Taxes in Thailand when buying, selling and owning property

As you know, there are two types of legal forms of real estate ownership in Thailand: freehold - the purchase of real estate in full ownership, leasehold-the purchase of real estate on lease for 30 years with the right to extend twice for 30 years, i.e. the total ownership will be 90 years. If the owner of the property acquired in leasehold wants to sell it or give it as an inheritance, then the new owner of the property will again have the right to 90 years of ownership of the property. Recently, for investment purposes, people are increasingly buying apartments in leasehold, since the final cost of the apartment turns out to be much more profitable, because for freehold you will have to pay an average of 200,000 ($6630) to 500,000 baht ($ 16,570) - depending on the conditions of the developer, but usually it is at least 6.3% of the value of the object and is divided in half between the developer and the buyer of the property.

Introduction of a real estate tax

Not only our compatriots, but also buyers from all over the world are attracted by the fact that there is no real estate tax in Thailand - the same fee that is paid annually by owners of real estate in almost any country. However, in 2020, the Thai authorities plan to introduce this tax, but it is difficult to say when exactly it will come into force and with what conditions. There is information that it will be paid by buyers of premium real estate worth over 50 million baht (approximately $ 1.6 million). It will amount to 0.3% of the purchase amount. The introduction of a tax on the possession of the second (third, fourth, etc.) real estate in the amount of 0.01% of the value of the object is also being discussed. However, so far there has been no official data on this in Thailand - everyone is expecting the onset of 2020.

Taxes on the purchase of real estate

The tax on the purchase of real estate in Thailand is paid only once when registering a transaction with the Land Department. The fee is 1.1% of the contract value of the apartment purchased in leasehold. The buyer divides it in half with the developer. Thus, in the end, you will need to pay only 0.55% of the tax.

At the moment, there are no annual taxes on housing in Thailand in Thailand, but in any case, you will have to pay a transfer fee (tax on the transfer of ownership), which is 2% of the estimated value of the apartment. Also, 10,000 baht ($ 330) will be spent on paying for the services of a lawyer for the preparation of a contract. This amount may vary depending on the developer and the selected object.

When buying a home, the ginking fund (capital repair fund) is also paid once when registering real estate as a property. It affects those objects that are under construction (therefore, the secondary market, as a rule, does not have this additional payment). Depending on the project, the cost of paying the tax is about 500-700 baht ($ 16-23) per sq.m. At the same time, there are investment projects, when investing in which this additional payment is not charged. Usually, about $ 400-500 is paid for a studio of 30 sq.m. once.

When buying a villa in a leasehold, a foreigner takes full ownership of the building and usually pays full or half of the transfer fee for the transfer of ownership of the building (transfer fee), which is 2% of the estimated value of the apartment. The land is issued for a long-term lease, and the buyer pays a tax on the registration of the lease agreement of 1.1% of the contract value. 

Regular expenses

The only annual additional payment in Thailand is the maintenance fee (maintenance fee), a monthly fee that is paid one year in advance. Depending on the project, the costs for it are about 50-70 baht (1.6-2.3 dollars) per sq.m per month. This amount is multiplied by 12 months and the result is the full amount of the fee. There are also investment projects where this payment is not charged during the duration of the guaranteed return on investment program. If we are talking about a studio with a size of 30 sq.m, then for a year the total utility payment will be 720 dollars. At the same time, there are always options to save money: some developers cancel this payment for the first few years of ownership as a bonus for buyers.

When buying a home, the buyer is waiting for the costs of installing water and electricity meters, they are paid only once when registering the property and usually amount to about 20,000 baht ($663). The costs of utilities (water, electricity, Internet) are paid upon consumption at the time when the person himself lives in the apartment. The costs of paying for water consumption in Thailand are insignificant - the average bill per person is 60 baht ($2) per month. Electricity is paid at the state tariff of 4.5-5 baht per 1 kW. As a result, the average bill is 1000-1500 baht ($33-50) per month.The average cost of Internet access is 600 baht (20 euros) per month. Partially or all of these types of expenses may be absent when it comes to buying square meters in investment projects.

