Over the past several weeks, we've discussed the various taxes applicable in a property deal in Thailand. This week we'll look at an example that covers all of them.
Let's say you are a foreigner who wants to buy a house at a development in Thailand, with all funds coming from your personal savings. Because foreigners generally can't own land in Thailand, your employer, whom you've known for a long time and who is Thai, will hold title to the land and lease it to you for a period of 30 years.
As discussed earlier, foreigners can own houses, so you will buy the house. There is a trend at some land offices, not to recognise house ownership by foreigners. Therefore, before you plan to take title to a house, you should check to make sure your local land office allows this.
The cost of the land is two million baht and your lawyer has prepared a contract of sale from the developer to your employer and a 30-year lease from your employer to you for 5,000 baht a month. Over a 30 year period, therefore, the total lease price is 1.8 million baht. The appraisal price of the land is one million baht.
The developer is a company that bought the land a couple of years ago. The house was built over the last few months and the developer, a company, has just received a certificate of completion for it from the local authorities. No blue book has yet been issued on the property. The lawyer has also prepared a contract for the sale of the house from the developer to you for 10 million baht. The house's appraised price is six million baht.
What are the taxes and fees on this deal that have to be paid at the land office when the documents are registered?
Remember, as discussed earlier, not all of these taxes and fees will be payable on the same day because to get title to the house you have to give notice 30 days in advance before you get the title. Also, the land office may not allow the transfer of the land from the developer to your employer and then the lease from your employer to you to take place in one day. The following are the taxes that will be payable at the land office on this transaction over the course of a few weeks.
To calculate the taxes we'll first break them down by transaction, because in the deal described above there are three transactions:
The above example shows that taxes form a major part of a property deal and as such care should be taken to ensure they are correctly calculated, and to arrange for another party to absorb as much of these taxes as possible.
Remember, if there's nothing in the contract about who is supposed to pay the taxes, the tradition, though not the law, is that the buyer will pay all of them. If you're the buyer, therefore, you should at least try to have the contract provide that the taxes will be paid equally by the buyer and seller.
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.
