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Property taxes in Thailand apply to both residential and commercial properties, with various tax obligations depending on the type of property, its use, and ownership status. The key taxes include the Land and Building Tax, Transfer Fees, Withholding Tax, and Specific Business Tax (SBT). Understanding the intricacies of these taxes is crucial for buyers, sellers, and property owners to navigate Thailand’s real estate landscape efficiently.
Introduced in 2020, the Land and Building Tax replaces the older House and Land Tax. It is an annual tax levied on owners of land and buildings, with different rates depending on the type of property. The tax aims to encourage more efficient use of land and discourage land speculation by taxing unused or underdeveloped properties at higher rates.
For properties that serve as the primary residence, the tax rate is 0.02% to 0.1% of the property’s appraised value, depending on its value. A primary residence exemption applies to the first THB 50 million of the appraised value of a home.
Commercial properties face a higher tax rate ranging from 0.3% to 1.2%, depending on the property value and its use for commercial activities like hotels, shops, or office buildings.
Unused land incurs the highest tax rates under this system, with rates starting at 0.3% and increasing by 0.3% every three years up to a maximum of 3%, creating an incentive for owners to develop or use vacant land.
When property changes ownership in Thailand, transfer fees are levied on the appraised value of the property. The transfer fee is set at 2% of the appraised value, and the payment of this fee is usually negotiated between the buyer and seller. In practice, the buyer often pays the transfer fee, but this can vary based on the terms of the sale agreement.
Withholding tax in property transactions is a form of income tax collected at the point of sale. The tax is applied differently depending on whether the seller is an individual or a company.
If the seller is an individual, the withholding tax is calculated based on the length of ownership and the government-assessed value of the property. The applicable rate ranges between 0.3% and 5%, depending on the seller’s income tax bracket.
For companies selling property, the withholding tax is set at 1% of the appraised value or the actual sale price, whichever is higher.
The Specific Business Tax (SBT) applies to property sales made by individuals or companies engaged in regular property trading, or if the seller has owned the property for less than five years. The SBT is 3.3% of the appraised or selling price, whichever is higher, and it is often paid by the seller.
Stamp duty is an alternative to the Specific Business Tax, and it applies if the property has been owned for more than five years. Stamp duty is charged at 0.5% of the sale price or the appraised value, whichever is higher. Importantly, stamp duty and SBT cannot be applied simultaneously, meaning if SBT is due, stamp duty is not payable.
Rental income is considered taxable in Thailand, and landlords must pay personal income tax on the profits they earn from renting out property. The income tax rates vary according to the owner’s income bracket, with rates ranging from 0% to 35%. If the property is owned by a company, corporate income tax applies at a rate of 20%.
Foreign property investors in Thailand are subject to the same property taxes as Thai nationals, including the Land and Building Tax, withholding taxes, and transfer fees. However, foreigners are limited in their ability to own land outright and typically hold property through leasehold agreements or company ownership structures.
Foreigners who own condominiums are also required to pay property taxes, including the Land and Building Tax, on their units. Additionally, foreign landlords earning rental income in Thailand are subject to local income tax laws, and careful tax planning is recommended to avoid double taxation, particularly for individuals who are tax residents in other countries.
Property taxes in Thailand play a critical role in real estate transactions and ownership. From the Land and Building Tax applied to residential and commercial properties to transfer fees and withholding taxes levied during sales, it is essential to understand these obligations fully. Whether you are a buyer, seller, or property owner, being well-informed about tax rates, exemptions, and responsibilities ensures compliance and avoids unexpected costs.