Taxes on the sale of real estate

The general rule for the sale of housing in Thailand is the payment of transfer fee, a tax on the purchase of real estate, which is divided equally between the seller and the buyer. However, if the owner decided to sell his Thai property before five years have passed after the purchase, then the transaction is considered commercial - this means that he will have to pay a special business tax (special business tax - SBT) 3.3% of the cost of the apartment. However, the vast majority of freehold buyers usually do not part with their purchase for at least ten years, which means that the tax will no longer be relevant for the subsequent sale.

Withholding tax or withholding tax affects only the sale of housing in the freehold format; its amount is calculated based on the period of ownership and the value of the property. The rate ranges from 0 to 0.35%, and the stamp duty is 0.5%. If the property is sold in a leasehold, then the seller will need to pay only the stamp duty. Thus, the cost of selling an apartment worth 3 million Thai baht (about 100 000 dollars) under the form of freehold ownership , the following will be:

If the term of ownership is less than 5 years: a special business tax of 3.3% in the amount of 99,000 baht and withholding tax (0-0.35%), which will amount to 10,500 baht, as well as stamp duty of 0.5% 15,000 baht, is deducted from 3 million baht. As a result, the amount of taxes will amount to 124 500 baht (approximately $ 4150).

If the period of ownership is more than 5 years: from 3 000 000 deducted withholding tax (0-0.35%) 10 500 baht and stamp duty 0.5% in the amount of 15,000 baht. As a result, the amount of taxes will be 25,500 baht (approximately $ 850). With this calculation, the registration fee was imposed on the buyer, but who should pay this tax (seller or buyer) is not spelled out in the law. Therefore, its payment is usually distributed depending on the arrangements.

Inheritance and gift taxes

For heirs, the tax on entry into ownership will be 0.5% of the value of the object for relatives and 2% for heirs who do not have family ties with the owner. If we are talking about inheritance, donation or resale of real estate, then transfer fee - a tax on the purchase of real estate will be mandatory again. 

Taxes in Thailand related to real estate

Just like in any other country in the world. There is an income tax in Thailand. For example, if we are talking about real estate that is rented out with an income of 7% of the cost of the apartment per year, this percentage is considered profit, which is subject to income tax WHT (withholding tax), which ranges from 3% to 15% depending on the object. For comparison, in Spain, non-residents have to pay 24% of the annual rent. With an apartment cost of 3 million baht ($ 99,500), the owner receives 7% annually - 210,000 baht (6960 baht) per year. The minimum WHT amount of 3% is deducted from this amount and as a result, net income will amount to 203,700 baht ($6,750).

It is also necessary to take into account the option when the owner moves to a permanent place of residence in Thailand and receives the status of a tax resident. In this case, the tax is 5%. There is an agreement between Russia and Thailand on the elimination of double taxation. But if the owner of the property in freehold and uses it only for his own residence, then the tax is paid on preferential terms. Namely: 0% - forreal estate worth less than 10 million baht, 0.02% - for real estate worth more than 10 million baht. The tax is calculated exclusively for the part of the amount that goes beyond 10 million baht. That is, for an object worth 12 million baht, only 2 million baht is taxed - it will amount to 400 baht.

If the owner uses his property for investment purposes, then the entire value is taxed 0.3%. For example, for an apartment purchased for 3 million baht, the annual tax will be 9,000 baht or $ 300. The rules for paying property tax for leasehold buyers are still in development and two options are possible: the buyer pays the tax, or the seller.

Thank you for your help in preparing the material:

Svetlana Kasatkina, Managing Partner of the real estate agencyExotic Property

Nadezhda Kriulina, company specialist Phuket Buy House

Maria Khromova and Anatoly Shipulin, experts of the company LemanDom