5 Essential Tips on Property Fees and Taxes in Thailand

Purchasing property in Thailand is an exciting prospect, whether for investment or personal use. However, a crucial aspect that often causes confusion for foreign buyers is the system of fees and taxes.

A clear understanding of these costs, especially the Property Fees and Taxes in Thailand, is essential for accurate financial planning and to avoid unexpected expenses. This guide provides a detailed breakdown of the main fees and taxes you will encounter when buying property in Thailand, helping you navigate the process with confidence.

1. Property Transfer Fee

This is a fundamental cost associated with the transfer of ownership at the Land Department. It is a mandatory fee for all property transactions, whether for land, houses, or condominiums.

The Cost: The fee is 2% of the appraised value of the property. The appraised value is determined by the Land Department, and it can sometimes be lower than the actual sale price.
Who Pays: The transfer fee is typically split equally between the buyer and the seller, with each party paying 1%. However, this is not a legal requirement, and the distribution can be negotiated as part of the sales contract. It is crucial to have a clear agreement on this point before the transaction.
Example: For a property with an appraised value of THB 5,000,000, the total transfer fee would be THB 100,000. If split equally, the buyer and seller would each pay THB 50,000.

2. Specific Business Tax (SBT)

The Specific Business Tax is a key consideration, as it can significantly impact the total cost of a sale. It is a tax on the income from selling commercial property or property held for a short period.

When It Applies: The SBT is levied on sellers who have held the property for less than five years from the date of purchase.
The Cost: The tax rate is 3.3% of the appraised value or the actual sale price, whichever is higher. This tax is typically paid by the seller.
Exemptions:
- Over Five Years of Ownership: If the seller has owned the property for more than five years, they are exempt from paying SBT.
- Primary Residence: If the property being sold is the seller’s registered primary residence and they have held it for at least one year, they are also exempt from SBT, even if the ownership period is less than five years.

Understanding the SBT is vital for both buyers and sellers, as it can influence the negotiation of the final sale price.

3. Stamp Duty

Stamp Duty is a tax on legal documents, and it applies to the transfer of property. However, it’s not always paid, as it is often a secondary tax.

The Cost: The rate is 0.5% of the appraised value or the actual sale price, whichever is higher.
When It Applies: Stamp Duty is only payable if the seller is exempt from paying the Specific Business Tax (SBT). In most property sales, either SBT or Stamp Duty will be paid, but not both.
Who Pays: Like the transfer fee, this cost is generally paid by the seller, but this can also be negotiated.

4. Withholding Tax

Withholding Tax is a tax on income from the sale of a property and is handled differently for companies and individuals.

For Companies: If the seller is a company, the withholding tax is fixed at 1% of the sale price or the appraised value (whichever is higher). This is considered a final tax and is paid at the Land Department during the transfer.
For Individuals: If the seller is an individual, the withholding tax is calculated based on a progressive tax rate, similar to personal income tax. The calculation is complex and depends on the appraised value of the property and the duration of ownership. It is not a fixed percentage but rather a bracketed system. The buyer is responsible for withholding this tax and submitting it to the Land Department.

5. Other Potential Costs

Beyond the main fees, you should also budget for a few other potential expenses:

Mortgage Registration Fee: If you are financing your purchase with a mortgage, you will have to pay a mortgage registration fee of 1% of the mortgage value.
Common Area Fees (Condos): For condominium purchases, buyers must pay a one-time sinking fund fee and an annual common area fee. The sinking fund is for major repairs, while the annual fee covers day-to-day maintenance.
Legal Fees: It is highly recommended to hire a local lawyer to perform due diligence, draft contracts, and manage the transfer process. Legal fees can vary depending on the lawyer and the complexity of the transaction.
Agent Commissions: If you are using a real estate agent, their commission is typically paid by the seller, but this should be confirmed in your agreement.

Conclusion: Plan Your Finances and Seek Professional Help

Navigating the fees and taxes when buying property in Thailand can seem daunting, but with a clear understanding, you can plan your budget effectively and avoid any surprises. The total cost of these fees can add up to 5%–7% of the property’s value, so it is a significant factor in your overall investment.

The most important step you can take is to consult with a local lawyer or a reputable real estate agent who has a deep understanding of the local market and legal requirements. They can provide a precise cost breakdown based on your specific situation and the property you are interested in, ensuring a smooth and secure transaction.

For personalized advice and to ensure your real estate journey in Thailand is a success, we are here to help with all your property needs.