Tax Reduction On Thai Property Transfers Explained

[george]

Tax reduction on Thai property transfers explained

PROPERTY TRANSFER TAXES 1 : The unthinkable has happened

Someone once said that though both death and taxes were inevitable, at least death didn't get worse each year. But something has happened in Thailand. There has been a realisation that the property sector has to be stimulated and this has created an opportunity for the moment - taxes on property and land sales have been reduced.

By Royal Decree, issued in accordance with the Revenue Code Regarding Tax Reduction (No 472) B.E. 2551, dated March 28, and Proclamations of the Interior Ministry on March 24, 2008 and on April 30, 2008 by Chalerm Yubamrung, then minister of the interior, specific business tax and government registration fees on property, land sales and mortgages have been reduced for a period of one year, from March 29, 2008 to March 28, 2009. Thus if you know you're going to buy a place to live in Thailand but can't decide when, maybe the time is now.

HERE ARE THE NEW RATES, WHICH APPLY TO BOTH NEW AND USED HOUSING:

For the sale of: 1) a house; 2) land up to one rai (1,600m2) including a house; 3) raw land subdivided under a land allocation licence (the licence a developer gets to subdivide a larger tract); 4) land including house subdivided pursuant to a land allocation licence; 5) a condominium; 6) an office building under the construction control law; or 7) land including an office building under the construction control law.

The registration fee is 0.01% of the assessed price, plus the specific business tax (which includes the municipality tax) of 0.11% of the transaction price (this is only applicable if the property has been held by the seller less than five years), or stamp duty of 0.5% of the transaction price, if the specific business tax is not applicable because the property has been held by the seller more than five years.

For the sale of: 1) raw land; or 2) land exceeding one rai not subdivided pursuant to a land allocation licence that includes a house, the registration fee is 2% of the assessed price, plus the specific business tax of 0.11% of the transaction price (again, this is only applicable if the property has been held by the seller less than five years), or stamp duty of 0.5% of the transaction price, if the specific business tax is not applicable because the property has been held by the seller more than five years.

There are additional fees for the registration of a mortgage on: 1) a house; 2) land up to one rai including a house; 3) raw land subdivided under a land allocation licence; 4) land including house subdivided pursuant to a land allocation licence; or 5) a condominium.

The mortgage registration fee is 0.01% (up to a maximum of 200,000 baht) of the mortgage value for these interests bought between March 29, 2008 until March 28, 2009. For the period before March 29, 2008 and after March 28, 2009, the mortgage registration fee is 1%.

There are still withholding taxes on the seller's income, which must be withheld by the buyer and paid to the government at the time of registration. We will not cover these in this article though because they haven't changed and aren't charged to the buyer, but to the seller.

Here's a very simple example. Let's say a condominium is sold new today without a mortgage for the price of three million baht. The taxes are as follows: the registration fee is 0.01% of the assessed price, or three million x 0.01% = 300 baht. The specific business tax is 0.11% of the transaction price, or three million x 0.11% = 3,300 baht. Total 3,600 baht.

Under the old rules, and those that will apply after March 28, 2009, this calculation is: The registration fee is 2% of the assessed price, or three million x 2% = 60,000 baht. The specific business tax is 3.3% of the transaction price, or three million x 3.3% = 99,000 baht. Total 159,000 baht.

You can see that the reduction is substantial.

We'll cover a few more subtleties of all this and more examples in later articles.

