Land Transfer Fees

[JimGant]

When buying land, who customarily pays the transfer fee/tax -- the buyer or seller? Or is this normally negotiated?

Also, what are the current transfer rates?

Thanx.

[Sunbelt Asia]

When buying land, who customarily pays the transfer fee/tax -- the buyer or seller? Or is this normally negotiated?

Also, what are the current transfer rates?

Thanx.

Specific Business Tax with a flat rate of 3.3% on a selling price

Transfer Fees with a flat rate of 2% of an official appraised price

Stamp Duties with a flat rate of 0.5% of an official appraised price

Income Tax with a flat rate of 1% on a selling price for a juristic person or a progressive rate on a selling price for a natural person

Income Tax (Withholding Tax)

The above income tax will be imposed on the recipient of taxable income from the sale of real property. This income tax will be withheld by the land office upon the registration for transfer of the land. The recipient can be either natural person or juristic person which are limited companies, limited partnerships, condominium juristic persons, associations and foundation etc.

For the transfer of real property with the Land Office which is either only land or land and building, a seller or owner of the property will have to pay.

Natural Person Taxpayer

A natural person is subject to all taxes prescribed by law. The tax rate will be under the progressive rate as per the schedule under the Revenue Code with a maximum tax of 37%.

Juristic Person Taxpayer

If the recipient of taxable income is a juristic person, the tax will be calculated with a flat rate of 1%.

The income tax for both a natural and juristic person is based upon the actual selling price which cannot be lower than the official appraised price. If it is lower than they go with the appraised price.

How to calculation the Income Tax

If the company is the owner, the tax is 1% of the actual selling price which cannot be lower than the official appraised value.

If the Seller is a natural person, you have to look at the income in the schedule of the progressive rate under the Revenue Code of Thailand :-

not more than 100,000 0%

more than 100,000 - 500,000 10%

more than 500,000 - 1,000,000 20%

more than 1,000,000 - 4,000,000 30%

more than 4,000,000 37%

The method of calculation is like this....

You need to first calculate the amount of tax to be paid under the progressive rate, the gross amount of income will be first deducted by deductible allowance with the percentage according to a number of years the owner owns the land.

1 year 92%

2 years 84%

3 years 77%

4 years 71%

5 years 65%

6 years 60%

7 years 55%

8 years 50%

For example, if you sell the land you own for three years for the price of 4,000,000 baht, you may first deduct the allowance of 71% for the rate of 4 years being 2,840,000 baht. The sales price of 4,000,000 baht deducted by 2,840,000 baht is 1,160,000 baht.

The deducted amount of 1,160,000 baht will be divided by 4 years which has the result of 290,000 Baht.

290,000 baht will be used as the base to calculate the progressive tax rate being :-

0% for the amount not more than 100,000 baht being 0,000 baht

10% for the amount of 190,000 baht being 19,000 baht

The result is 19,000 baht.

The amount of 19,000 baht must be multiplied once again by the number of years the seller owns the land. In this case it was 4 years

The amount of tax to be paid is 76,000 baht.

Specific Business Tax

Specific Business Tax is a flat tax rate of 3.3% on the actual selling price is collected if the seller owns the land not more than 5 years. If the seller is not subject to the Specific Business Tax, the stamp duty of 0.5% will be applied.

Transfer Fees and Stamp Duties

Government fee for the transfer of land of 2% on the official appraised value is collected on the registration of transfer with the land office. The stamp duty of 0.5% is collected if the seller is exempted from Specific Business Tax.( own the land more than 5 years)

You should always negotiate hard with the seller and put this in the sales and purchase agreement on who pays the tax. We charge 15,000 Baht to negotiate on behalf of our clients( who have found a house, land, condo on their own) If they don't save at least 25,000 Baht from what the seller's final price( they have negotiated by themselves) , the professional fee is waived.

We strongly advocate that the Income Tax and Specific Business Tax is the responsibility of the seller as he is getting the income.

In most cases, we are able to convince the seller to split the transfer tax and stamp duty( if the seller was exempted from paying Specific Business Tax.

Most sellers will want the buyer to pay for everything as this they claim this is "standard" Nice try! This may be more than 6% of the selling price while with our negotiations, in a number of cases, it was only 1% tax for the buyer.

Capital Gains Tax

The annual corporate income tax for a SME is 15% from the net profits on the first million Baht in net profits, 25% tax from 1 million to 3 million and over 3 million baht in net profits is 30%. A SME is a company with registered capital lower than 5 million Baht.

www.lawyer.th.com

[splitlid]

eeeeerrrrrrrrrrrmmmmmmmmm.....yer......what he says.....

