House Purchase And Under Declaring Value

[maxheadroom007]

Hi,

Can someone please help me?????

I am in the process of buying a house. We have decided what price we are paying, paid our deposit and now the estate agent is telling us we need to under declare the property by a massive 30%. Is this normal or are we being had over? We don`t want to have problems later on, when we come to sell the house.

Thanks

[Samui Coconut]

Hi,

Can someone please help me?????

I am in the process of buying a house. We have decided what price we are paying, paid our deposit and now the estate agent is telling us we need to under declare the property by a massive 30%. Is this normal or are we being had over? We don`t want to have problems later on, when we come to sell the house.

Thanks

Sounds fishy......to say the least. Good luck !

[sbk]

Am moving this to the housing and real estate section, there are several real estate experts who post there and can give you more response

[Forkinhades]

Probably to keep the transfer fees down, as they are a percentage of the declared value

[donx]

Hi,

Can someone please help me?????

I am in the process of buying a house. We have decided what price we are paying, paid our deposit and now the estate agent is telling us we need to under declare the property by a massive 30%. Is this normal or are we being had over? We don`t want to have problems later on, when we come to sell the house.

Thanks

If you search this forum you will find that this has been a common practice, especially with raw land sales. And the reason is as Forkinhades says, to lower transfer fees. There are two recent changes that now make this practice of declaring a low sales price less valuable. First is that some of the transfer fees and texes have been lowered for a period of one year. Second is that the government is now using their own valuations to determine these fees instead of relying upon what the buyer and seller declare the price to be.

As for the future, the price you pay or say you pay will not have any affect on the fees and taxes you pay in the future. We had the same situation when we bought a plot of land. At that time, they were still using the price we declared which was over 50% less than the price we paid. At that time I asked the same question you did and was assured that any future tax we pay will be based upon the price we sell it for and will not even consider what we paid for it.

If I were you I would remind the real estate agent of the new changes and suggest that the actual price paid be indicated. If this will cause all sorts of hysteria from the agent or the seller, then just go with the flow and don't worry about it too much.

[BigC]

Hi,

Can someone please help me?????

I am in the process of buying a house. We have decided what price we are paying, paid our deposit and now the estate agent is telling us we need to under declare the property by a massive 30%. Is this normal or are we being had over? We don`t want to have problems later on, when we come to sell the house.

Thanks

Sounds fishy......to say the least. Good luck !

this is normal it is to save on tax

[tangoll]

Here is my take on this delicate situation. I had just sold a condo unit and had an agent help me do the transfer of ownership to the buyer. The Land Dept office has its own estimated value for the property; let's say it's baht 50,000 per sq meter. Let's also say the actual selling price is baht 70,000 per sq meter, and your sales and purchase agreement reflects this value.

When it's time to declare what is the transaction value to the Land Dept, what do you do? If you declare baht 55,000 per sq meter, the Land Dept official doing the transfer usually will accept that declared value, but, if that official is having a bad day or you have done something to displease him/her, he may ask to see some documentary proof of that declared value as the transaction value. If you declare the actual sales price of baht 70,000/sqm, then you are on safe ground even if he asks for some proof, and the tax/fees are calculated on the actual sales price.

The problem comes when the new buyer sells the property a year or later and goes to do the transfer at that time. The declared transaction price is on record at the Land Dept office, either baht 55,000 or 70,000, and the issue for the then seller (ie your buyer) is what he should declare. If you had declared 70,000, the seller in the future might find it difficult to declare under 70,000, which by that time, the higher taxes/fees are back in force, and this will cause the then seller some consternation.

This is the crux of the problem showing the difference in thinking between Thais wishing to save on taxes/fees, and the Western desire to reflect the truth, which unknowingly may cause difficulty to a Thai person in the future wishing to avoid paying some tax/fees.

[quiksilva]

An agent should never advise clients to under report the value of the transaction.

Saving tax is a polite way to put it, the correct term I believe is tax evasion, which is not only morally wrong, it is illegal.

