Thailand Property Taxes: Building or Housing and Land tax is charged yearly. Only owner-occupied residences are exempt.

For individual property owners if they lease out their property Building and Land Tax shall be collected at the rate of 12.5% of the yearly rental according to the lease agreement or the annual value assessed by the Land Department, whichever is higher. The annual assessed value means the amount of money which the property may reasonably be gained from the lease out of a property for each year if the property is offered for lease.

A common clause in a property lease agreement is:

• 'The lessee agrees to pay to the Lessor any and all taxes, if any, beginning with taking possession of the property and during the term hereof which may be levied upon or assessed against the property and all interests therein and all improvements and other property thereon, whether belonging to Lessor or Lessee. The Taxes are payable annually in advance beginning on the Commencement Date and subsequently at the first of each calendar year whereby for the first year of the term hereof the Taxes shall be prorated as of the Commencement Date and taxes for the last year of the term hereof shall be prorated as of the expiration of the term'.

Owner-occupied residences are exempt from Building and Land tax for the first property (the second or more properties are not exempt). If the house on the leased land is owned freehold and owner occupied the house is exempt from Building and Land tax. It is the owners responsibility to inform the local authorities (Or.Bor.Tor) and pay this tax before the end of February each year.

• To prevent this tax burden foreigners should make sure that the own the house and not lease land and house, or own land and house through a company structure.

Thai Companies and Building and Land Tax

If the land and buildings or any other improvements is owned by a Thai company and the property is used as a rental property, director's residence or holiday home the company is required to pay Building and Land Tax, even if the company does not receive any income out of it or does not operate a business

Do they send a tax bill?

It is the responsibility of the individual or company to come forward and pay this tax, but periodically the relevant authorities do collect Building and Land tax active. Foreigners who own a land and building through a company have been fined for not paying this tax. In case of foreigners owning his property in a Thai company the authorities will simply assess the rental value and send tax bill with a substantial fine. It is recommended to pay this tax to prevent investigations into the company and ownership structure.

There is also a tax on non-rental property (local development tax) imposed upon the person who either owns or is in possession of the land without a building. The rate depends on location and land classification and assessed value, and varies from 0.25% to 0.95% a year.

Proposed Changes to the housing and Land Tax system

There are approved plans to replace the current Building and Land Tax and Local Maintenance Tax by a new Building and Land Tax . It is not yet known when the new tax law will be announced, but under the new property tax law every owner of land and/ or any permanent structure built upon the land must pay building and land tax (owner-occupied residences  are under the new property tax law not  exempt). For every building the new property tax must be paid. The new building and land tax will be based on the appraised value and use of the property. Appraised value is set by the Treasury Department and adjusted every 4 years, with next valuation in 2011. Under the new building and land tax there are 3 maximum rates:

1. If the property is used for commercial purposes the tax rate shall not exceed 0,5 % of the appraised value of the land and building.
2. If the property is used for a private residence by he owner the tax rate shall not exceed 0,1 % of the appraised value of the property.
3. A tax of 0.05% of the appraised value shall be charged if the land is used for agricultural purposes.

The above rates are the maximum tax rates that can be charged by the local authorities, therefor building and land tax under new systemncan vary per location.

Transfer tax

The transfer of a house as immovable property is subject to withholding (income) tax, transfer fees, stamp duty, business tax. There is no fixed formula for sharing these costs and 'who pays the transfer tax' is part of the overall price negotiation. The last place you want to be working out such details is when you arrive at the Land Office (read more transfer tax transfer tax).