Real Estate Closing Costs in Thailand
There are costs related to selling real estate in Thailand. By understanding those costs real estate owners can set an appropriate price for their asset to adequately cover all the transaction costs and not be surprised by unexpected payments that leave the seller with less than they anticipated.
The fees for selling the real estate are as follows:
- Transfer Fee, 2% of the government price of the property.
- Specific Business Tax, 3.3% of the selling price or government price whichever is higher.
- Stamp Duty, 0.5% of the selling price or government price whichever is higher.
- Withholding tax
- If the seller is a company, withholding tax is fixed at 1% of the selling price or government price whichever is higher.
- If the seller is an individual, withholding tax is calculated at a progressive rate based on the government price of the property.
Stamp Duty and Specific Business Tax (SBT) in Thailand Real Estate
- Stamp Duty is exempt if Specific Business Tax is charged.
- Specific Business Tax consists of 3% of business tax and a municipal tax of 10% of the amount of Specific Business Tax. So, total tax is 3.3%.
- If the seller is a company, Specific Business Tax will be charged no matter what. Then, Stamp Duty will not be applied.
- If the seller is a private person, Specific Business Tax does not have to be paid if:
- The seller has possessed the property more than five years before the transfer without the seller’s name appearing on the house register.
- Or the seller’s name appears on the house register for not less than one year.
- The seller transfers the real property to the legal heir or an heir by a will.
- The seller transfers the real property to a legitimate child, but not including an adopted child.
- The seller transfers the real property without consideration to government agencies.
- The seller transfers the real property without consideration to temples, churches or mosques.
The Treasury Department is the body who sets the government price. Usually, the government price will adjust every 4 years, for example, in 2016-2019. The land office will collect the transfer fees and taxes accordingly.
Withholding Tax for the Individual
The withholding tax for the individual is calculated at a progressive rate based on the government price of the property.
Calculating the tax will also take into consideration how long the property has been held. Then, the owner can cut the expense accordingly resulting in lower tax. The number of years the property has been held will count as a year basis e.g., if the tenure is between January 1, 2018 to February 1,2019, this will count as two years.
|Number of Holding Years||Assessable Income Ratio (%)||Expense Ratio (%)|
|More than 8||50||50|
For example, selling the condominium at THB 5.0 million, the owner holds the property for 6 years;
Assessable Income = 5,000,000 x 40%
Assessable Income = 2,000,000
Assessable Income per year = 2,000,000 / 6
Assessable Income per year = 333,333
Then, the amount of 333,333 will be applied to individual progressive income tax.
Which Party Usually Pays for the Fees and Taxes
There is no standard rule for who will pay which part of the transfer fees and taxes at the land office. It is part of the overall price negotiation to come up with the appropriate cost sharing. It can be all costs for the sellers or all costs for buyers. It is very important that the Sale and Purchase Agreement clearly identify who will be responsible for transfer fees and taxes to avoid any problems at the land office when the real property is transferred.
In general, the transfer fees and taxes are recommended to pay as follows:
- Specific Business Tax : the seller’s duty.
- Stamp Duty : the seller’s duty.
- Transfer Fees : the buyer’s duty or shared.
- Withholding Tax : always the seller’s duty.
After understanding the related cost of selling real estate, next time, you have the transaction, you can have a good plan and do not pay more transfer fees and taxes than necessary.