GENERAL
It is the fewest people that consider taxation upon sale when investing in property in Thailand. However while Thailand doesn’t technically have a tax on “capital gains” it is taxed like any other form of income. Depending on the ownership structure capital gains are taxed through personal or corporate income taxes.
Therefore, as some ownership structures are more tax efficient than others upon sale you risk giving up a significant part of any capital gains in taxes. It is advisable to ensure professional advice already at the acquisition stage.
In the following is described the taxation upon sale which is based on the interplay between legal ownership (leasehold, freehold, condominium freehold) and the ownership structure (personal name, Thai company, foreign company).
TAXES UPON SALE OF LEASEHOLD PROPERTY
The transfer procedure and tax consequences upon sale are different for the three primary forms of leasehold ownership. Below is outlined the consequences upon sale for the ownership forms; personal name, Thai company and foreign company.
PERSONAL NAME
A lease is considered sold/transferred when the lease is registered in the name of the new owner. Upon transfer of ownership the land office will collect 1% in registration fee and 0.1% in stamp duty. The fees are calculated based on the appraised value and not the sale price. The appraised value is a government assessed value which is used to determine the tax amount that must be paid. The appraised value is often lower than the actual sale price.
Any capital gains based on the government assessed value is subject to personal income tax, which currently is taxed at a rate ranging from 0% – 37%. A standard deduction for expenses is allowed against the appraised value with a maximum of 50% for ownership of 8 years more.
THAI COMPANY
If a lease is hold through a Thai company the taxation depends on whether the lease is sold by selling the property out of the company or the shares in the company holding the lease is sold.
If the lease is sold by transferring the controlling shares to purchaser the transfer fees are limited to 0.1% stamp duty. However the seller of the shares is subject to personal income tax at a rate ranging from 0% – 37%.
If the lease is sold out of the company the transfer fees applicable to the lease will apply. This means 0.1% stamp duty and 1% registration fee has to be paid at the land office. Since the seller is the company any capital gains will be subject to corporate income tax, which is taxed at a rate ranging from 0% – 20%
FOREIGN COMPANY
If a lease is hold through a foreign company the taxation depends, as for a Thai company, on whether the lease is sold by selling the property out of the company or the shares in the company holding the lease is sold.
If the lease is sold by transferring the controlling shares to purchaser no taxable events has taken in place in Thailand.
If the lease is sold out of the foreign company a taxable event has taken place in Thailand which means 0.1% stamp duty and 1% registration fee has to be paid at the land office. Further the foreign company is subject to 15% withholding tax.
TAXATION UPON SALE OF CONDOMINIUM FREEHOLD
The transfer procedure and tax consequences upon sale are different for the three forms of ownership of “condominium freehold”. Below is outlined the consequences upon sale for the ownership forms; personal name, Thai company and foreign company.
PERSONAL NAME
When a condominium freehold title has been transferred to a new owner a 2% registration fee will be collected by the land office. Further either a Specific Business Tax of 3.3% or stamp duty of 0.5% is payable. The Specific Business Tax is payable if the “condominium freehold” has been transferred within the last 5 years and stamp duty is payable if it has not been transferred within the last 5 years and if the property has been used as the sellers residential home. Specific Business Tax is an assessment tax calculated over the registered sale value or the government appraised value of the property, whichever is higher.
In addition any capital gain based on the government assessed value is subject to personal income tax, which currently is taxed at a rate ranging from 0% – 37%. A standard deduction for expenses is allowed against the appraised value with a maximum of 50% for ownership of 8 years more.
THAI COMPANY
If a condominium freehold title is hold through a Thai company the taxation depends on whether it is sold by selling the property out of the company or the shares in the company holding the condominium freehold title is sold.
If the condominium freehold title is sold by transferring the controlling shares to purchaser the transfer fees are limited to 0.1% stamp duty. However the seller of the shares is subject to personal income tax at a rate ranging from 0% – 37%.
If the condominium freehold title is sold out of the company the transaction fees applicable to the condominium freehold will apply. This attracts a 2% transfer registration fee, 1% withholding tax (as the seller is a company) and 3.3% Specific Business Tax. In addition the Thai company will be subject to corporate income tax on capital gains, which is taxed at a rate ranging from 0% – 20%
FOREIGN COMPANY
If a condominium freehold title is hold through a foreign company the taxation depends, as for a Thai company, on whether the condominium freehold title is sold by selling the property out of the company or the shares in the company holding the condominium freehold title is sold.
