Calculation of Personal Income Withholding Tax on property sale.

[rak sa_ngop]

I have been trying to estimate the amount of Withholding Tax that is payable on sale of a property by an individual.

 

I found the most comprehensive information on the following website:

 

http://lawonline.weebly.com/property-transfer-tax-and-fee.html

 

Using the example provided on this website the WHT on a 4,000,000 baht property held for 5 years is 115,000 baht.

 

If the property is sold a year earlier i.e 4 years, by my calculation it comes to 96,000 baht

 

Whereas if you keep it for 8 years you will pay 160,000 baht.

 

This all sounds a bit counter-intuitive to me. Keep the property longer and you pay more tax!

 

And is there any way that a Thai national can get a rebate of all or part of this Withholding tax based on their tax status.

 

Maybe this is why Thai people do not sell their houses so often.

[Monomial]

Yes, it is a truly messed up system.

 

Do keep in mind that if you sell before 5 years, there is a 3.3% tax instead of a 0.5% stamp duty, so that makes it more expensive to sell before 5 years, even though the tax code penalizes you for holding it longer. Generally, the optimum time to sell is 6 years, but that can vary depending on the specifics of the property.

 

And yes, the personal income withholding tax can be recovered on a tax return, but keep in mind that the entire amount of appreciation on your house sale must be included in that year's return. The result of this is usually greater than the tax withheld (unless there has been little to no appreciation in the property.)  The complex calculation is an attempt to spread the tax liability over the years in which you owned the house, and based on the tables the government is assuming around an 8.75% annual appreciation (doubling in 8 years) in property values in determining how much to spread the wealth.

 

That seems steep in today's climate, but might not have been when this arcane tax system was conceived.

 

Anyway, the easy way to think about it is to assume approximately a 2.5% tax on the sale assuming an ordinary priced house held for more than 5 years. If your total appreciation when assessed at the brackets above your ordinary income is less than this value, then you can get some back. If not, the withholding tax can be treated as a final tax.

 

It's generally less than capital gains tax would be in the West, except that you don't get a pass by reinvesting the amount. So you are correct that it does act as a disincentive to trade up into a new home.