Is Vat Normal For Apartment Rental?

[Slim Chance]

Renting an apartment for my student son in Rangsit, I'm experiencing numerous problems and some downright dishonesty from the real estate gentlemen. This is universal enough in their business, but one small but annoying item that I've never heard of before when renting, is that the VAT is added to the price of the apartment.

Any comments on whether this is common and/or legal?

[chuchok]

never, ever knowingly paid it myself.It could have been added in the price though,but I would not have a clue otherwise.

[OldAsiaHand]

An agent's services attract VAT, but not the rental payments themselves. If an agent is charging you, say, a month's rent for his work in setting up the deal, that might explain the confusion. If the landlord is trying to charge you VAT on top of the rental you agreed to for each and every month, then he probably sees you as a guy who's good for an extra 7%.

[Sumitr Man]

SC:

Rentals are subject to personal or corporate income tax (10-37% personal; 30% corporate). Services are subject to VAT 7% For this reason, most landlords rent their apts as "furnished", even if they are not, because the provision of the "furniture" is subject to 7% VAT and the rentals are (in most cases) subject to 30%. In fact, it is not uncommon to see the "service" amount of each months "rent" exceed the "rental" charge.

It is called tax planning and is vey common in the CBD.

SM

[sriracha john]

Necessity (to rip off) is the Mother of Invention as they say...

VAT on an apartment rental is a new one for me.

I've never paid it in any rental...wouldn't tolerate it. There's too many out there to choose from that don't.

[elsie]

From my office..

Office Rental - no VAT, tenants issue Withholding Tax documents for the landlord.

Fixture Rental - plus VAT 7%, same thing for Withholding Tax stuff.

[farangene]

Renting an apartment for my student son in Rangsit, ..... is that the VAT is added to the price of the apartment.

<{POST_SNAPBACK}>

The landlord of the place I rent breaks out the rent into furnishings, maid and rental. The furnishings separate the vat and furnishings.

When I rented, I agreed to one price and the landlord explained that it was better for him taxwise to separate the vat. However, the landlord does not charge VAT on top of rents. The rent we agreed to is what I pay.

I think you are being taken advantage of by your landlord if it is an added amount over the rental agreement.

I would be inclined to ask the tax office whether this was legal and also whether the landlord is actually reporting the VAT he is collecting.

[Slim Chance]

Thanks to all, and...

...FARANGENE,

how does one make inquieries to the tax office & where is it?

-Slim

[richard10365]

I would ask for a reciept and tell the person charging you tax your going to take it to the Thai tax collector. Then see if he still wants to charge you tax.

[farangene]

how does one make inquieries to the tax office & where is it?

<{POST_SNAPBACK}>

There is a tax office in every district in Bangkok and they should be able to handle VAT related questions but you should bring along a Thai speaker just in case.

Also, I think anyone who collects VAT is supposed to (required to?) issue a receipt showing the amount of VAT collected and their business Taxpayer ID number. You often get this at the larger restaurants and is for purpose of tracking VAT for the govt.

You might tell your landlord that your _______ (fill-in the blank with your employer, your home gov't, your what-ever) now requires you to get a VAT tax receipt for all transactions. His facial expression will show how anxious he is to supply the requested document.

Good luck.

[sriracha john]

Rather than going to the trouble of reporting or even inquiring at the tax office regarding a probable tax cheat (your landlord)... I'd move your son elsewhere, if it's at all possible (do you have a long lease?).

Threatening your landlord by asking for receipts or telling him you're going to go to the tax office to report him or make inquiries may not be such a wise thing to do.

Rather than be afraid of you by your threats or demands for a receipt, you might want to consider being afraid of him as Thais don't normally respond well to threats.

[ProThaiExpat]

I would think that the vat issue becomes a nullity if you negotiate a 10% or more rent reduction up front, which is often done by renters, especially falang who do not accept the "asking price" in most transactions involving money.

[Slim Chance]

John,

Thanks for the advice and I'm inclined to agree with you, but no, I never signed the lease...

The story is--

My son is arriving as a transfer student. The University’s office told me about a new building where they were recommending the international students, the ones who weren’t staying in dorms, be housed. It is being built by a company whose owners have connections to the college and is the only one the office was promoting. $$$ I looked around at several other nearby buildings catering to students--this was several weeks ago--and chose, though it was still unfinished, the one recommended on the basis that it was far nicer than the others; pool, weight room, roof garden, etc., and chose an unfinished apartment. Supposedly it would have been ready by now--school starts in 3 days.