-- Bangkok Post 2008-11-02 byJames Finch of Chavalit Finch and Partners finch(at)chavalitfinchlaw.com

and Nilobon Tangprasit of Siam City Law Offices Limited nilobon(at)siamcitylaw.com

[Pappiklon]

Does anyone know if this reduction in transfer fees has been extended to March 2010, in another post it said they had but I can't find an official source for that information anywhere

[ballbreaker]

Does anyone know if this reduction in transfer fees has been extended to March 2010, in another post it said they had but I can't find an official source for that information anywhere

Its only an article but you can read where it was extended another year. Go to be below address and then click on "builders urge tax breaks".

http://www.reic.or.th/home_eng/news/news_i...p;t=36&p=28

[Pappiklon]

Thanks Ballbreaker for the link, I've been checking this out today with several agents In Bangkok, of the 3 I've spoken to so far 2 say that yes it is extended but the 3rd says they had thought it was extended but on Friday when contacting land offices in both Bangkok and Hua Hin they had been informed that as far as the land office was concerned the rates were going back up again at the end of March. The agent pointed out that this could just be because they hadn't received the official notification of the extension yet, the way things seem to work here that is entirely feasible. My main concern here though is that as this was extended in the last days of the previous government it may never have gone through the required channels to become law and now never will.

[ballbreaker]

My main concern here though is that as this was extended in the last days of the previous government it may never have gone through the required channels to become law and now never will.

Those were my exact thoughts also.

Thanks for passing on what land offices had to say.

[Arkady]

I can't find any confirmation of the extension either. Perhaps the necessary Royal Decree or ministerial regulations were never issued. The Abhisit government seems to have different ideas on tax measures like tax relief on larger mortgages that favour the urban middle classes and developers building in that segment, rather than across the board for new developments. I am also not clear whether the reductions applied to second hand properties as they were designed to stimulate sales to developers. I came across a case where a buyer of a second hand moobaan house didn't qualify for the reduction, the last time it was introduced in 1998-2000 but he never found out whether that was because it was an old house or an old moobaan that was somehow not registered as a jatsarn area.

[Arkady]

I checked with my local land office today and they said the reduced tax levels of 0.11% special business tax and 0.01% transfer tax (compared to 3.3% and 2%) apply only till 27th March 2009 and there is no regulation from the current governement at this point to extend the period of the reduction. Apparently it applies to all transfers not just to "jatsarn" land and condos. The problem for most second hand transactions is that transfers from private individuals attract personal income tax not special business tax which applies to corporate sellers. Therefore, if buying from a private individual, I think there would only be a reduction in the transfer tax. This is logical as it is intend to stimulate sales from developers which are nearly all corporates.

[wasaskater]

We just transfered a condo on Monday(1st week of May 2009)...and we had to pay 3%...they told us the extension had been passed until 2010...but they had not been notified by the government...Were they lying to me? Can I get a refund...once they get the letter?

[trajan]

heard today that the Ministry of Interior already issued a notice effective 29th March 09 that the transfer tax is reduced to 0.01% until 28th March 2010....

but the SBT tax of 3.3% reduction extension is not yet extended and you need to pay that now (for any current transactions) until the tax reduction extension is finalized.....it is currently uncertain whether people paying 3.3% SBT now will get a retroactive refund.....

(another example of different govt agencies failing to coordinate to achieve a unified effective state policy...in this case encouraging transactions with lower taxes)

Edited May 12, 2009 by trajan

[tangoll]

And now over to quiksilva for his official notification and posting here about the reductions.

[cloghead]

I'm collecting the final 1.5 million tomorrow on a land sale of one rai. The total price of the sale is 3.8 million. So what tax rate will I have to pay the land office?

[tangoll]

This is just my calculation on a sale of a condo unit for 3.8 million, and assuming

1. you declare a transaction value of 3.8 million

2. the Land Office applies the reduced rates to Specific Business Tax and Transfer Fee

3. the number of calendar years between the prior transfer and this current transfer is between 1 - 5 years

then the total taxes and fees that would be assessed on this transaction value would be about 1% for 1 year, 2% for 3 years, and 3% for 5 years.

I do not know if the calculations for land property is the same as for condo units, or what happens with stamp duty assessed on over 5 years, or what happens if the property has been used as primary residence (tabien baan) for the seller for over 1 year. In the case of primary residence of at least one year, the Specific Business Tax of 3.3% would not apply and the stamp duty tax of 0.5% would have been applied, but since the reduced SBT is now less than the stamp duty rate, I don't know which rate would apply in the case of the primary residence.

