Update on Tax payable on rental income

[Inquisitorial]

Hi

We have read many differing opinions on TV regarding the legalities of renting out your condo and the tax payable so we thought we would share our adventures with the Tax revenue department over the past few days - yes we are now into the third day of visiting the tax office.

Just to set the scene:

We are non-resident westerners.

We don't read or speak Thai (hope to one day).

We have started renting out our condo.

Our condo is in Joint Names.

Rental Agreement is with private individual not a company so no withholding tax

Decided to do the right thing and check out to see if we needed to lodge tax return and pay tax.

Can rent out condo as non resident without work permits etc.

Day 1. Visit to the main tax office in Bangkok only to be told that we need to visit the tax office local to where we live - they were however very helpful in translating the parts of the form that we needed to complete in order that we could get our tax file number then we headed of to the tax office in Sukhumvit. They also confirmed that a Tax return would be required if rental income over 50,000 baht.

Arrived at the Sukhumvit office 1 1/2 hours later only to find it was packed people lined up outside the door and heading down the street. waited in line for a while then thought we should check this is right place, found supervisor who spoke English only to be told that they cant help us today as they are too busy, as last day to pay tax - come back tomorrow.

Day 2.

Headed back to the local tax office which only had a few people in, what a difference. Excellent service in about 15 min we had our two tax file numbers, then we asked for help to complete the two returns only to be told that one person should declare tax, tried to explain that our condo is in joint names and that the rental contract is in joint names so income should be split between the two of us - No you cant do that, we must see your title that condo is in joint name (problem that is back in Australia) come back tomorrow with copy of title then we can register for a partnership tax file number (cost 105 baht)

Day 3.

Heading back to tax office with a scanned copy of our title deed - so hopefully we will be able to set up our partnership and lodge tax return. Basically if your net income is over 150,001 baht you will be 90,000 baht worse off by having to lodge under partnership rather than splitting income and completing separate tax returns.

The Important stuff - we have been told:

• If you receive rental income over 50,000 baht you should lodge tax return even if the rental income does not exceed the tax free threshold.

• If condo is in joint names we have been told that we need to register for a partnership cant split income and declare individually (cost for lodging tax file for partnership 105 baht for the stamp).

• Then lodge tax return in partnership.

• Example of tax under partnership.

Tax calculation example under partnership income 300,000 less 30% exp 90,000 sub total 210,000 less partnership allowance 60,000 Income 150,000 No Tax payable as below 150,001

Has anyone else lodged tax return for rental income when the condo is in joint names, would be interested to hear if you also had to lodge under a partnership?

[chiang mai]

What kind of heresy is this, a farang declaring rental income in Thailand, unheard of before!

[Inquisitorial]

What kind of heresy is this, a farang declaring rental income in Thailand, unheard of before!

Surely not !!!!!

[KittenKong]

I admire the OP for wanting to do the "right thing" but I suspect that in Thailand he is probably unique or close to it.

I would particularly be inclined to look at the penalties for not filing a return (even assuming that you are caught, which is a big assumption) as I suspect that these may be extremely small.

[chiang mai]

Upon reflection I think if I was going to rent out a condo. in Thailand I may actually do as the OP proposes, firstly I'd want to see how much tax I was going to have to pay (exemptions/allowances are getting to be more generous) and unless it was an unduly onerous amount I think I'd probably pay it. The reason I would do that is because it future proofs me, it keeps the tax guys at bay when the time comes they start to scrutinize expat income more closely and it keeps me clean with Immigration when my expat tenant wants to use his lease agreement as proof of address. I think that scrutiny and legislation is only ever going to get heavier and more close, not lighter and more distant, probably best to bite the bullet from the outset, but that's just me.

[Gsxrnz]

The %&^#ing Tax Man should be treated like a mushroom and always kept in the dark.

The chances of an individual being nobbled by the Thai tax department for non declaration of income from leasing a residential dwelling to a private person are about the same as the chances of the second coming happening this Christmas Day.

Somewhere between zero and none.

[blackcab]

You also need to talk to the district office the condo is located in as you are liable to pay Par See Rong Ruan on your rental income.

Roughly speaking, if you let your condo for a full year then you will have to pay 12.5% or about 1 month of income to the district office. Note that is income, not profit.

So with rentals you only earn 11 months out of 12, then you have to pay tax on profits above the taxable threshold. However the Par See Rong Ruan is a deductible expense which you can use to lower your income tax.

