With very attractive prices, an incredible quality-price ratio, a vast offer to meet all needs, very low maintenance costs or even high rental demand, Thailand is an ideal place to make a real estate investment. In addition to these numerous advantages, the country has an additional advantage when it comes to investing in real estate: its (very) attractive property tax system. Right more below!
When buying a property in Thailand, going to the Land Office is an inevitable step to complete the sale. Indeed, this is when the sale will be formalized, completed, and the property will be registered in the name of the new buyer. This is called the transfer of ownership, and on this occasion, you have to pay a few fees and taxes:
* The Specific Business Tax is only payable when the apartment is sold less than 5 years after having acquired it. It is not payable in the case of an inheritance, even if it occurs less than 5 years after the acquisition.
** The Stamp Duty is not payable if you have to pay the Specific Business Tax.
How are these fees and taxes shared?
When buying a new property, the sharing of these various fees and taxes is regulated and you will only be asked to pay half of the transfer fees or 1% of the value of the property. The rest of the costs will be borne by the developer who sells the property. On the other hand, if you purchase a second-hand property, there are no predefined rules and the sharing of fees and taxes can be subject to negotiation. Generally, the transfer and registration fees on a resale are generally shared equally between the seller and the buyer. In any event, the sharing of these costs should be clearly stated in the sale and purchase contract.
To sum up, the property tax system when buying a property in Thailand is relatively simple and inexpensive. The various taxes and fees amount to 1% (for the buyer) for a purchase in the new and generally between 5% and 7% (shared between the buyer and the seller) for a second-hand property.
Since the 1st of January 2020, Thailand has implemented a new property tax. The amount varies depending on the nature of the property and its use (residential, rental, vacant land, agricultural land, etc.). However, this tax on owning properties remains very low. Indeed, here is what it corresponds to for residential properties:
It is also important to keep in mind that properties valued at less than 10 million baht and registered as main residences (owner’s name written on the household registration – also called Ta Bien Baan in Thai) are not concerned by this tax. For properties valued at over 10 million baht, a 10 million baht allowance will be applied for the tax calculation. For example, for a property worth 12 million baht, only the part exceeding 10 million will be taken into account, that is to say, 2 million baht, with a rate of 0.02%, hence only 400 baht.
To sum up, although the government has introduced this new tax on owning properties, it is minimal and therefore in no way hinders a property purchase in Thailand.
Regarding the taxation of rental income, Thailand is once again relatively soft. In order to determine the taxation that will be applied to your case and therefore the amount of taxes and duties that you will have to pay, you must first distinguish between two situations: are you a tax resident in Thailand or not?
In this case, the rental income generated by your various real estate investments will be taxed according to the progressive scale regarding your total income, namely between 5% and 35%. If your property is managed by a company registered in Thailand, the company will withhold a 5% deposit (which will be deducted from the tax payable) – in order to make sure this has been done, you will be entitled to request proof from the property management company – if the management company has not taken a deposit, you will have to declare this income yourself. The good news is, several deductions can be taken into account in order to lower your total taxable income (dependent child, marriage, loans to repay, etc.). You can find more details regarding the Thai tax scale in the table below:
You are not:
In case you are not residing in Thailand, a flat rate of 15% of rental income is applied.
To sum up, the taxation applied to rental income generated in Thailand remains very low compared to what is done in most of western countries. It is also important to keep in mind that in most cases, the income generated in Thailand will not be retaxed in your home country. Indeed, Thailand signed a non-double taxation agreement with a lot of countries.
Thanks to the dynamism of its economy and its real estate market, resales with a capital gain are common in Thailand, but then, what is the tax applied on capital gain? Well, again it’s very sweet since it just isn’t taxed as capital gains. Indeed, a tax on the resale is applied but it depends on the amount of the sale and the length of ownership of the property, regardless of the realized capital gain. For more information about the taxation applied to a resale, go to the beginning of this article in the paragraph “property tax when buying in Thailand“.
To sum up, Thailand is once again doing well when it comes to property taxation. Indeed, while in some countries taxes can make any capital gain almost uninteresting, this is far from being the case in Thailand.
In Thailand, when it comes to inheritance, the taxation is once again much softer than in most of western countries. Indeed, when the total value of the properties concerned by the inheritance is less than 100 million baht (just over 3 million USD at the time of this writing), it is simply not subject to any tax. However, when inheriting one or more properties, you will have to pay fees related to the transfer of ownership. This represents 0.5% of the land office appraisal value of the property if the heir is a spouse or a descendant, and 2% if the heir is neither one nor the other.