Property law | land and housing tax in Thailand
For individual property owners; if they lease out their property (land and house, condominium) building and land tax shall be collected at the rate of 12.5% of the yearly rental according to the lease agreement or the annual assessed value, whichever is higher. The annual assessed value means the amount of money which the property may reasonably be gained from the lease out of a property for each year if the property is offered for lease. If anyone leases a property at a rent lower than a reasonable rent, the lessor could be taxed on what the rent should have been.
Owner-occupied residences are exempt from building and land tax (only for the first property, the second or more properties are not exempt). Not regarded as owner occupied is a situation where a foreigner owns a property through a separate juristic entity (Thai company) and uses the house as his holiday home or residence. If the land and buildings or any other improvements are owned by a company and used for residence by the foreign director the company is required to pay building and land tax, irrespective if the company receives any income out of it.
Foreigners owning land AND house through a limited company are often unaware of their responsibility for this tax and possible consequences of not paying. The relevant authorities do occasional checks which will lead to a higher tax assessment and fines
Who pays building and land tax
Building and Land tax is calculated at 12.5% of the yearly rental or yearly assessed rental value. It is the responsibility of the owner of the property to pay and to come forward and pay building and land tax.It is the owners responsibility to inform the local authorities (Or Bor Tor or Municipality) and pay building and land tax before the end of February each year.
Most property owners want the tenant (lessee) to pay these taxes as part of the lease agreement (as they don't want to lose 12.5% of their revenue). A common clause in a lease agreement in Thailand:
'The lessee agrees to pay to the Lessor any and all taxes, if any, beginning with taking possession of the property and during the term hereof which may be levied upon or assessed against the property and all interests therein and all improvements and other property thereon, whether belonging to Lessor or Lessee'
In any long term real estate lease structure it is recommended for the foreigner to have separate ownership over the structures (lease the land own the house). Not only will this improve the rights towards the land it reduces tax liabilities.
Local land tax
There is also a tax on non-rental property (local development tax) imposed upon the person who either owns or is in possession of the land without a building. The rate depends on location and land classification and assessed value, and varies from 0.25% to 0.95% a year.
A new building and land tax is approved
A new housing and land tax will replace the current housing tax and local land tax. Under the new in 2010 approved but not yet announced land and housing tax every owner of land and/ or any permanent structure built upon the land must pay building and land tax (owner-occupied residences are under the new tax law not exempt).
For every building tax must be paid at different rates depending on the appraised value and actual use of the property. Appraised value is set by the Treasury Department and adjusted every 4 years, with next valuation in 2011. Under the new building and land tax there will be 3 maximum rates:
- If the property is used for commercial purposes the tax rate shall not exceed 0,5 % of the appraised value of the land and building.
- If the property is used for a private residence by he owner the tax rate shall not exceed 0,1 % of the appraised value of the property.
- A tax of 0.05% of the appraised value shall be charged if the land is used for agricultural purposes.
The above rates are the maximum tax rates that can be charged by the local authorities, therefore, under the new tax law, building and land tax can vary per location.
Related: property transfer tax | lease agreement in Thailand | superficiies agreement in Thailand | transfer of a house |
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