There are ways to lower your Par See Rong Ruan liability, especially if you will not exceed the VAT threshold of 1.8 million baht income in the tax year.

[Ganador]

So if you live outside Thailand and you decide to leave your condo rental management with your juristic office,

or a real estate office, do they usually deduct the tax from your monthly income... and forward it on to the tax dept?

Any landlords out there have any ideas/advice about this?

[ripley]

Excellent Topic. Thanks for starting it.

I've heard a lot of "word of mouth" on the subject so it's useful to hear about actual experiences.

[Inquisitorial]

So if you live outside Thailand and you decide to leave your condo rental management with your juristic office,

or a real estate office, do they usually deduct the tax from your monthly income... and forward it on to the tax dept?

Any landlords out there have any ideas/advice about this?

If a company pays the rent then they will withhold 5% tax and pass onto the tax office (hopefully) but if you deal with an individual then no tax will be deducted - which has been our case. But you will still be required to lodge a return and maybe you will get a refund

Normally the agent who lets your apartment does not get involved in the rent payments that is between you and the renter or their company. If an agent lets he property for you they charge 1 month rent letting fee for a 12 month contract or two weeks rent for 6 month contract. Our Agent has been very good and will keep in contact with the tenant and let us know if anything goes wrong and assists us with the checkout process. We hold 100,000 baht bond.

We have now completed our tax return for 2015 after having to set up a partnership (as mentioned this was required due to fact our condo is in joint names) - at the end of the day we did not have to pay any tax. Basically you can earn 300,000 baht in rent without having to pay any tax after the allowable 30% deduction and threshold allowance if jointly owned and around 210,000 for single over this then you will have to pay 5% tax on the amount over the net 150,000. You are however required to lodge a return when income is over 50,000 baht.

One more thing we found out yesterday at the tax office was that you should get the actual contract stamped - you purchase stamps from the tax office and stick them on the contract - for our 6 month contract it cost us 300 baht.

Finally if you do let your condo and you are overseas I strongly recommend that you return for the final checkout process when the lease finishes as what is acceptable damage to the agent is likely to be very different from your standards. You can claim the expense on your tax in your home country if you are declaring the rent.

[GordonP]

I've been chasing around this issue as well. As far as I have got is a chicken and egg situation whereby the tax office in Pattaya won't give me a tax number without me having a work permit. I also have to be very careful as my tax authority outside Thailand does not have a double taxation agreement with Thailand and as such I could end up paying tax on worldwide income in both jurisdictions.

I have had a consultation with the an accountant who confirmed the problem.

After much deliberation I have decided to go the way of the mushroom kept in the dark.

[Raybangkok]

A post on TV about a week ago said they were being asked by the immigration dept when they went for extensions or 90 day reporting to produce rental agreement and a copy of the owners passport as the government are trying to increase the countries tax income so maybe all owners renting will soon have to be paying tax

[Liquorice]

Just how much are you renting out the Condo for per month?

Personal allowance is around 20,000 baht per month.

[chiang mai]

The tax tables are here:

http://www.rd.go.th/publish/6045.0.html

[Inquisitorial]

I've been chasing around this issue as well. As far as I have got is a chicken and egg situation whereby the tax office in Pattaya won't give me a tax number without me having a work permit. I also have to be very careful as my tax authority outside Thailand does not have a double taxation agreement with Thailand and as such I could end up paying tax on worldwide income in both jurisdictions.

I have had a consultation with the an accountant who confirmed the problem.

After much deliberation I have decided to go the way of the mushroom kept in the dark.

You certainly don't need a work permit, we are non resident only on 30 day visa (currently only spend 28 days in Thailand each year). Though not sure if this is different for those on 12 month retirement visa.

They will ask for work permit but we explained situation and we each had a tax file number in about 15 min after supplying copy of rental agreement & passport and the next day we supplied copy of our title deed and showed them the bank account to confirm in joint names then they issued us with a partnership tax no as well and completed the Tax return for us

Not sure on the dual tax situation between home country. Something we need to look into.

[ozyjon]

a farang declaring rental income in Thailand

you must be the first one, try not to startle the

tax department, go in slow and cautious.

[Ulic]

The %&^#ing Tax Man should be treated like a mushroom and always kept in the dark.

The chances of an individual being nobbled by the Thai tax department for non declaration of income from leasing a residential dwelling to a private person are about the same as the chances of the second coming happening this Christmas Day.

Somewhere between zero and none.

