Under-declaring

[easyridercc]

Hello, I'm looking at a condo to buy and would appreciate any advice. 

 

Value of other condos of this size have gone for around 3.8-4million.   Looking at one particular room in more detail and agent says that when we go to register, the owner will declare sale at 2.2million to land office in order to pay less tax (owner will cover all fees/taxes as part of this condo deal) and is that ok with me.

Is there any downside for me as the buyer?  For example, in the future if/when i resell?  

 

Thanks for reading.

 

[Peterw42]

Its common practice, no real issues for you as the buyer.

Nowadays, you will find the land office has their own valuations that you cannot go under, maybe not possible to declare as low as 2.2 on a 4m baht condo.

Later when you sell, if you do the same and under-declare, it may have an impact on exporting all the money.

[impulse]

It may be common practice, and it may go on forever.  Or the tax authorities may clamp down tomorrow.

 

What if the enforcement zeal changes between the OP's purchase, and him selling the condo?  Or, simply not having the same buddies at the land office that his seller is counting on to sign off.   Imagine paying taxes on the gain of the amount between 2.2 and 4 Million.  And the feeling that would come with being had if he sold at a loss and STILL had to pay tax on the money his seller made, not him.

 

Plus, that's a good observation regarding the ability to export the money, not to mention the possible need to hide the unreported amount from the tax guys.

 

Edited June 29, 2018 by impulse

[Pattaya46]

I sold a condo last month at Pattaya. As said above, the Land office uses its own valuation for most taxes, with result that the selling price you declare has relatively few impact on the total amount of taxes.

Keep in mind that the Land Office also has a good idea of the selling prices in your condo, and the lawyer advise us that a 20% under-declaring was a bit risky nowadays. He knew cases where the Land Office asked to see you bank book... and you may find yourself in a delicate situation to explain what use you made of the 4 millions you transferred in Thailand if you only paid the condo 2.2... 

Seriously, it's only a few thousands baht more to pay and no bad surprise in a few years when you will want to sell it.

[scubascuba3]

Doesn't it mean you will need to do the same? Otherwise when you sell at say 4m and bought at 2.2m tax on profit?
Also if you then say proceeds 2.2m perhaps you will only be able to take 2.2m out of the country rather than the real 4m. Sounds dodgy

[KittenKong]

I dont think it's clear to most people that the tax payable on a condo sale in Thailand is not really a capital gains tax or an income tax. It is an ownership tax (erroneously associated with income) and as such is not based on the difference between the purchase price and the sale price, but on the sale price alone (albeit with various possible adjustments depending on length of ownership).

Even if you technically sell at a loss you will still be charged this ownership tax calculated on the total amount of the sale, which itself is based on the higher of the appraised value and the declared value, always allowing for the various deductions.

So the tax payable on a 3MB sale will not vary simply because you originally paid 1MB or 5MB.

https://www.samuiforsale.com/condominium/foreign-exchange-transaction-form.html#i

[easyridercc]

Thanks for the comments so far.

 

I was also concerned about exporting money when selling, however I work in thailand so can show pay slips to account for any difference so think this will be ok.

 

@KittenKong  I also can't see any taxes on the capital gains between buying and sell, thanks for confirming.

 

As I understand,

Transfer Fee - land office will use their own appraisal price for this so declared sale price won't affect this tax.

Stamp duty 0.5% (owner lived for >5years) - this will vary on declared sale price,  this is the one that will reduce if owner/agent under declare.

Withholding tax - calculated on years of ownership and land office's appraisal price.

 

Given its only the stamp duty that changes, @Pattaya46 is right, its only a few thousand bht more with higher declared price.  

 

I need to transfer money into Thailand and provide a FET form, so think declaring 2.2million price also isn't good and my FET will be significantly higher.

 

Think I'll push back on the agent and ask for a higher declared price due to my FET form.   Appreciate the other opinions, thanks.

 

Edited June 30, 2018 by easyridercc

[KittenKong]

Personally I would not worry about the FET showing a larger value than the supposed price of the condo. There is no law that prevents you bringing in money to buy new furniture, or to cover a renovation, or even just to spend on beer and hookers. Just because it may say "condo purchase" as the reason for a transfer doesnt mean that you have to spend every last satang on that particular purpose. It's just a guide. When I bought my condo I transferred 2MB more than the purchase price (which itself was much higher than the appraised price) and I used part of it to buy a car, and am still spending the rest.
And if anyone is still worried, just send two transfers and only present the smaller FET at the Land Office.

[Jonmarleesco]

14 hours ago, scubascuba3 said:

Doesn't it mean you will need to do the same? Otherwise when you sell at say 4m and bought at 2.2m tax on profit?
Also if you then say proceeds 2.2m perhaps you will only be able to take 2.2m out of the country rather than the real 4m. Sounds dodgy

Underdeclaring a sale price to the authorities IS dodgy. The seller is looking to screw the system and at some point in the future, it might end up coming back on you. 

[Gabor]

Sold and bought condos in the last 15 years, never declared the actual price. Once you paid the transfer tax, end of the story. ( you can transform money back to your country based on tor tor 3 , not on the purchase price )  BTW, the most common practice is to pay the transfer tax 50-50% by the seller and the buyer. 

Edited June 30, 2018 by Gabor

[dotpoom]

19 hours ago, impulse said:

Imagine paying taxes on the gain of the amount between 2.2 and 4 Million

Not sure exactly how anybody would know....the contract would be signed at 2.2 MB....not for the 4MB... That's just my thoughts on it?

[gaff]

hello, can you tell me what is the minimum years to own a condo to resell it with minimum tax ? Thanks.

[Peterw42]

3 hours ago, gaff said:

hello, can you tell me what is the minimum years to own a condo to resell it with minimum tax ? Thanks.

The tax greatly reduces after 5 years

[CH1961]

The truth is just simple as you pay 4 million for a condo 2 million worth .. the rest is just a fairytale for you to feel great about the good deal you made ?