This is only my understanding of how the tax and fee rates would be applied.

[qbkh]

I find it is always interesting that no one can firmly state what is the SBT level at this moment. Shouldn't the tax and fee of property transaction be explicitly and clearly stated in a country?

This is just my calculation on a sale of a condo unit for 3.8 million, and assuming

1. you declare a transaction value of 3.8 million

2. the Land Office applies the reduced rates to Specific Business Tax and Transfer Fee

3. the number of calendar years between the prior transfer and this current transfer is between 1 - 5 years

then the total taxes and fees that would be assessed on this transaction value would be about 1% for 1 year, 2% for 3 years, and 3% for 5 years.

I do not know if the calculations for land property is the same as for condo units, or what happens with stamp duty assessed on over 5 years, or what happens if the property has been used as primary residence (tabien baan) for the seller for over 1 year. In the case of primary residence of at least one year, the Specific Business Tax of 3.3% would not apply and the stamp duty tax of 0.5% would have been applied, but since the reduced SBT is now less than the stamp duty rate, I don't know which rate would apply in the case of the primary residence.

This is only my understanding of how the tax and fee rates would be applied.

[thaiwanderer]

I find it is always interesting that no one can firmly state what is the SBT level at this moment. Shouldn't the tax and fee of property transaction be explicitly and clearly stated in a country?

becuase layman farangs should be expected to know these things / be kept informed with a publicity blitz about current rates just on the off chance they need to know - rather than just checking if they need to know and or keeping themselves informed if they so desire?

how many short stay immigrants / 'aliens' are kept abrest of such matters in that detail by the authorities in other countries?

[quiksilva]

And now over to quiksilva for his official notification and posting here about the reductions.

The PDF of the official announcement is posted in the SBT thread below

http://www.thaivisa.com/forum/Specific-Bus...on-t266507.html

[qbkh]

I find it is always interesting that no one can firmly state what is the SBT level at this moment. Shouldn't the tax and fee of property transaction be explicitly and clearly stated in a country?

becuase layman farangs should be expected to know these things / be kept informed with a publicity blitz about current rates just on the off chance they need to know - rather than just checking if they need to know and or keeping themselves informed if they so desire?

how many short stay immigrants / 'aliens' are kept abrest of such matters in that detail by the authorities in other countries?

Who insiders in this forum can tell between Mar and May before the "official announcement" issued yesterday? Not just no insiders can tell, even no one can check it out because there wasn't any "official announcement" during the last two months. Of cousre, I will not be informed by the immigration officers at airport when I arrive at bankgok but at least I should be able to check it out. Don't forget that usually 40+% owners of high end condo are foreigners. Get my point?

[thaiwanderer]

Who insiders in this forum can tell between Mar and May before the "official announcement" issued yesterday? Not just no insiders can tell, even no one can check it out because there wasn't any "official announcement" during the last two months. Of cousre, I will not be informed by the immigration officers at airport when I arrive at bankgok but at least I should be able to check it out. Don't forget that usually 40+% owners of high end condo are foreigners. Get my point?

so how exactly did your efforts to check it out rather than merely reading this thread fail to gather the information you required?

and if the information you required was in the official announcement now made are you expecting specifics on tax measures to be ascertainable with 100% certainty prior to such a required official annoucement?

Edited May 20, 2009 by thaiwanderer

[quiksilva]

I got to know that it was happening through our government contacts. Also as a member of the BCCT I attended a lunch where Korn spoke and confirmed that it was going ahead during the Q&A session, supporting similar announcements of policy changes made in the press.

Was it 100% certain? At that time, well, no, but its stands to reason [as TW pointed out] that it cant be until the official announcement has been issued.