Returning this week to sign the lease, I found the apartment I’d chosen wasn’t ready, so we agreed that my son would stay in a smaller but almost finished ‘front building’ apt. for the approximately 2 weeks to a month that it would take to finish the ‘back building’, then he would change to the apt I had asked to have reserved. First problem was when I was told that I was to pay the same rental price of the large apt. for the small one that would serve as my son’s temporary home. I kept my cool but was insistent that I should only pay the amount that that, smaller and cheaper apt. was priced at, and when we took possession of the larger one, we would pay the higher & agreed upon rent. I was willing to pay the higher deposit, which incidentally, they were trying to double from the amount that I was originally quoted. The difference wasn’t a great amount of baht, but I resent being played for a fool. And how did I know if the place would actually be ready on time? Or better yet, why should I now trust them?

The real estate man would not hear of this and insisted that I was to pay the higher price for the smaller apt. I presented my case and he came up with quite a few b.s. reasons that were down-right laughable--the view was worth the extra money, I was creating a hardship because my son would be changing apts, and even finally saying that the small apt was really a large apt! I did not sign the lease, but chose to walk, thinking that he surely couldn’t stay that greedy about such a small sum, considering that I was signing a years lease, and would call me back. Didn’t happen.

So though you didn’t ask for it, now you got the background. Anyway…

Later when looking at the lease, written in English, I discovered that the entire amount of rent is to be VAT taxed at 7%, which got me to thinking and led to the forum post. All the exchange students being funneled there will be signing and paying. My rough estimation is that this amounts to about 35,000 baht per month and 420,000 per year for the realtors.

Now that I know that the vat can only be applied to a portion but not to the entire amount, and my son has nothing to fear in terms of retribution, I’m inclined, at least now while I’m still angry--by next week I may have forgotten about it-- to file complaints with the school, the international exchange program, the tax office, and the great thaiforum.

As I said before, real estate con artists are universal.

As Eddie Murphy said, Kill my landlord!

Edited September 10, 2005 by Slim Chance

[Digger]

It all depends on how the contract is structured.

Rent, per say is not VATable, however the owner is required to pay a further tax of the rental amount at around 15%. Therefore its better for them to split the contract into say 3 contracts:-

Rent for the unit - No VAT, but 15% of the rent in a rental tax

Services - VAT, but no 15% of the rent

Furniture/fittings - VAT, but no 15% of the rent

So typically rental agreements are on this basis.

Basically the reason they do this is that the 15% tax is higher than the VAT - they often get the renter to pay the VAT as an extra anyway so they are keeping more money.

Your bill should be split into 2 - the rent, with no VAT, for which a tax invoice is not applicable and the Services/furniture which is vatable and for which you could ask for a tax invoice.

Most landlords will not give you a proper tax invoice, for the simple reason that they are not VAT registered.

A tax invoice needs to state exactly that either in Thai or English at the top together with a invoice number, company name and address providing the service and their tax number. It must also show exactly the buyers name and correct tax registered address. Any ommission of this will rule it invalid and not eligable to recover the VAT by the buying company. Having said that, companies cannot recover the VAT for any element of employee housing as its not permitted by the VAT office, which is why landlords can and do get away with it.

[sriracha john]

John,

Thanks for the advice and I'm inclined to agree with you, but no, I never signed the lease...

The story is--

Thanks for the additional information. THANK GOODNESS, you didn't sign a lease. Obviously more than a few alarm bells were ringing in your head and you heeded them... Good for you.

Go and rent elsewhere... There's no shortage of apartments in BKK and that one has been a scam since the git go. Pity the school seems to be in on it.

Leave all it's troubles and spare yourself the headaches...

p.s. you're quite welcome for any humble advice I've given... and best of luck to your son on his educational pursuits...

[sriracha john]

It all depends on how the contract is structured.

I would walk away from ANY landlord that wanted to charge ANY vat on ANY part of the apartment I was considering to rent.

[ovenman]

It all depends on how the contract is structured.

I would walk away from ANY landlord that wanted to charge ANY vat on ANY part of the apartment I was considering to rent.

I'd be very very surprised to discover that the landlord in question was actually paying that collected VAT to the government.

[sriracha john]

It all depends on how the contract is structured.

I would walk away from ANY landlord that wanted to charge ANY vat on ANY part of the apartment I was considering to rent.

I'd be very very surprised to discover that the landlord in question was actually paying that collected VAT to the government.

<{POST_SNAPBACK}>

All the more reason to walk away from any snake-in-the-grass that wanted me to pay it.