If you choose to do go through with it that is a decision for you take on your own, and will have to live with in the future.

Starting off on this foot, effectively forces you to also embark on tax evasion in the future. [if the full price is reported when you eventually sell what will be the tax implications?]

Other items to consider, if you are buying, you should look very carefully at the transaction. For example do you know, for sure, that all the cash you are paying is going straight to the seller? When you conduct the transaction make sure you meet the seller, and have a friendly Thai (who does not know the agent) translate if needed, so that you are sure you are both on the same page.

The reason being is that are some despicable agents out there who mark up the price of the property and pocket the difference.

Its a murky market out there, be careful, and good luck.

Edited June 19, 2008 by quiksilva

[glyph]

"...now the estate agent is telling us we need to under declare the property by a massive 30%..."

The agent wants to minimize the transfer tax, generally a rather insignificant amount of money. If you lie to a government official, especially as a farang, you are setting yourself up for failure.

[tawan300]

An agent should never advise clients to under report the value of the transaction.

Saving tax is a polite way to put it, the correct term I believe is tax evasion, which is not only morally wrong, it is illegal.

If you choose to do go through with it that is a decision for you take on your own, and will have to live with in the future.

Starting off on this foot, effectively forces you to also embark on tax evasion in the future. [if the full price is reported when you eventually sell what will be the tax implications?]

Other items to consider, if you are buying, you should look very carefully at the transaction. For example do you know, for sure, that all the cash you are paying is going straight to the seller? When you conduct the transaction make sure you meet the seller, and have a friendly Thai (who does not know the agent) translate if needed, so that you are sure you are both on the same page.

The reason being is that are some despicable agents out there who mark up the price of the property and pocket the difference.

Its a murky market out there, be careful, and good luck.

If you do this witch is common. pay in 2 lots one at the transaction price the other harlf into one more a/c .the down side is if you need to take the seller to court you can only claim back what you payed at the transaction in the land office.

[ThaiLawOnline]

It's common practice in Isaan but I totally agree with quicksilva. It's illegal.

[BigC]

Here is my take on this delicate situation. I had just sold a condo unit and had an agent help me do the transfer of ownership to the buyer. The Land Dept office has its own estimated value for the property; let's say it's baht 50,000 per sq meter. Let's also say the actual selling price is baht 70,000 per sq meter, and your sales and purchase agreement reflects this value.

When it's time to declare what is the transaction value to the Land Dept, what do you do? If you declare baht 55,000 per sq meter, the Land Dept official doing the transfer usually will accept that declared value, but, if that official is having a bad day or you have done something to displease him/her, he may ask to see some documentary proof of that declared value as the transaction value. If you declare the actual sales price of baht 70,000/sqm, then you are on safe ground even if he asks for some proof, and the tax/fees are calculated on the actual sales price.

The problem comes when the new buyer sells the property a year or later and goes to do the transfer at that time. The declared transaction price is on record at the Land Dept office, either baht 55,000 or 70,000, and the issue for the then seller (ie your buyer) is what he should declare. If you had declared 70,000, the seller in the future might find it difficult to declare under 70,000, which by that time, the higher taxes/fees are back in force, and this will cause the then seller some consternation.

This is the crux of the problem showing the difference in thinking between Thais wishing to save on taxes/fees, and the Western desire to reflect the truth, which unknowingly may cause difficulty to a Thai person in the future wishing to avoid paying some tax/fees.

i agrea it is better to do it the proper way. as i remeber the seller is liable to pay the tax on the profit which is obvious. so in my case the sellers would not exept the actual value so it was either i pay 300 000 k or 20 k. looking back now i wich i paid the full wack even though i would have been being ripped off more. there again the value of the house or the land is only the value that u decide it to be so the land officer cannot argue unless he finds out about other transactions taking place.

[quiksilva]

An agent should never advise clients to under report the value of the transaction.

Saving tax is a polite way to put it, the correct term I believe is tax evasion, which is not only morally wrong, it is illegal.

