Value Added Tax on Thai Properties

The Thailand Revenue Code (Tax Law) spells out the terms of taxation imposed to businesses, individuals and properties in accordance with the provisions of Thailand Laws. Chapter 4 of said Revenue Code or Tax Law specifies the stipulations on Value Added Tax.

Value Added Tax or VAT is an assessment tax which applies to all wholesalers, manufacturers, producers, importers, retailers and other entities providing direct services unless exempted under the Revenue Code. All firms not covered by the Revenue Code exemption must register and adopt the VAT system.

The following are specified as exempted from VAT.

  • Firms with turnover not in excess of 1.8 million Baht per year
  • Businesses engaged in:
    • the sale and import of raw agricultural products and related goods
    • the sale and import of newspapers, magazines and textbooks
    • health and educational services, domestic transport
    • leasing of immovable property
  • Goods exempt from import duty and destined for export-processing zones are included in this category, along with research and technical services, labor contracts, auditing and legal services.

VAT Standard Rate and Payment Schedule

The standard and current VAT rate is 7%. VAT is payable on the 15th of the month following the month in which VAT is collected. VAT becomes payable on the 7th of the month following the month of the payment if self-assessment of VAT output is required on the payment of certain income to non-residents.

Companies that qualify for VAT exemptions must still pay VAT on services and products it purchases but is not entitled to a VAT refund. Such companies are not required to collect VAT on its sales or file monthly VAT forms. If the exempt company opts to do so voluntarily, it will be entitled to a VAT refund if registered for VAT purposes.

Real Estate Taxes

Aside from VAT, house and land tax and local development tax are levied by the municipalities on Thai properties. It is imposed annually on the owners of a house, a building structure or land that is rented or used commercially. Real estate tax rate is 12.5% of the actual or assessed annual rental value of the property. The local development tax is also an annual tax paid by the owner of the land or the person in possession of the land. The local development tax rate will depend on the appraised value of the property according to the assessment of local authorities. The rate ranges from 0.25% to 0.95%.

Taxes Imposed on Thai Property

The following tax requirements should be considered when buying property in Thailand:

  • VAT of 7 percent  paid every month
  • Land and House Tax of 12.5% of the rental value of the property to be paid every year
  • Withholding Tax of 15% applicable to rents paid to nonresident individuals and foreign companies without active business operations in Thailand

The Need for Tax Planning

The advantage of tax planning is that everyone gets to arrange their financial affairs so they are aware of exactly how much they should pay in taxes for properties they acquire, according to the provisions of the law.

A foreign investor who is planning to buy a villa in a completed development held in a Thai company should carefully consider the tax consequences or tax exposures of the purchase. The same applies to property deals that require the owner to take a shareholding in a company

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