When purchasing real estate abroad, it is essential to know about all the associated taxes in advance. Each country has its own property tax rates. Investors who plan to rent out or resell properties should also collect income tax information.
Content:
- Property tax in Thailand
- Taxes and fees on the transfer of residential properties
- Property Income Tax in Thailand
- Non-payment fines
Property tax in Thailand
In Thailand, property taxes are regulated by the Land and Building Tax Act B.E. 2562 (2019). Until this time, the annual property tax had to be paid only for the commercial use of buildings. This is now a thing of the past.
Due to the financial difficulties of local citizens during the COVID-19 epidemic, the authorities have introduced a 90% tax cut on land and buildings from 2020. It has already been announced that these measures will not be extended to 2022.
The Royal Order sets the current rates on land and building tax rates (2021). A recalculation of tax rates is expected in 2024.
Thailand has accepted four categories of property tax rates depending on the goal of using them:
- agricultural
- residential
- undeveloped land and unused buildings
- other purposes (commercial, industrial, etc.)
Tax rates depend on the appraised property value. They are shown in greater detail in the table below:
| Kind of real estate | Appraised property value (m baht) | Tax rate |
|---|---|---|
| 1. agricultural real estate | 0–75 | 0,01 |
| >75–100 | 0,03 | |
| >100–500 | 0,05 | |
| >500–1000 | 0,07 | |
| >1000 | 0,1 | |
| 2.1. residential real estate (a building and a land plot) | 0–25 | 0,03 |
| >25–50 | 0,05 | |
| >50 | 0,1 | |
| 2.2. residential real estate (a building) | 0–40 | 0,02 |
| >40–60 | 0,03 | |
| >60–90 | 0,05 | |
| >90 | 0,1 | |
| 2.3. residential real estate (other types) | 0–50 | 0,02 |
| >50–75 | 0,03 | |
| >75–100 | 0,05 | |
| >100 | 0,1 | |
| 3. commercial, industrial, etc. | 0–50 | 0,3 |
| >50–200 | 0,4 | |
| >200 – 1000 | 0,5 | |
| >1000 – 5000 | 0,6 | |
| >5000 | 0,7 | |
| 4. undeveloped land and unused buildings | 0–50 | 0,3 |
| >50–200 | 0,4 | |
| >200–1000 | 0,5 | |
| >1000–5000 | 0,6 | |
| >5000 | 0,7 |
Taxes and fees on the transfer of residential properties
When carrying out a real estate transaction, you must pay fees and taxes distributed between the two parties involved. In Thailand, there are two types of transfers of real estate property to another legal entity or person:
• a long-term lease (leasehold)
• a purchase of property (freehold)
Government fees vary depending on the type of transaction. The parties may decide in advance who will pay specific taxes and fees. At the same time, there are accepted standards and norms that most sellers and buyers follow in Thailand. The table presents the tax rates and shows which party in the agreement usually pays for it:
| Taxes and fees | freehold | leasehold | who pays for it |
|---|---|---|---|
| Transfer tax | 2% of the actual cost | - | A buyer |
| Rental registration tax | - | 1% of the estimated cost or the actual cost (depending on which is higher) | A buyer |
| Stamp duty | 0 – 0,5% of the actual cost | 0,1% of the actual cost | A seller |
| Income tax | 0-35% of the actual cost (details are in the table below) | - | A seller |
It is worth mentioning inheritance. A real estate inheritance tax has been levied in Thailand since 2015. Inheritance worth less than 100 million baht is not the subject of this levy. Spouses are also not taxed. On a straight ascending and descending line, the tax is 5%. In other cases, the inheritance tax is 10%.
Property Income Tax in Thailand
In Thailand, a person who receives rental income must declare it to the tax authorities and pay the related taxes.
Suppose you rent out a housing unit through a management company or other legal entity. In that case, the tax should be paid in two parts: an advance (a Withholding Tax), which is withheld when you pay money, and the second part, if necessary, is paid after submitting a declaration (if the advance was paid with excess, then, on the contrary, the state authorities compensate for the overpayment). The management company will withhold a 5% tax advance with a TIN (Taxpayer Identification Number) when it transfers rental income to you. Without a Thai TIN, the tax rate will be 15% on rental income.
Earning revenue from real estate investment is usually equivalent to rent in Thailand. The investor will pay 5% if he has a local TIN or 15% without it. But income from investments in hotels is often declared as "remuneration, bonus and other benefits from commercial activities." If you have a Thai TIN, the advance tax payment will be 3% of the planned income.
Without a Thai TIN, it is not necessary to submit an annual declaration to the appropriate authority, in which case the tax advance is counted as fully paid tax. When applying for a Thai Taxpayer Identification Number, the process is more complicated but more profitable: you must submit a tax return on the income received once a year. You can receive a personal deduction of 30,000 baht a year per taxpayer and a 30% rental deduction on expenses. However, it is worth remembering that buying real estate under the leasehold form will not make you the property owner. You just rent it for a long-term lease. Thus, it will be considered a sublease when you rent out this property. In this case, you do not have the right to a deduction for rental costs.
The amount of annual income, after all, deductions, is subject to income tax on a progressive scale:
| Total income (baht) | Tax rate |
|---|---|
| 0–150 000 | tax-free |
| 150 000–300 000 | 5 |
| 300 000–500 000 | 10 |
| 500 000–750 000 | 15 |
| 750 000–1 000 000 | 20 |
| 1 000 000–2 000 000 | 25 |
| 2 000 000–4 000 000 | 30 |
| >4 000 000 | 35 |
Thailand has an agreement with 48 countries to avoid double taxation, including Russia and Ukraine. This helps to avoid tax payments on overall profits by location and citizenship simultaneously.
Income from the sale of real estate is subject to ordinary income tax on the progressive scale indicated above.
Non-payment fines
A penalty is a fine for not making a tax payment on time. If payment is made after the due date but before receiving the notification letter, the penalty will be 10% of the outstanding amount. If the tax is not paid within the period specified in the notification letter, the penalty will be 20% of the outstanding payment. After the expiration of the period mentioned in the letter, the penalty will increase to 40%. At the same time, 1% of the outstanding tax amount will be added for each additional month of non-payment.