If you choose to do go through with it that is a decision for you take on your own, and will have to live with in the future.

Starting off on this foot, effectively forces you to also embark on tax evasion in the future. [if the full price is reported when you eventually sell what will be the tax implications?]

Other items to consider, if you are buying, you should look very carefully at the transaction. For example do you know, for sure, that all the cash you are paying is going straight to the seller? When you conduct the transaction make sure you meet the seller, and have a friendly Thai (who does not know the agent) translate if needed, so that you are sure you are both on the same page.

The reason being is that are some despicable agents out there who mark up the price of the property and pocket the difference.

Its a murky market out there, be careful, and good luck.

If you do this witch is common. pay in 2 lots one at the transaction price the other harlf into one more a/c .the down side is if you need to take the seller to court you can only claim back what you payed at the transaction in the land office.

Sorry but I will never advise anyone on how to break the law.

Edited June 19, 2008 by quiksilva

[bkk_mike]

When we bought, we notified the land office of the full price. (but then we do have a mortgage on it.)

But, I know for instance, when some family land was split between family members (with no payment being made), the land office decided the value, and based the payments on their valuation.

I'd avoid it - best to have the price you're actually paying, so that when it comes time to sell, if there's a tax on the gain (don't think there is under current tax rules, but tax rules change), then you wouldn't be hit for a gain you didn't make.

Edited June 23, 2008 by bkk_mike

[Gary A]

The real estate agent may have sold the property for 30 percent more than the owner was asking thus the owner would have gotten the price he wanted and the agent gets a hefty commission.

[Burgernev]

As quicksilva rightly pointed out the future tax liability is a concern.

Apart from saving a relatively small amount of property tax (see rates below) sellers also mark prices down to save on personal or corporation tax.

I would insist on declaring the full amount otherwise YOU will be taking on the liabilty of this 30%.

When you sell your buyer may refuse to under-declare your selling price. IF tax is liable by you on the profit/gain made it will be far more as you'll have this extra 30% 'profit' to declare.

Property taxes are currently very low, something like: Transfer Fee 0.01%, Specific Business Tax 0.1%, Stamp Duty 0.5%

But IF profit/gain tax is applicable to you when you sell, it could be liable at a worse case of 37%.

Burgernev

Edited June 23, 2008 by Burgernev

[BigC]

An agent should never advise clients to under report the value of the transaction.

Saving tax is a polite way to put it, the correct term I believe is tax evasion, which is not only morally wrong, it is illegal.

If you choose to do go through with it that is a decision for you take on your own, and will have to live with in the future.

Starting off on this foot, effectively forces you to also embark on tax evasion in the future. [if the full price is reported when you eventually sell what will be the tax implications?]

Other items to consider, if you are buying, you should look very carefully at the transaction. For example do you know, for sure, that all the cash you are paying is going straight to the seller? When you conduct the transaction make sure you meet the seller, and have a friendly Thai (who does not know the agent) translate if needed, so that you are sure you are both on the same page.

The reason being is that are some despicable agents out there who mark up the price of the property and pocket the difference.

Its a murky market out there, be careful, and good luck.

If you do this witch is common. pay in 2 lots one at the transaction price the other harlf into one more a/c .the down side is if you need to take the seller to court you can only claim back what you payed at the transaction in the land office.

Sorry but I will never advise anyone on how to break the law.

it is not breaking the law it is a loop hole in the law big difference

[BigC]

An agent should never advise clients to under report the value of the transaction.

Saving tax is a polite way to put it, the correct term I believe is tax evasion, which is not only morally wrong, it is illegal.

If you choose to do go through with it that is a decision for you take on your own, and will have to live with in the future.

Starting off on this foot, effectively forces you to also embark on tax evasion in the future. [if the full price is reported when you eventually sell what will be the tax implications?]

