Last week we talked about the income tax to the seller in a property deal and how it's withheld and paid to the government. But what about the other fees and taxes paid at the time the sale, and at the time the property is transferred at the land office? We're going to explain what these are and how they are calculated this time.
Let's put these in perspective, as we did last time. Who cares what these fees are, anyway. Somebody calculates them and will tell you how much they are, right?
Right, but at a bare minimum you have to figure what they are so you'll know whether you can afford the property. Also, lots of mistakes are made in calculating these fees.
For example, the seller may miscalculate them and ask you to pay them before going to the land office. It may turn out that you owe less fees and that if you don't stand up for yourself, some of the fees you thought you paid to the government will end up in the other party's pocket.
So let's look at them. The first one is the fee that is generally called the land office fee. It's a flat 2% of the appraised price of the property. Let's say, for example, your wife, who is Thai, is buying a piece of land for 15 million baht. The assessed price of the land is 10 million baht. At the time the title is registered at the land office, the land officer will collect 2% of 10 million baht as the land office fee.
You should note that we are talking about two prices here _ the real purchase price and the appraised price. The purchase price is the actual price paid between the parties. The appraised price is an artificial price, usually lower than the market value of the property, used by land officials to calculate taxes. It is determined by land officials and based on average values of similar property trading in the market. In this case, for calculating the land office fee, they use the appraised price.
But that's not the end of it. There may be an additional tax due. It's called the specific business tax. It's 3.3% of the appraised price or the purchase price, whichever is higher. In the above example, where purchase price is 15 million baht and the appraised price is ten million baht, the specific business tax is 3.3% of 15 million, because this is the higher of the two.
Sometimes the property is exempt from specific business tax. It's exempt when:
- The seller has held the property for more than five years.
- The seller's name has been registered in the blue book (the official document showing a registered address in Thailand) for at least a year.
Assuming the property in our example is not exempt from specific business tax, the land office fees would be 2% of 10 million baht, the appraised price, or 200,000baht (10,000,000 x .02 = 200,000). The specific business tax would be 3.3% of the actual purchase price, or 495,000 baht (15,000,000 x .033= 495,000). The total payable to the land office for these would be 695,000 baht (200,000 + 495,000). These are, of course, in addition to the amounts withheld for the seller's income tax mentioned in an earlier column.
There's an additional fee, for stamp duty, which will be discussed next week.
James Finch of Chavalit Finch and Partners (email@example.com)
and Nilobon Tangprasit of Siam City Law Offices Ltd (firstname.lastname@example.org).
Researchers: Arnon Rungthanakarn and Sitra Horsinchai.
For more information visit www.chavalitfinchlaw.com.
Questions? Contact us at the email addresses above.
About the author
Writer: James Finch & Nilobon Tangprasit