The Building and Land Tax Act of Thailand governs the regulation of the collection of building, housing, and land taxes annually. Although there is no universal annual property tax in Thailand, if private owners rent out or utilize their property for commercial purposes, a 12.5% annual housing and rent tax is applied. However, for many people, the fact that Thailand has no general property taxes is welcome news.
The owner is responsible for informing the municipal authorities if the property is on rent or used for commercial purposes. Additionally, the owner must pay the rental tax by February of each year. As previously stated, this particular “rental tax” is passed on to the tenant, making payment his obligation.
Clause: Leasing Agreements and Property Tax in Thailand
The following clause covers property tax and leasing agreements in Thailand:
‘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’
This specifies that tenants who sign a separate lease agreement are responsible for paying their landlord’s building and land taxes.
New Property Tax Rates in Thailand
The Thai government’ examines the existing structures, lands, and municipal levies before deciding to replace them with the new property tax.
This new tax will apply to immovable property and every owner of that land. Additionally, every permanent construction built on that site, will be responsible for paying property tax. According to the new property tax, there will be a maximum of three tax rates based on the property’s use. Further, there is a computation of tax over the appraisal value of the property.
The following are the three tax rates:
- If the property is used for commercial purposes, the tax rate shall not exceed 0.5% of the appraisal value of the land and structure.
- The tax rate should not exceed 0.1% of the property’s appraisal value if it is a private dwelling.
- A tax rate of 0.05% of the appraisal value if the land has agricultural use.
The rates here are the maximum amounts that local governments can charge. As a result, under the new system, building, and land tax rates may differ by district.
Property Tax in Thailand for Foreigners
Thailand’s legislation prohibits foreigners from owning land in the country, and if a foreigner persists, it will be a difficult task. Thailand’s Land Code Act governs land ownership. It is critical to note that the foreign land ownership limits in Thailand’s land laws. Moreover, it applies solely to land and does not apply to any buildings or condominiums on the land.
To purchase land in Thailand, a foreigner has more than one option. The first is to not own the property at all and instead lease it for a 30-year period. The bulk of these situations involves a foreigner marrying a Thai citizen. One reason can be the Thai purchasing the land and the foreigner negotiating a lease. You will be a 49% shareholder in a Thai Limited Company.
A foreigner cannot own more than half of a company’s shares, according to Thai property law. After clearing this hurdle, the Thai owner can now sign the company over to the foreigner. However, the immigration office maintains a careful eye on the foreigner’s operations.
Selling Property in Thailand
Many people with investments in Thai real estate are unaware of the applicable taxes at the time they sell it. Foreigners frequently invest in real estate, sometimes by purchasing a condominium or taking up a lease on the land. When buying or selling a property in Thailand, the Thai government charges a transfer fee of 2% of the sale price. The charge distributes equally between the seller and the buyer, with each receiving 1%. Depending on the terms of consent, both parties have the right to negotiate. A stamp duty of 0.5% also adds to the sale of the property in the owner’s possession for five years or more.
That isn’t all as there are several taxes to consider. For business tax on property sales, you have to pay 3.3% of the appraisal value or the sale price. Generally, you have to pay a higher value. The 3.3% tax is the Specific Business Tax (3%) and the local tax (0.3%). Moreover, both of these are applicable to the commercial or profitable sale of immovable property. It’s important to note that this tax only applies for the first five years after you acquire ownership of the property. This amount reduces if the property acquisition was by inheritance, regardless of the time of possession.
Property tax is payable by sellers on the basis of the retained tax structure. It is computed over time based on the appraised value or sale price of the property. Additionally, the time period for which the property was under that ownership remains in consideration. In comparison to the other countries, Thailand is the only one that has a favorable tax system. Moreover, it ensures that your investment returns are protected with the least potential erosion of capital gains.
Property Lawyer in Thailand
Konrad Legal provides a range of services to safeguard the rights and interests of foreigners dealing with property in Thailand. Our organization provides a comprehensive range of property-related services. We aim to better meet the demands of our international and Thai clients. Our team of Thailand Property Lawyers encourages you to contact us at [email protected]. We can be your SPOC if you have any property questions or issues that need to be addressed.
