If you are an individual and are selling a real estate property in Thailand you will be liable to pay personal income tax on the gain you will realized on the transaction at the time of the transfer at the Land Department. Now how does the Land Department Officer actually calculate the withholding tax payable by individual Sellers?
The calculation of the withholding tax payable by an individual seller at the time of the closing of a condominium sale at the Land Department is a bit complicated, because individuals are allowed to make deductions in the form of a lump sum deduction, wherein rates depend upon the years of ownership.
The calculation of the withholding tax due by individuals sellers at the Land Department is a three-step exercise.
First Sept: Determining the Seller Yearly Assessable Income Resulting from the Sale
Firstly, the Land Department will calculate the Net Yearly Assessable Income based upon the following formula:
Net Assessable Income per year = Assessed Value – Lamp Sum Expenses per year of ownership: Years of Ownership
A mitigation factor consisting of a Lump Sum Expenses deduction will be applied to the Assessed Value of the sold property. The Lump Sum Expenses deduction is between 92% and 50% and depends of the number of years of ownership as follows:
- 92% for up to one year of ownership,
- 84% for more than two years of ownership,
- 77% for more than three years of ownership,
- 71% for more than four years of ownership,
- 65% for more than five years of ownership,
- 60% for more than six years of ownership,
- 55% for more than seven years of ownership and
- 50% for more than eight years of ownership.
In the example shown in Table 1B published in yesterday post, the Assessed Value of the condominium unit was THB 9,000,000 and the duration of ownership was 3 years; therefore, the mitigation factor was 77% of 9,000,000 THB that is to day 6,930,000 THB.
The Net Yearly Assessable Income is therefore = 9,000,000 – 6,930,000 (9,000,000 x 77%) = 2,070,000: 3 (years of Ownership) = THB 690,000 per year
Second Step: Determining the Yearly Personal Income Tax due by the Seller as a result of the Sale
Once the Yearly Net Assessable Income has been determined, the second step is to calculate the Yearly Personal Income Tax Liability of the seller. This is done based on Land Department Progressive Tax Rates table which is as follows:
- From 0 to THB 100,000 = 5%;
- From THB 101,000 up to THB 500,000 = 10%;
- From THB 500,001 up to THB 1,000,000 = 20%;
- From THB 1,000,001 up to THB 4,000,000 = 30%;
- From THB 4,000,001 and up = 37%.
Note that the Land Department does not use the Revenue Department’s income tax table that provides for an income tax exemption of 0 to THB 150,000. According to the explanation provided by the Land Department officer, this is because the Revenue Department already grants buyers a lump sum deduction.
In our example, Yearly Personal Income Tax liability will be as follows:
Net Assessable Yearly Income is THB 690,000:
- Tax due on the first THB 100,000 of yearly income = 100,000 THB x 5% = 5,000 THB
- Tax due on the next 400,000 THB of yearly income = 400,000 THB x 10% = 40,000 THB
- Tax due on the next 190,000 THB of yearly income = 190,000 THB x 20% = 38,000 THB
The Net Yearly Personal Income Tax due by the seller is therefore equal to: 5,000 + 40,000 + 38,000 = 83,000 THB per year.
Third Step: Calculating the Personal Income Tax due by the Seller on the period of ownership
Then it suffices to multiply the Net Yearly Personal Income Tax by the number of year of ownership to obtain the total amount of personal income tax to be paid by the seller at the Land Department.
In our example the Net Yearly Personal Income Tax due by the seller was THB 83,000. The seller owned the property for 3 years THB 83,000 x 3 = THB 249,000, which was the total withholding tax to be paid at the Land Department.
Note: Once the transaction has been completed an individual seller will have the choice either to consider the withholding tax he/she has paid at the land department as his/her final tax payment on the condominium sale or to integrate the income resulting from the sale in its personal income tax and apply the withholding tax credit against its tax. Your accountant may help you to determine which option is better.
About the Author:
The author Rene-Philippe DUBOUT is a lawyer since 1990 when he was admitted to Geneva bar (Switzerland). He practiced as a litigator there for 10 years until he moved to Thailand in 1999. In 2002 he founded with a group of Thai lawyers Rene Philippe & Partners Ltd a local law firm that specialized in Cross Borders Investments and Real Estate. He has been lecturing in several Thai Universities and a speaker to numerous conferences and seminars. He is the author of a must read book:”How to Purchase Real Estate Offshore Safely: The Case of Thailand”.
© Copyrights 2009 – Rene Philippe Dubout – This article may be reprinted if information about the author, the websites, and the URLs remain intact
Originally posted 2009-12-09 09:26:58.