Property Conveyance in Thailand
OK, you have found your ideal property in the price range that suits your wallet, then suddenly you realise there are additional costs that you haven’t budgeted for.
Usually the property is being sold through a real estate agency, and therefore the sales costs such as commission is paid by the seller, not you. However, it is standard practice in Thailand for the seller to ask the buyer to share the cost of the taxes and fees imposed, and in some cases this can be a fairly large sum, depending on how long the seller has owned the property, and if they have actually lived in it.
Standard tax rates
Taxes and fees imposed and collected by the Land Department's local or provincial branch office upon transfer of ownership of realty property (condominium, apartment, land, house, land and house):
Transfer fee 2% over the appraised value of the property
Business Tax * 3.3% registered (sale) value or appraised value (whichever is higher)
Stamp Duty 0.5% over the registered value
Withholding Tax for companies is fixed at 1% over the registered sale value or appraised value (whichever is higher)
Withholding Tax for private persons is charged at a progressive rate (exemptions are applied in certain situations)
Sharing the real estate transfer costs
In a normal transfer of ownership of a real estate property in Thailand there is no fixed rule who pays the transfer fee, stamp duty, specific business tax or even personal withholding income tax. This is negotiated at the same time that you finalise your offer to buy and have agreed on the purchase price. As a standard rule the following general formula for sharing these costs is advised in a private sale and purchase of real estate, although recently many sellers, especially in Pattaya, have been trying to get buyers to pay 50/50 on all transfer costs.
Transfer fees: the seller's or the buyer's duty or shared
Specific business tax: the seller's duty
Stamp duty: the seller's duty
Withholding tax: always the seller's duty
The above fees and taxes are paid in the land office at the time of transfer of the property. The sale and purchase agreement should clearly specify who will be responsible for the above taxes and fees. Only in a government licensed housing or condominium development the law specifies that only up to half of the 2% transfer fees may be transferred to the buyer by the developer. All other transfer costs are by law the responsibility of the developer, even though it is common that developers try to charge a higher percentage in the sale and purchase agreement.
A real estate property appraised or assessed value is an actual evaluation price of the property by the government and is used by the land office to determine the amount of tax that must be paid. The appraised value of a house (separate from the land) depends for example on criteria like floor area of the house, number of floors, materials used (e.g. wood or concrete) and location.
Registered value is the actual registered sale price between the parties. The appraised value used by land office value is often pretty much lower than the actual sale price, and in practice the Thai seller tends to insist on declaring and registering a sale price close to the appraised value as this decreases his taxes. This is a known practice but not so common practice. The parties are required by law to state the correct true sale price at the Land Department.
Specific Business Tax
SBT is charged at a rate of 3%, plus a municipal tax of 10% on the amount of the specific business tax, bringing the total tax to 3.3%. This is charged if the seller is a company (specific exemptions applied), or if the seller is an individual and sells the property within five years of the purchase registration date. The transfer is not subject to business tax if the seller is an individual and has possessed the property for more than 5 years before the transfer. Other exemptions are for example if the seller transfers the real property to a legal heir or heir by a will or the seller transfers the real property to a legitimate child (there are other specific exemptions). Companies transferring property are subject to Specific Business Tax, irrespective the period of ownership but there are exemptions depending on the business objectives of the company.
Stamp Duty depends if the seller is subject to any Specific Business tax. In case Specific Business Tax is paid the seller is exempt from the payment of the Stamp Duty. However, if the stamp duty has been paid to the Land Department, the seller shall have the right to claim for the refund in full within 6 months after the payment. Specific Business Tax 3 % + local maintenance tax at the rate of 10% charged over the business tax, calculated over the registered value or actual sale price (whichever is higher).
For individuals withholding tax depends if the immovable property is acquired by inheritance or gift or if the sale and purchase of the property has a trade or profit seeking purpose or not, usually the final Withholding Personal Income Tax income shall be calculated at progressive rate based on the government assessed value with a deduction depending on the number of years of possession.
If the seller is a company, then withholding tax is fixed at 1 % over the registered or sale price or government assessed value of the property, whichever is higher.