Building A House But How To Do It Right From A Tax Point Of View

[OKF]

Hello @ all

I have a company that owns land and I want to build a villa on that land. As I do have 2 options for building (personal or company) I need to try to do it right. I have investigated the DTA with my home country and no personal taxes to pay on income for rents or for any capital gain if I would sell a house . This means I now have to consider the Thai tax part of the issue especially in case I have to exit and sell the property for some I reason I do not know yet.

1. When built under company name:

Example figures for easier answering of the questions below if someone likes to refer to figures which sometimes makes it easier;

land price (company price) = 4.500.000,- BAHT,

house price for building incl. furniture and diesel engine= 11.000.000,- BAHT,

monthly cost for maintenance: 30.000,- BAHT

a) How is taxation in Thailand over a period of 15 Years?

Which taxes are applicable (e.g. property tax, house tax, land tax)?

c) What tax would I have to pay when I sell the house after 15 years if the house has an appraised value of 20.000.000 by then? (If I understand right the write of per year is quite high in Thailand. Also the sales price could be split up in let us say 'building' and 'furniture and kitchen' whereas you would not have to pay tax and the furniture etc. you sell. What sort of goods would fall under that? Would it also cover things like e.g. a diesel engine?)

d) As the company would have to have income from rental, what would that rental have to be the?

e) What cost can be held against any rental income? I will have maybe 30.000 Baht per month cost

2. When built under personal name:

a) I understand that it may be a good idea to have a leasing agreement between me and the company as the tax man automatically will get his share at some time or at least the company has some income which is necessary, so in your opinion what value should the agreement have for the period of 30 years? Could it be below the value I paid for the land e.g. 4.500.000? So for the lease let us for example say 4.000.000,- BAHT which would mean an annual leasing payment of 133.333 will have to paid by me to the company.

A leasing agreement will have to be registered by the land dept if I understand and it is 1% of the leasing rate plus 0,1% stamp duty = 40.400 BAHT?

c) If I have rental income of more then 100.000 BAHT I have to pay personal income tax on that. Could I deduct maintenance fees from the income if above the 100.000 to get below? I read in some BDO Paper there is a flat rate of 30% deductions that would be accepted? Is that right?

d) Do I always have to file a personal income tax in Thailand even if I do not have income?

e) If I want to sell the house in 15 years thai tax says there is fictious gain. From what I can see I do not submit a value. A value comes from somewhere? How is a villa valued then and how is the so called 'capital gain' calculated? Also I read cost could be deducted. Which cost precisely? The annual running cost for maintenance etc.?

Please use my example figures from above for easier reference. I know those are difficult questions but maybe someone has experience with this as he/she had the same decission to take. I have asked that question to my bookkeeper as well but I am curious what people here may say because I may have missed out on the one or the other question.

Maybe there is some other issue I have not considered with all this?

Thanks & regards

Oliver

Edited January 13, 2010 by OKF