How Good's The Deal?

[rishi]

We're in the process of getting paperworks done regarding buying house and land from our soon to be former landlord. The seller is Thai and he owns the property as a private person. The buyer is also Thai and will own the property as a private person. The actual price (i.e. the amount we pay) is 3 millon baht.

All major issues are quite okay, but there is this minor issue: The seller offers to pay the transfer fee and other governmental costs involved in transfer the chanote etc. However, he also suggests that we register only a price of 2.2 million baht at the land office.

I've heard mentioned, that the transfer cost is about 60,000 baht - nice to save. However, the seller saves how much in incometax by the "reduced" amount? ... And this tax - saved by the seller - might be an extra tax we'll eventually might have to pay, when we sell the property with a seemingly higher profit than we actually have.

So - should we tell the seller: Never mind - we'll pay the transfer costs and we want the actual price registered at the land office ?

[JimmyGreaves]

I would like to know the answer to this one, apparently this is the normal thing to do to reduce the tax on the purchase. Everyone does it, even my lawyers said it was common practice and not to worry. However if your company pays the seller the full amount but signs at the land office for a lesser amount then where does that leave you. In Europe you would be in the shit!

Waiting for someone in the know..................

[donx]

I will give my completely unprofessional opinion based upon no personal experience outside of the knowledge I have gathered from reading from this forum. Others, I'm sure, will be glad to point out my errors.

I believe you will find that when Thai's sell real estate, they don't pay capital gains tax the way you may in other countries. Therefore, changing the recorded price for the property will not affect the transfer fees you will end up paying when you sell the property in the future. For example, let's say you sell the property later for 4 million baht. The transfer fees you will pay then are the same regardless of what the current seller is pays in transfer fees. In other words, the transfer fees are based solely on the purchase price registered at the land office. If capital gains taxes have to be paid, then my theory is blown out of the water.

[Dragonman]

We're in the process of getting paperworks done regarding buying house and land from our soon to be former landlord. The seller is Thai and he owns the property as a private person. The buyer is also Thai and will own the property as a private person. The actual price (i.e. the amount we pay) is 3 millon baht.

All major issues are quite okay, but there is this minor issue: The seller offers to pay the transfer fee and other governmental costs involved in transfer the chanote etc. However, he also suggests that we register only a price of 2.2 million baht at the land office.

I've heard mentioned, that the transfer cost is about 60,000 baht - nice to save. However, the seller saves how much in incometax by the "reduced" amount? ... And this tax - saved by the seller - might be an extra tax we'll eventually might have to pay, when we sell the property with a seemingly higher profit than we actually have.

So - should we tell the seller: Never mind - we'll pay the transfer costs and we want the actual price registered at the land office ?

As you say he owns the property as a private individual I doubt whether he saves more than the 60,000 baht by reducing the price for the Land Office! Some Land offices only go on their own valuations anyway.

As rishi suggests there is no Capital Gains in Thailand, and if there is no Company purchase involved it will eventually revolve around the price it is sold for next time as to what tax is paid.

jflundy. Company purchase is a different matter, which has tax implications and the obvious checks on Company records. People still do it, but I do not see it in the interest of the purchaser.

[JimmyGreaves]

What I'm getting at is if the land department has a record that a company purchased the land for 1 Million to save land tax for the seller and the company Accounts has a record that they paid the seller 2 million for the same land, then this could have implications for the company if 2 and 2 were put together.

[Dragonman]

What I'm getting at is if the land department has a record that a company purchased the land for 1 Million to save land tax for the seller and the company Accounts has a record that they paid the seller 2 million for the same land, then this could have implications for the company if 2 and 2 were put together.

Yes, this could happen, but it is very rare for Government Department's to communicate in Thailand. Also vice versa, the Revenue Dept. could say the accounts were falsified for the Company to pay less tax on sale.

[JimmyGreaves]

What I'm getting at is if the land department has a record that a company purchased the land for 1 Million to save land tax for the seller and the company Accounts has a record that they paid the seller 2 million for the same land, then this could have implications for the company if 2 and 2 were put together.

Yes, this could happen, but it is very rare for Government Department's to communicate in Thailand. Also vice versa, the Revenue Dept. could say the accounts were falsified for the Company to pay less tax on sale.

Don't get the vice versa dragonman:

Your company has a receipt paying the seller 2 Million Baht, If you then sell for 5 Million baht, the buyer gives you a cheque which you deposit in your company, you make 3 Million which is taxable. How is this falsified?

[Dragonman]

What I'm getting at is if the land department has a record that a company purchased the land for 1 Million to save land tax for the seller and the company Accounts has a record that they paid the seller 2 million for the same land, then this could have implications for the company if 2 and 2 were put together.

Yes, this could happen, but it is very rare for Government Department's to communicate in Thailand. Also vice versa, the Revenue Dept. could say the accounts were falsified for the Company to pay less tax on sale.

Don't get the vice versa dragonman:

Your company has a receipt paying the seller 2 Million Baht, If you then sell for 5 Million baht, the buyer gives you a cheque which you deposit in your company, you make 3 Million which is taxable. How is this falsified?

It is not difficult to get a cheque paid which is much higher than the actual purchase price. Thus when you sell you save say 30% of the additional million. As you have notified the Land Office that purchase price is really 1 million. Revenue will be suspicious.