We only have one more official fee to discuss in connection with a property deal _ the stamp duty, which is in addition to the fees mentioned last week. This is 0.005% of the appraised price of the property or the purchase price, whichever is higher.
There is one break from the government in connection with stamp duty. If specific business tax is paid on the deal, no stamp duty need be paid. You'll recall that there is a specific business tax of 3.3% of the purchase price or the assessed price, whichever is higher. The sale is exempt from specific business tax if the owner has held it for more than five years or if the owner's name has been in the blue book for more than one year.
There are other reasons a property transaction can be exempted from specific business tax. For example, transfers from a son or daughter or a statutory heir may also be exempt from specific business tax. Another example is if the property being sold was previously expropriated.
This means that stamp duty is only paid on deals in which the owner has held the property for more than five years, if the owner's name has been in the blue book for more than one year or if another exemption from specific business tax applies.
Earlier we explained that the appraised price is an artificial one used by land officials to calculate certain taxes, and in Thailand is usually lower than the market value of the property.
Let's look two examples. One is a deal in which stamp duty is paid, the other where specific business tax is paid.
With stamp duty and specific business tax you pay one or the other.
In our examples we'll only calculate the stamp duty or specific business tax, to show the difference. Next week, we'll do an example that includes all of the fees and taxes on property sales mentioned in previous weeks.
Example one: You are buying a condominium for 12 million baht. The assessed value of the condo is eight million baht. The seller has owned it for six years.
As we mentioned above, because the seller has held the property for more than five years, it is exempt from the 3.3% specific business tax.
Instead the owner must pay stamp duty _ 0.5% of the assessed price or the actual purchase price, whichever is higher. In this case, it's 0.5% of the purchase price, because it's higher than the assessed price.
So the stamp duty on the deal would be 0.005% times the purchase price of 12 million baht (.005x12,000,000=60,000), or 60,000 baht.
Example two is the same deal, but here the specific business tax is payable instead of the stamp duty. This means, of course, that the person from whom you're buying the condo has held it for five years or less and hasn't had his or her name in the blue book for one year or more. It also means that another exemption from specific business tax, such as being a child of the seller, is not applicable.
We'll say that the purchase price and assessed value of the condominium are the same as in example one _ 12 million and eight million baht respectively.
Now let's calculate the specific business tax on the property. It would be 3.3% of 12 million, for the same reasons mentioned above. This is .033x12,000,000=396,000 baht.
What conclusion do we draw from a comparison of these two examples?
If you're shopping for property, you should prefer one for which the owner has had his or her name in the blue book for one year or more, or that the owner has owned for more than five years, because the taxes will be less.
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.