[Sunbelt Asia]

eeeeerrrrrrrrrrrmmmmmmmmm.....yer......what he says.....

Splitlid,

Were you unsure of anything? It can't be the fees so I surmise its the question, can we negotiate the buyer just splits the transfer fee and possibly the stamp duty and the Seller has to pay the rest?

Most foreigners don't even negotiate this point or are not aware. Six villa owners this past week, EACH saved 316,000 from what was negotiated before on a brand new development. As we were doing the contract work and registration at the land dept, we didn't even charge for this. Its our job to fight for our client. The biggest advantage we have is we are not emotional about the purchase.

The Seller made the money, let him pay his own taxes!

www.lawyer.th.com

[excaliber]

The Seller made the money, let him pay his own taxes!

www.lawyer.th.com

I for one appreciate all the information you took the time to post. It's a bit confusing but after reading it several times it makes more sense now.

One question: I was recently in the bank looking at NPL/bank repo properties and the bank manager specifically told me that the buyer would have to pay an additional 6 to 6.5% on top of the selling price, near or exactly what you stated above. Are the banks immune to negotiating the 6 to 6.5% ? and do you offer your professional services in saving this when dealing with bank properties?

thank you

Edited May 21, 2006 by excaliber

[Sunbelt Asia]

One question: I was recently in the bank looking at NPL/bank repo properties and the bank manager specifically told me that the buyer would have to pay an additional 6 to 6.5% on top of the selling price, near or exactly what you stated above. Are the banks immune to negotiating the 6 to 6.5% ? and do you offer your professional services in saving this when dealing with bank properties?

Banks are the same as anyone, they would like the buyer to pay and save this cost. We would be very much interested in getting involved after you have obtained the best final price. Please do not sign a offer and give a deposit till our team negotiates on your behalf. Once you have, it makes our job much harder as you have shown commitment with those terms already.

www.lawyer.th.com

[briley]

One thought ...........

I sort of missed any reference to the price you pay for land/condo etc when you come to sell.

I assume that if you sell for 4 million but paid 1 million to buy then you only pay income tax on the growth of 3 million? So you calculate the income tax using the calculations above on the growth in value of the property. Otherwise rather unfair to pay income tax on the total sale price since you could be selling at a loss.

[astral]

IME the seller usually pays the fees, but this should be clarified before the deal goes through.

I should also be noted that:

1. The price declared

2. The price paid

3. The price used for tax calculation

are rarely the same.

Edited May 22, 2006 by astral

[Sunbelt Asia]

One thought ...........

I sort of missed any reference to the price you pay for land/condo etc when you come to sell.

I assume that if you sell for 4 million but paid 1 million to buy then you only pay income tax on the growth of 3 million? So you calculate the income tax using the calculations above on the growth in value of the property. Otherwise rather unfair to pay income tax on the total sale price since you could be selling at a loss.

In short, personal income tax is payable on the official appraised price of the property at the time of sale, less deductions stipulated by the law.

The actual sales price of the property is not relevant. The actual cost of acquiring the property is not relevant in most cases.

It is a tax that assumes that after holding a property for eight years or more you have made a gain of 100 per cent. The result - the seller pays tax on a gain he has not made - is a tax on a fictitious gain.

After eight years or more the deduction is limited to 50 per cent, which is the same as saying the seller has made a gain of 100 per cent. Hence, the actual cost of the property is not relevant for calculating the withholding tax.

By the way, when you sell, you can pay the withholding tax and leave it at that – there is no need for you to include the gain in your personal income tax return at the end of the year. A taxpayer that includes the gain in his personal tax return may elect to claim a deduction for the actual cost of the property rather than the standard deduction.

You should also be aware since 2003, an exemption applies to income from the sale of your residence in the case that a new residence is also purchased. However with a condition, the income exempted, which will be based on the official appraised price and not the contract price, cannot exceed the value of the new property and the new home must be bought within one year prior to or after the sale of the old one.

www.lawyer.th.com

[Nadia 2]

JimGants post is 'When buying land, who customarily pays the transfer fee/tax -- the buyer or seller?'

There is no fixed rule, it can vary from purchaser pays all to seller pays all. In general it is part of the overall price negotiation to come up with an appropriate formula for sharing these costs.

In many aspects Sunbelt's answer is correct however I do not understand the 'personal income tax income from the sale residential property'. JimGants will never be able to own the property himself but will have to set up a company (which is of course it is an illegal circumvention of the law and this may very likely lead to potential problems in the future) and the tax liability must be answered from a corporate income tax point of view...

