Taxes, particularly corporate tax, progressive income tax, and value-added tax (VAT), are comparatively low in Thailand, making the country attractive to foreign investors. These taxes also apply to other major sectors of the economy, but the most significant are corporate tax (20%), progressive income tax (0–35%), and VAT (7%). They are collected by the Thai tax authorities.

Special corporate taxes

Some businesses are exempt from value-added tax (VAT) but must instead pay Special Business Tax (SBT). These include, for example, real estate companies and related sectors dealing in immovable property. They pay between 0.1% and 3% SBT plus a 10% municipal tax. SBT is levied on gross turnover at fixed rates. Registration is mandatory for individuals or groups of individuals, legal entities, government bodies, and other legal entities. Businesses that must pay SBT also include those involved in the sale of immovable property and real estate (3% SBT). An additional 10% municipal tax is also levied. Monthly tax returns must be submitted by the 15th of the following month. Penalties are imposed for failure to register for SBT, failure to submit monthly SBT returns (also 200% of the tax due), or incorrect or incomplete payment of the tax in the monthly tax return (100% of the underpaid or incorrectly paid tax). and additionally a monthly surcharge of 1.5% in case of underpayment or incorrect payment, which corresponds to a maximum of the amount of tax due.

Fee for registering the lease agreement

According to Section 538 of the Thai Civil and Commercial Code, leases for land with a fixed term exceeding three years must be in writing and registered in the Land Registry. This document must be kept at the relevant provincial or municipal land registry office. Without registration, the lease is only enforceable for three years in the event of a lawsuit. Section 540 allows a maximum registered lease term of 30 years. While leases with a term of less than three years do not need to be registered, they must be in writing to allow for potential legal action.

Lease agreements in Thai land registries are written in Thai script. Even the name of a foreign party involved is written in Thai script. However, the script can be translated into a language readable by the non-Thai contracting parties.

This fee is payable to the relevant provincial or municipal office and amounts to 1% of the total rent for the entire duration of the lease. The rent comprises the agreed-upon rent, construction costs, a security deposit (key money), the land surveying costs, the construction contribution, and any other amounts paid by the tenant to the landlord under the lease. Stamp duty of 0.1% of the rent is payable upon registration of the lease and throughout the entire agreed-upon lease term.

Which party usually pays the fees and taxes?

The property owner is required to inform the local authority and pay the exact building and land tax by the end of February each year. An owner's first property is exempt from building and land tax. However, all subsequent properties are subject to these taxes, even if a foreigner acquired them through a Thai legal entity or company and only occupies them occasionally. This legal entity or company must pay the taxes even if it generates income from the property. The owner cannot evade this legal obligation, as local authorities conduct unannounced inspections, and violations result in higher fees and fines.

Some unscrupulous property owners attempt to circumvent the law by including a clause in the lease agreement obligating the tenant to pay these fees and taxes. The owner or landlord typically wants to avoid losing 12.5% ​​of their income as a result. The Thai government plans to replace existing land and building taxes with a new one that will require every owner of land or buildings on land to pay a property tax. Under this new law, first-time buyers will no longer be exempt from the tax. Three maximum tax rates will be established, based on the use and market value of the property. These rates will be up to 0.5% for commercially used land and buildings, up to 0.1% for privately used or rented residential properties, and up to 0.05% for agricultural use.

Fees when buying new condominiums

A buyer of a condominium in Thailand has three options. First, they can purchase a newly built condominium through a developer project that is already registered and licensed under the Thai Condominium Ownership Act. Second, they can buy a previously owned condominium directly from the seller. Third, they can purchase the condominium from a legal entity. When buying a newly built condominium from a developer, the developer covers the transfer fees and taxes. However, the developer can only charge the buyer a maximum of 2% of the transfer fee. All other government transfer fees are borne by the developer.

Other fees

Stamp duty is levied on 28 documents listed in the Thai Tax Code. Contracts or agreements for the lease of land or buildings are the primary examples. The duty ranges from 1 to 1,000 baht. The recipient of the document must pay the stamp duty and stamp the document. Failure to do so will result in a surcharge of 200% to 600% of the duty due. In addition, a local development tax is levied, based on the land value assessed by the local authority (excluding existing buildings). The annual tax ranges from 0.25% to 0.95%. Land is subject to this tax unless it is used by the owner for personal or public purposes. The tax is due in the first month of the tax year. Failure to pay will result in an annual surcharge of 24% of the tax due.

References:

ASEAN UP (2019). Taxes in Thailand. Guide to taxes in Thailand. Retrieved from https://aseanup.com/guide-taxes-thailand/

Weerawutiwong, S. (2015). Thai Tax 2015. Price Waterhouse Coopers. Retrieved from https://www.pwc.com/th/en/publications/assets/thai-tax-2015-booklet-en.pdf