Other items to consider, if you are buying, you should look very carefully at the transaction. For example do you know, for sure, that all the cash you are paying is going straight to the seller? When you conduct the transaction make sure you meet the seller, and have a friendly Thai (who does not know the agent) translate if needed, so that you are sure you are both on the same page.

The reason being is that are some despicable agents out there who mark up the price of the property and pocket the difference.

Its a murky market out there, be careful, and good luck.

If you do this witch is common. pay in 2 lots one at the transaction price the other harlf into one more a/c .the down side is if you need to take the seller to court you can only claim back what you payed at the transaction in the land office.

if u have a good lawyer then you should not need to go to court because the chanote paper work should be all checked. the house been servayed and there should not be a problem. just be carefull. never buy land without a chanote paper. just ain;t worth the head ache later on. make sure u get a good lawyer. i got mine from bangkok. if it wasn't for them i would have been in big trouble.

[GuestHouse]

There are two possibilities her:

The agent is trying to reduce the transfer tax burden.

The agent is selling you the house at a much higher price than he is passing onto the owner.

The likelihood is that both of these are the motives.

As noted, the practice is illegal - Its a tax fraud and it is you who will be out on a limb if it gets discovered.

(Why anyone buys from an agent in Thailand I can't understand).

[quiksilva]

An agent should never advise clients to under report the value of the transaction.

Saving tax is a polite way to put it, the correct term I believe is tax evasion, which is not only morally wrong, it is illegal.

If you choose to do go through with it that is a decision for you take on your own, and will have to live with in the future.

Starting off on this foot, effectively forces you to also embark on tax evasion in the future. [if the full price is reported when you eventually sell what will be the tax implications?]

Other items to consider, if you are buying, you should look very carefully at the transaction. For example do you know, for sure, that all the cash you are paying is going straight to the seller? When you conduct the transaction make sure you meet the seller, and have a friendly Thai (who does not know the agent) translate if needed, so that you are sure you are both on the same page.

The reason being is that are some despicable agents out there who mark up the price of the property and pocket the difference.

Its a murky market out there, be careful, and good luck.

If you do this witch is common. pay in 2 lots one at the transaction price the other harlf into one more a/c .the down side is if you need to take the seller to court you can only claim back what you payed at the transaction in the land office.

Sorry but I will never advise anyone on how to break the law.

it is not breaking the law it is a loop hole in the law big difference

No, its not a loop hole. Loop holes are legal. Tax evasion is illegal. The fact that is common practice does not change that.

Deliberately misreporting the true value of a taxable transaction is a dishonest act, it is tax evasion, plain and simple.

By contrast tax evasion is the general term for efforts by individuals, firms, trusts and other entities to evade taxes by illegal means. Tax evasion usually entails taxpayers deliberately misrepresenting or concealing the true state of their affairs to the tax authorities to reduce their tax liability, and includes, in particular, dishonest tax reporting (such as declaring less income, profits or gains than actually earned; or overstating deductions).

wikipedia

An illegal practice where a person, organization or corporation intentionally avoids paying his/her/its true tax liability. Those caught evading taxes are generally subject to criminal charges and substantial penalties.

investopedia

An example of tax mitigation (legal) in a property transaction might be to sell the holding company which owns the property, taxes are still payable but the rate is much less.

[tangoll]

Here are some ways I have heard of to lessen legally the amount of tax you, as seller, might pay:

1. negotiate with the buyer that the buyer pays part of the tax/fees due

- as a straight percentage, such as 50/50, or

- if the buyer wishes to underdeclare, then 50/50 up to lower amount, and

you as seller pay 100% of the rest up to the actual selling price

2. split up the actual selling price into two or more parts:

a. the portion for the property, which is the declared amount to Land Office

b. the extras, such as sinking fund, electric meter deposit, fitted equipment,

furniture, improvements to the property that can be documented, etc.

c. any real estate agent's commission

With the incentive tax/fees less than 1% now, these may not seem too significant, but if rates

get reverted to pre-incentive levels, 6 - 8% for condos held less than five years, the tax savings

become more interesting.