees and taxes need to be paid. These can account for up to 6% of the contract price.
The taxes and fees involved vary according to whether the ownership is leasehold or freehold.
Leasehold OwnershipWhen acquiring a lease of a land or building, both stamp duty and a lease registration fee need to be paid. These are calculated using the total value of the lease (i.e. total rental throughout the lease term), the stamp duty is 0.1% and the lease registration fee is 1%. In Thailand, the seller normally pays the stamp duty and the lease registration fee is split 50:50 between both parties. These fees are the same if the party involved is a person or a company.
Summary of Leasehold Transfers
|Lease registration fee||1%||Buyer and seller share 50:50|
The seller of the lease is also subject to tax on any capital gain (see section on Capital Gains below).
Freehold OwnershipIf the transaction involves freehold property, such as land or a freehold condominium, the following taxes/fees need to be considered: transfer registration fees; withholding tax and either Specific Business Tax or stamp duty.
Note, when a transaction is deemed commercial in nature, this is when the property is registered in a company name or it has been held in a personal name for less than 5 years, then Specific Business Tax applies, otherwise stamp duty is applicable.
The transfer registration fee is currently 2% of the land office appraised value. Also known as the assessed value, this what the land office values the property at. This is normally significantly below the actual market value or the agreed purchase price.
If the seller is a company, the withholding tax is calculated as 1% of either the land office appraised value or purchase price, whichever is higher. However, if the seller is an individual, then the withholding tax is calculated using a combination of the appraised value, the length of time owned and the progressive personal tax rate.
Specific Business Tax is calculated as 3.3% of either the land office appraised or the purchase price, whichever is higher. Stamp duty is calculated as 0.5% of which is the greater out of the land office appraised value and the purchase price.
So how are these taxes and fees partitioned between buyer and seller? Theoretically, the transfer registration fee should be split 50:50 between both parties and the seller is liable for the withholding tax and either the specific business tax or the stamp duty. However, in practice many deals are agreed on the basis that all the transfer fees and taxes are split equally between buyer and seller.
Summary of Freehold Transfers
|Transfer registration fee||2%||Buyer and seller share 50:50|
|Specific Business Tax||3.3%||Seller|
Taxes on Capital GainThe seller of both leasehold or freehold property, and also shares in a Thai company, is subject to tax on any capital gain. If the seller is a person, any capital gain is subject to income tax (rates of 10 to 37% apply). If the seller is a Thai company, instead corporation tax is applicable (rates of 15 to 30% apply). In the case where the seller is a foreign company, the foreign company is subject to 15% withholding tax.
Note, foreign buyers of Thai property need to ensure that they have documentation to confirm that the funds for the purchase were sent in from overseas. For transfers greater than 20,000 USD, the official document issued for the transfer is the Foreign Exchange Transfer Form (FET). The funds should be sent into Thailand as foreign currency, not Thai baht. The FET officially documents the remittance of the foreign currency into Thailand, and the subsequent exchange into Thai baht inside the country. With proper documentation to show that foreign currency was sent into Thailand for the purchase (ideally an FET), the seller can later repatriate the same amount of money that they sent in tax free and only the capital gain is subject to income tax.
Personal Income TaxForeigners earning income from Thai property registered in their own name are obliged to file a personal income tax return. The tax is calculated using a progressive rate after deducting allowable expenses. The progressive rates range from 5 to 35%:
|Income After Expenses (THB)||Tax Rate (%)|
|Up to 150,000||0|
|150,001 - 300,000||5|
|300,001 - 500,000||10|
|500,001 - 750,000||15|
|750,001 - 1,000,000||20|
|1,000,001 - 2,000,000||25|
|2,000,000 - 4,000,000||30|
Corporation Income TaxThai limited companies are subject to corporate income tax (CIT) on annual net profit. This naturally includes the situation when a company holds an asset in the form of real estate, this could be land or a building/structure, and the real estate is sold producing a capital gain. This capital gain is taxed the same as any other form of company income.
For a companies with paid-up capital of up to 5 million baht, progressive CIT rates of up to 20% apply as follows:
|Net Profit (THB)||Tax Rate (%)|
|Up to 300,000||0|
|300,001 - 3,000,000||15|
Taxes on Rental IncomeIncome earned from renting property in Thailand is subject to Thai income tax. The rates applicable depend on whether the property is registered in a person’s name, a Thai company or a foreign company.
Property registered in a person’s nameRental income from foreigners owning Thai property in their own name is subject to Thai personal income tax whatever their nationality and whether or not the income is receive in Thailand or overseas. This means that that they have a duty to file a personal income tax return in Thailand.
The rental income is subject to progressive rates ranging from 5 to 35% (see rates table above for personal income tax). This is based on net income after allowances and expenses. A 30% deduction is permitted, no questions asked, or rental income.
Note, if the property has been rented to a Thai company, 5% withholding tax is deducted from the rental amount received. i.e. the 5% is taken at source and this acts as a tax credit on the individual’s personal tax return.
Property registered in a Thai company nameIf the real estate is registered in a Thai company name, the rental income (after deductible company expenses) is subject to corporate income tax at progressive rates ranging from 15 to 20% (see rates table above for corporate income tax).
Property registered in a foreign company nameThe tax rates which apply to rental income received from property which is registered to a foreign company depend on whether or not the company is deemed to be carrying on business in Thailand, i.e. if it has a branch, an office, an employee in Thailand.
For foreign companies not carrying on business in Thailand, a flat 15% withholding tax is applicable to rental income from Thai property. For foreign companies carrying on business in Thailand, as with Thai companies, the rental income is subject to Thai corporate income tax.