When you transfer property, are there taxes to pay? You bet. Some of these are called land office fees, but whatever they are called, they are taxes.
Typically, with the land office fees, which we'll discuss below, the parties agree to split them. But this isn't required by law. So you should get the best deal you can from the other party. If he or she will agree to pay all the land office fees, great _ get this in the contract.
Likewise, if the fees are to be split, you should get this in writing.
But what happens if the parties just show up at the land office without having previously agreed about the land office fees, and there's nothing in the contracts? In this case, there's nothing in the law that says who has to pay. But as a matter of practice the land officer will turn to the buyer or the tenant.
So what happens if you're the buyer or tenant and the parties turn to you for payment, and nobody has said anything about land office fees or anything similar? In the absence of some contract to the contrary, you can, of course, walk away from the deal. And nobody can force you to pay these fees, because, as mentioned above, there's nothing in law about who must pay them.
But if you refuse to pay, the interest you are buying, such as title or long lease won't be registered, and you won't have any legal claim to it. Also, you can just walk away from the deal, but then you'll lose your deposit _ at a minimum.
So, if it has not been mentioned and you're the buyer or tenant, and you and the seller or landlord show up at the land office, you'll probably end up being stuck paying the land office fees. The moral of the story? Have this covered in the contracts beforehand.
Splitting the land office fees is customary, but the owner or landlord may pay more if you drive a hard bargain when the overall price is being negotiated.
As to the actual fees and taxes the land office will charge and withhold before registering property interests, let's start by looking at long leases.
The land office fee on a lease is 1% of the amount declared in the lease, plus a stamp fee of .001% of the same amount. So the total amount payable on a lease is 1.001%.
Let's see how this works in an example. Let's say you have signed a lease for 30 years. Though the assessed price of the land is very low, the lease says you're paying 5,000 baht a month for the land covered by the lease. Remember, it is possible for a foreigner to own a house on leased land, so the house may be the subject to a different contract, for which you'll have to pay extra, but this will be the subject of a later column. Both the house and land may also be leased, and if they are, the land office fees would be the same _ 1.001% of the contract price.
But let's say you're just leasing the land, and it's 5,000 baht a month in the contract.
To determine the land office fees, we first have to calculate the lease price for the entire 30 years. For one year, obviously the price will be 5,000 (the monthly rent) times 12 (the number of months in a year), or 60,000 baht. Now multiply 60,000 by the number of years in the lease, 30. It comes out to 1,800,000 baht.
Now we take 1.001% of this amount (1,800,000 x .01001) and the result is 18,018 baht.
So, 18,018 baht is the land office fee you would pay on the lease in this example.
What if you have additional leases beyond 30 years that you plan to register when the present lease expires and in those leases it says that you don't have to pay any further rent beyond that in the original lease? It is likely that the land office will require you to pay some rent in the later leases, regardless of what they say, because the government has some expectation of getting revenue when it files a lease.
James Finch of Chavalit Finch and Partners (finch@chavalitfinchlaw.com)
and Nilobon Tangprasit of Siam City Law Offices Ltd (nilobon@siamcitylaw.com).
Researchers: Arnon Rungthanakarn and Sitra Horsinchai.
For more information visit www.chavalitfinchlaw.com.
Questions? Contact us at the email addresses above.