If the condominium freehold title is sold by transferring the controlling shares to purchaser no taxable events has taken in place in Thailand.
If the condominium freehold title is sold out of the foreign company a taxable event has taken place in Thailand which attracts a 2% transfer registration fee, 1% withholding tax (as the seller is a company) and 3.3% Specific Business Tax. Further the foreign company is subject to 15% withholding tax.
TAXATION UPON SALE OF FREEHOLD PROPERTY
With regards to foreigners the most common forms of freehold relates to houses and land controlled through a Thai company. The transfer procedure and tax consequences upon sale of freehold property are different for the three forms of ownership of freehold property. Below is outlined the consequences upon sale for the ownership forms; personal name, Thai company and foreign company.
PERSONAL NAME
As Thai law contains no provisions for foreigners to own freehold land, the only freehold property, with the exception of “condominium freehold” that foreigners can poses is structures built on land which usually means houses.
When a freehold title has been transferred to a new owner a 2% registration fee will be collected by the land office. Further either a Specific Business Tax of 3.3% or stamp duty of 0.5% is payable. The Specific Business Tax is payable if the “condominium freehold” has been transferred within the last 5 years and stamp duty is payable if it has not been transferred within the last 5 years and if the property has been used as the sellers residential home. Specific Business Tax is an assessment tax calculated over the registered sale value or the government appraised value of the property, whichever is higher.
In addition any capital gain based on the government assessed value is subject to personal income tax, which currently is taxed at a rate ranging from 0% – 37%. A standard deduction for expenses is allowed against the appraised value with a maximum of 50% for ownership of 8 years more.
THAI COMPANY
If a freehold title is hold through a Thai company the taxation depends on whether the land and/or buildings is sold by selling the property out of the company or the shares in the company holding the freehold title is sold.
If the property is sold by transferring the controlling shares to purchaser the transfer fees are limited to 0.1% stamp duty. However the seller of the shares is subject to personal income tax at a rate ranging from 0% – 37%.
If the property is sold out of the company the transaction fees applicable of the freehold property will apply. This attracts a 2% transfer registration fee, 1% withholding tax (as the seller is a company) and 3.3% Specific Business Tax. In addition the Thai company will be subject to corporate income tax on capital gains, which is taxed at a rate ranging from 0% – 20%
FOREIGN COMPANY
As Thai law contains no provisions for foreign companies to own freehold land, the only freehold property, with the exception of “condominium freehold” that foreign companies can poses is structures built on land which usually means houses
If a freehold title is hold through a foreign company the taxation depends, as for a Thai company, on whether the freehold title is sold by selling the property out of the company or the shares in the company holding the freehold title is sold.
If the freehold title is sold by transferring the controlling shares to purchaser no taxable events has taken in place in Thailand.
If the freehold title is sold out of the foreign company a taxable event has taken place in Thailand which attracts a 2% transfer registration fee, 1% withholding tax (as the seller is a company) and 3.3% Specific Business Tax. Further the foreign company is subject to 15% withholding tax.
TAXES ON RENTAL INCOME
Rental income from property situated in Thailand is taxable income, but the level of taxes payable depends on the property ownership structures. Below is outlined the tax implications for the different ownership forms; personal name, Thai company, foreign company.
PERSONAL NAME
All rental income is taxable, regardless of nationality, residence status or whether rent is received within or outside of Thailand. The net rental income is subject to personal income tax at a rate ranging from 0% – 37%. Property owners are permitted a standard 30% deduction for expenses against rental income or claiming actual expenses incurred.
If a property is rented out to a company a 5% withholding tax shall be deducted from the rental receipts. There is no withholding tax if the property is rented to a person.
THAI COMPANY
All rental income is taxable and the rental income is subject to corporate income tax at a rate ranging from 0% – 20%.
If the property is rented out to another company a 5% withholding shall be deducted from the rental receipts. There is no withholding tax if the property is rented to a person.
FOREIGN COMPANY
Whether the rental income is taxable in Thailand depends on whether the company is carrying out business in Thailand. A foreign company is carrying out business in Thailand if the foreign company has an employee, a representative or go-between to manage the property in Thailand.
If a foreign company is not carrying out business in Thailand the tax payable is 15% of the gross income. If the company is carrying out business in Thailand the foreign company is subject to corporate income tax of a rate ranging from 0% – 20%.