You may well be right. The left hand does not know what the right hand is doing. But, when

I went to Soi 5 Immigration in Jomtien for a 30 day extension I had to file a TM 3o with proof

of accommodation which was my 12 month condo lease. They do have all the information

from the airport declaration of where you are staying, to the TM 30 required filing, and

immigration forms filed for extensions, bank accounts, drivers license, etc.......So the

Thai immigration department in sitting on all the information necessary to investigate

private condo rentals. Will they share that, who knows. Government departments rarely

co-operate with each other and share information. Each department is a fiefdom.

[Ulic]

Just how much are you renting out the Condo for per month?

Personal allowance is around 20,000 baht per month.

Some people are renting out 8-10 condos.

[Madgee]

I've recently used this simple calculator for Thai income tax on several occasions on behalf of several colleagues and it has been 'spot on' every time, providing the correct documentation is submitted.

https://www.tiscoasset.com/en/asset/html/tax-calculator.jsp

You do not need a work permit to gain a tax I.D. number as a poster above claims. Many retirees actually claim their tax back that they have paid on interest accrued in savings accounts. To do this they must have a tax I.D. number readily supplied by the local tax office, of course they have no work permit.

Edited March 11, 2016 by Madgee

[cocopops]

I've been chasing around this issue as well. As far as I have got is a chicken and egg situation whereby the tax office in Pattaya won't give me a tax number without me having a work permit. I also have to be very careful as my tax authority outside Thailand does not have a double taxation agreement with Thailand and as such I could end up paying tax on worldwide income in both jurisdictions.

I have had a consultation with the an accountant who confirmed the problem.

After much deliberation I have decided to go the way of the mushroom kept in the dark.

You certainly don't need a work permit, we are non resident only on 30 day visa (currently only spend 28 days in Thailand each year). Though not sure if this is different for those on 12 month retirement visa.

They will ask for work permit but we explained situation and we each had a tax file number in about 15 min after supplying copy of rental agreement & passport and the next day we supplied copy of our title deed and showed them the bank account to confirm in joint names then they issued us with a partnership tax no as well and completed the Tax return for us

Not sure on the dual tax situation between home country. Something we need to look into.

For Australia, technically you're supposed to declare the rental income as foreign sourced income. There is a JTA between Australia and Thailand, so whatever the OP pays the Thais will count as a foreign tax offset on his Aus. tax return.

[RedQualia]

I applaud OP's effort to comply with tax laws here in Thailand. I've always tried to do the same. I have never wanted to put myself into a position where I might have trouble with any of the various powers that be years down the road, or to have any one or several putting out their hands demanding big bucks or whatever might be worse, all because I forgot to dot some I or cross some T years ago.

I'm a tax pro in my home country, but Thai taxes are something about which I have always chosen to be naive. Which is to say that I pay an accounting office to take care of income tax matters. I depend on them to be the experts on these things, and assume they are so and are taking care of everything appropriately. Costs a couple of thousand annually (though there are companies that are happy to ask you to pay much more!).

The rental income here is under the thresholds mentioned above, and I've never had to pay income taxes. In fact, the accountants always make sure I get letters from my banks so that taxes collected by the banks can be refunded.

Given that we're not talking about mega-bucks here, and I have always had an accountant file my taxes, I doubt I would ever be audited. If I ever were to be audited, I am unsure of the degree to which I can plead ignorance, and simply refer the tax people to my accountant. But that would be the way I'd want to go and if I ever ended up owing more, it would be after the Thai tax collectors convinced the Thai tax accountant of the matter. That is, after the locals sorted out issues of wrongness and any face saving matters, and etc.

I don't want to know anything about Thai taxes. That's what the tax accountant is for. Cheap.

Edited March 11, 2016 by RedQualia

[KittenKong]

You do not need a work permit to gain a tax I.D. number as a poster above claims. Many retirees actually claim their tax back that they have paid on interest accrued in savings accounts. To do this they must have a tax I.D. number readily supplied by the local tax office, of course they have no work permit.

Indeed. I have a tax ID number which I use every year to claim back the tax withheld on my interest. I had no trouble getting the ID issued at Jomtien Revenue Office.

I have never worked here, nor had a work permit, but I do have a yearly retirement extension. So it may be that some sort of long visa or long extension is a requirement: I dont know.

I have no income in Thailand and so (apart from the aforementioned withholding tax which I can reclaim) I pay no taxes here and have nothing to declare.