Thailand Property Taxes
Housing and Land tax in Thailand
BUILDING OR HOUSING AND LAND TAX is collected yearly by the local government where the property is located. For individual property owners if they rent/ lease out their property (or otherwise put to commercial use) Housing and Land Tax shall be collected at the rate of 12.5% of the yearly rental according to the lease agreement or the annual assessed value by the local authorities, whichever is higher. This means that if the owner's self-declared value is to low the local authorities have the authority to adjust the amount depending on several factors. Owner-occupied residences are exempt from building and land tax, however the second and more properties are not automatically exempt.
It is the owners responsibility to inform the local authorities (Or.Bor.Tor) if the property is leased out or otherwise is put to commercial use and pay this 'rental tax' before the end of February each year. Generally this tax burden in Thailand is passed on to the tenant/ lessee in the lease agreement.
Note there are plans to replace the current housing and land tax by a general asset based property tax read more...
Owner-occupied houses are exempt
To prevent this rental property tax burden foreigners obtaining a long term lease interest in a property should make sure that they own the house and only lease the land and not lease land and house. Also if they own the property through a limited company the house should be owned separate from the land and the land should be held as an asset in the Thai company, not land and house. When the house on the leased land is owned freehold and owner occupied the house is exempt from housing and land tax. Building a house and ownership or transfer of ownership of an existing house in Thailand apart from the land requires a separate procedure read more...
|Standard sample clause in a lease agreement: The lessee agrees to pay to the lessor any and all taxes and general and special assessments beginning with the date of possession and during the term hereof which may be levied upon or assessed against the leased apartment and the lessees proportionate share of the common area charges through the property management company to be set up on behalf of all lessees and all interests therein and all improvements and other property thereon, whether belonging to lessor or lessee.|
Condo apartments and Building and Land tax
The owner of a condominium or leasehold apartment, similar to renting out other real estate, is responsible for payment of this property tax when he rents out his condo unit. Payment of this local rental tax, especially in long term leases, is always passed on to the lessee or the buyer of a leasehold apartment - read more...
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 housing and land tax, even if the company does not receive any income out of it or does not actually operate a business. A foreigner living in a house owned under a company structure is not regarded as 'owner occupied' and therefore the company is required to pay this property tax.
Do they send a tax bill?
The collection of building and land tax begins by self-declaration of the owner of the property to the local government authority. It is the responsibility of the individual or company to come forward and to declare the value and pay tax. The local authorities do periodically and actively collect building and land tax and will if applicable assess the amount including a fine over the years not paid. Foreigners who own land and building through a Thai company have been fined for not paying this tax. In case of foreigners owning property in a Thai company structure 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 - read more...
There are approved plans to replace the current Housing and Land Tax and Local Maintenance Tax by a new asset based Building and Land Tax. It is not yet known when the new tax law will be announced. 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 which will take effect from 2012 through 2015. Under the new tax system there will be 3 maximum rates that can be set by the local authorities:
- 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.
- 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.
- 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, therefore the building and land tax rates under new system can vary per district - related inheritance tax proposed and 'land tax bill back in discussion'
Property 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. Who pays the transfer tax and fees 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.
Rental income tax
A foreigner in Thailand is subject to income tax on assessable income from Thai sources (regardless of payment location). Rental income from a tenancy is subject to personal income tax (source: Thailand revenue department).