Sunbelt's answer is more relevant for Thai nationals.

According to the law (and of course) for tax purposes the company accounts and the land office documents should show the correct purchase price.

[JimGant]

JimGants will never be able to own the property himself but will have to set up a company

Actually, the question was asked from the perspective of having a Thai spouse who would assume title.

Interestingly, tho I asked the question as a perspective buyer of some additional land, the seller aspects appear more complex, at least from the income tax arena: Eg, the wife has dual US/Thai citizenship, and as such, we pay US income tax on our worldwide income -- and the tax treaty with Thailand prevents double taxation. But if we sell our house/land, income taxes will (it appears) have to be paid up front to Thailand. And since our Thai home is our secondary residence, at least right now, we would have to pay the US a tax on any capital gain. (But, yes, we should get credit for taxes paid to Thailand.)

Anyway, hadn't really pondered the income tax angle of owning real estate in Thailand -- but won't lose any sleep over it 'til the time comes.

[Sunbelt Asia]

do not understand the 'personal income tax income from the sale residential property'. JimGants will never be able to own the property himself but will have to set up a company

Nadia 2,

I surmise he was looking to buy, hence why I went into how much the withholding tax is due, if the seller is a Thai national or a corporation.

Many sellers would like the buyer to pay this tax as well!

According to the law (and of course) for tax purposes the company accounts and the land office documents should show the correct purchase price.

You are correct as some sellers and buyers declare the selling price lower than the price they actually bought or sold. They do this to lower the Income Tax and Specific Business Tax, but they should know that they are involved in tax evasion and even possibly money laundering if they cannot show where this money went to. ( The difference of the actual funds withdrawn from the bank acct and money declared)

If the buyer who is a company sells this land in the future and the new buyer insists to declare the real price, there will be a difference of the price generating capital gains which will be taxable at the end of the year once you prepare the balance sheet and file the corporate annual tax returns. The annual corporate income tax for a SME is 15% from the net profits on the first million, 25% from the net profits from 1 million to 3 million Baht and 30% from 3 million. The net profits come from the gross income deducted by allowable expenses. The allowable expenses are either actual expenses proved by actual receipts or depreciation expenses for the assets. The depreciation for any building is 5% of the total value for the period of 20 years. The capital gains can be taxable profits to be declared at the end of the year.

If a company is involved. Some simply do not doing anything with the Land Dept. They just change the directorship and shareholding structure of the company.

Others will have an offshore company hold the minor shares and change the ownership of the offshore company. This way, the buyer after doing due diligence would not involve the Land Dept or the Ministry of Commerce for the change of shareholders and tax owed (Just the director is changed) Both of these methods are recommended by a number of auditors in lowering tax and the transfer tax in Thailand.

www.lawyer.th.com

[thaihome]

All this is very informative.

All I can add, is in all 3 of the tansactions (buying, selling, buying) my wife has done in the past 2 years, the land office fees were split 50/50. This seems pretty standard.

TH

[newbepat]

I was looking for information regarding Buying and selling land in Thailand and came across this forum

This was posted 2006. The last post I agree with, saying splitting costs 50/50

anyone know how the land office calculates the regisration fees and tax. for the buyer or seller (In simple terms if thats possible)

Pat

[donx]

newbepat: in 2007 my wife bought empty land and the seller paid all of the taxes and fees. If you can get the seller to do that then the calculations are quite simple if you are the buyer.

[mark5335]

The annual corporate income tax for a SME is 15% from the net profits on the first million Baht in net profits, 25% tax from 1 million to 3 million and over 3 million baht in net profits is 30%. A SME is a company with registered capital lower than 5 million Baht.

www.lawyer.th.com

Regarding SME taxes, I received an update from a large accounting firm this week advising the following company income tax changes from 2012:-

For small and medium enterprises (SMEs), the first Baht 150,000 of net profit of an SME will continue to be exempt from income tax and the next Baht 850,000 subject to only 15% tax.

The new tax rate of 23% will apply to profits exceeding Baht 1 million for the accounting period commencing on or after 1 January 2012. The tax rate will then be reduced to 20% for accounting periods commencing on or after 1 January 2013.

To be eligible for the SME rates, the following conditions must be met:

1. The company’s paid-up share capital must not exceed Baht 5 million on the last day of its accounting period; and

2. The income derived from the sale of goods or provision of services during the accounting period must not exceed Baht 30 million.