Rental Contract - Split House And Furniture

[PMK]

Hi,

I'm about to rent out a house.

Can someone advise me of the typical price split between furniture and the house itself, what the different tax rates are, and if it really matters what furniture is included as long as the tenant signs off on it, i.e., what are the chances of an actual audit or inspection?

Also, someone previously recommended book stores for blank leases, but I could not find any there, nor in Office Depot except a very generic lease not appropriate for real estate. Any other suggestions?

Thanks,

Peter

[quiksilva]

It is generally split evenly over the 2 or 3 contracts. Household tax at 12.5% is payable annually on the rental income, where as VAT at 7% is payable on furniture hire / services (or if you go for just two decide what you will).

If you are going down the furniture route landlords typically include all loose furniture in the agreement, this then also serves as an inventory for handover and checking against security deposits when they vacate.

I can not tell you what the chances of an inspection are though, but I personally don't know anyone who has been audited.

Here are a couple of sample leases for your reference:

Commercial Lease

Residential Lease

Edited June 19, 2007 by quiksilva

[chinthee]

I also don't think you'll have any problems as long as you keep rent at around 56% or more, furniture at up to around 37%, and also can split out phone, if you offer that.

If your tenant wants to bring in their own furniture you can say fine, but it doesn't affect the price, but make sure you still have a good proportion of your own furniture in the place.

[Irene]

Hi,

I'm about to rent out a house.

Can someone advise me of the typical price split between furniture and the house itself, what the different tax rates are, and if it really matters what furniture is included as long as the tenant signs off on it, i.e., what are the chances of an actual audit or inspection?

Also, someone previously recommended book stores for blank leases, but I could not find any there, nor in Office Depot except a very generic lease not appropriate for real estate. Any other suggestions?

Thanks,

Peter

Hi PMK,

The reason why Thailand has this quaint split of rental of the property and furniture is because of the archaic law called household tax. Rental of property is subject to the household tax at the rate of 12.5% which is quite hefty if you go by the rental you charge your tenant. However, the law stated as rentable value of the skeleton of the property which has to go by your property rental figures or the official valuation whichever is greater. The official value is surprisingly enough extremely low. Take a five star hotel, it may pay the annual household tax at less than Baht 5 million. The value is negotiable with the district office. Hence most rental contract will be split into two in order not to expose the application of 12.5% unduly and as low as the official figures.

While furniture is subject to VAT if your VATABLE income is more than Baht 1.2 million p.a. (it may have now been increased to Baht 1.5 or 1.8 million, I can't remember the exact figures.) Hence, most landlord prefers to divert a substantial portion to furniture rental and/or service fees.

There is no hard and fast rule of the split since the exposure will not be that great once there is that split.

[PMK]

Thanks everyone.

Peter

[thaihome]

I was once told that the 12.5% household tax on rental income is only applicable to corporations and individuals did not have to pay it.

Any comments?

TH

[quiksilva]

Unfortunately its not true. Although many individuals choose to take the risk and not pay.

[thaihome]

I will take your word for it, but I cannot find a place on the Thai Personal Tax Form (PND 91) where you would declare the income and calculate the tax. How would an individual go about paying the household tax? How about the VAT on the furnishing, does an individual have to pay that as well?

TH

Edited June 22, 2007 by thaihome