If you are buying or selling property in Thailand, you will be asked to pay taxes when you register the ownership transfer at the Land Department. The total amount to be paid is in fact a sum of several taxes depending on certain criteria.
Understanding how each of these taxes is calculated and which taxes apply, will enable you to approach the Sale and Purchase process in a more confident manner, and avoid unexpected expenses on the signature date.
In total there are 4 different tax types that are applied when Selling or Buying Real Estate. For clarity we will explain each of them along with a practical example. Let's imagine that you want to purchase a property for 6,000,000 THB, that the appraised value for this property by the Land Department is 4,000,000 THB and that the seller has owned the property for 4 years through a Company Freehold.
1. Income Witholding Tax
This tax is in fact part of the income tax of the seller, that is paid directly on property sale registration instead of the normal income tax filing (hence the word "withholding"). For individuals, it is calculated on a progressive rate basis, varying from 0 to 37% of the sale price, whereas for juristic persons it is fixed at 1% of the sale price.
In our case, since the seller has owned the property through a Company Freehold (which is a juristic person), the Income Witholding Tax would be 1% of 6,000,000 THB = 60,000 THB
2. Transfer Fee
The Transfer Fee is a flat rate tax of 2% of the government appraised value of the property. In our example case it would then be 2% of 4,000,000 THB = 80,000 THB.
3. Specific Business Tax
The Specific Business Tax is a flat rate tax of 3.3% of the sale price or the appraised value of the property, whichever is higher. If the owner is a natural person, it is only applied when the seller has owned the property for less than 5 years. When the owner is a juristic person, it is applied in all cases. This tax is applied in place of Value Added Tax for businesses whose value added is too difficult to estimate, such as real estate businesses, but also banking, finance, life insurance, among others. It also serves to limit the risks of property bubbles, since it discourages quick resale of real estate assets.
In our example case this tax does apply, since the seller has owned the property through a Company Freehold, and it amounts to 3.3% of 6,000,000 THB = 198,000 THB
4. Stamp Duty
The Stamp Duty is a flat rate tax of 0.5% on the sale price or the appraised value of the property, whichever is higher. It is only applied when the Specific Business Tax doesn't apply, which means the seller has owned the property for more than 5 years or if the seller is a Juristic Person.
In our example case, since the seller has owned the property through a Company Freehold, this tax doesn't apply.
The total amount to be paid is then simply the sum of the above taxes. In our example it would be 60,000 + 80,000 + 198,000 = 338,000 THB. How the taxes are divided between the Seller and the Buyer should defined on the Sale and Purchase Agreement.