Exact Property Transfer Tax amount and Profit Tax amount

[hhfarang]

Can anyone tell me or give me the formula for the costs of selling and transferring land and house to a new owner (SJ )?

To my knowledge there are two items:

1) Transfer fee (for land and house?).

2) Tax on profit made between the original cost of land and house and sales price (I've heard this is based on time of ownership too, i.e., reduces the longer the seller has owned or lived on the property).

Is there a fixed percentage on these or a formula that I can use to predict what this will be (approximately) if the transaction takes place this week?

If there is anyone on here with specific current knowledge of this (SJ ) I could send a PM with specific information like original cost, year bought, and current sale price if you could use that information to give me some idea of what the fees and taxes will be (SJ ).

Thanks in advance for any info and the person who gives me correct info will be invited to the after sale party. (should the sale actually take place)...

[PeteC]

That sounds promising HHF, and amazing if you did it this fast in this economic and political climate. You have to continue to post from Florida though, and post pics of those Cuban babes on the beach. Pete

[Super Joe]

To my knowledge there are two items:

Hi hhf, there's another one you omitted which is either a) Special Business Tax (SBT) a big one at 3.3%, or 
b) Stamp Duty at 0.5% only when SBT is not applicable to your circumstances. 
These are the old higher %'s that come back into force very soon, see item 1 below. 

There's some basic info required first that could have a big impact either way on how much you're liable for:
1) Will the land office transfer to buyer happen by 26th March? 
If not fees revert back from this 2 year stimulus to original higher rates.

2) How do hold the property? 
Limited Company (if yes, will buyer be taking over your company?), freehold land in wife's name or land leased from a.n.other.
Also did you ever legally register the house (building) in your own name at land office ? Ditto for buyers intended set-up.

3) Have you held the property for more than 5 years? 
This 'could' determine if Special Business Tax (SBT), or Stamp Duty is applicable.

4) What agreement, if at all yet, do you have with buyer for the land office taxes, ie: like the common 50/50 arrangement. 
If not already too late, write into the sale contract that they are responsible for all taxes associated with registering the house 
(building) in their own name if a farang is involved. 
He may decide to do that months down the line could otherwise point to a 50/50 arrangement.

5) The land office usually sets the appraised value from their own 'book rates' for the land and house sq.m area. 
Their own land rates are well below the massive land increases over past 5 years, 
and their house rates are also way below a typical higher spec farang house.
So end result is usually that they appraise the value massively less than your actual sale price sale.
Usually both parties are happy to go along with this as means lower tax on the day, 
some buyers might want to declare the real price, especially if it's split 50/50 because they may not want to take on the responsibilty for this 'potential' future tax liability.

Sorry to waffle on but it's not exactly straight forward, I can give you the formulas as best I know them, but you need to address if buyer will go along with declaring any reduced value
to get your starting point, and your lawyer or wife can pop in the land office to get their provisional appraisal value for your location and sq.m areas.


And the fact that your garden spans 3 different provinces is sure to cost you a few extra Dollars

SJ

[Super Joe]

3) Have you held the property for more than 5 years? This 'could' determine if Special Business Tax (SBT), or Stamp Duty is 
applicable.

Just found another criteria, in addition to owning the property for over 5 years, where an individual (ie: not Limited Companies which are liable for SBT) is exempt from the high 3.3% SBT and instead only has to pay the 0.5% Stamp Duty, and that is the following ...

"An individual may be exempt from SBT if they have used the property as their principal residence and have had their name in the household registration certificate for at least one year."

SJ

[hhfarang]

Thanks SJ, by the way mods, I can't read a lot of SJ's post because it runs behind and is covered up by banner ads running down the right side of the page.

From what I can read, I'll give you the following information to see if that helps you to give me an estimate or formula.

1) The sale and visit to the land office should happen this week if it happens at all... so before 26 March.

2) The property is solely in my Thai wife's name and we are selling to a Thai who will hold it solely in her name... so Thai to Thai clear chanote transfer.

3) We have owned the land for nearly six years but since it took 2 years to build the house we have only lived on the land for 4 years if that is what they count.

4) I couldn't read your suggestion on this as it went under the ads, but it is not decided yet. We talked about 50/50 but the buyer wants it furnished and we wanted to sell unfurnished so we are negotiating that she pays all of the transfer fee and possibly the profits tax in exchange for the furniture... that's one of the reasons I want to know how much this will be so I can tell if this is a fair arrangement or not (for both of us).

5) I saw that in another post by you. So are you saying that they tax based on appraised value rather than sale price? Don't they ask what the sale price was? I'm confused on this point as when we bought the land six years ago the seller agreed to pay the transfer tax but asked us to low ball the selling price... the land office didn't buy it and actually appraised the land for much more than we paid and we ended up having to split it with the seller which cost me about two thousand extra (unexpected) dollars.

Thanks again for your help... and if giving you specific numbers would help more I will pm you if you think you can give me a ball park estimate of what to expect. I just hate to go in blind not having any idea of the cost and taxes.

[Big Boy]

Thanks SJ, by the way mods, I can't read a lot of SJ's post because it runs behind and is covered up by banner ads running down the right side of the page.

Sorry about that HHF. I've fixed it for you this time, but I know that our technical gurus are looking at reasons why the problem is happening.

[Super Joe]

HHF,
As your potential sale is a straight forward Thai freehold ownership transfer to a.n.other Thai freehold ownership, then much of what I asked does not apply. Regarding the Land Office's 'appraised value' compared with the 'actual selling price', they have always wanted to use their own values and not questioned, or asked to see contracts for the actual selling price. Although all transfers have been discussed before the day with the land office official to ask their value, either by the agent, a lawyer or my wife, and as you'll see below some taxes are stated under the regulations to be as per the 'appraised value', even if the actual selling value is higher.

So it would be well worth a Thai popping in and getting an understanding of what value is to be used, they're usually very accomodating especially when you take up their offer of a pre-arranged appointment time for a very minor fee, which will save you hours and hours of waiting time particularly bearing in mind how many people will be trying to get transfers done before the fees change.
1) Land Office taxes should be:
a) Transfer Fee - currently 0.01% of the land offices property 'appraised value', irrespective of whether the 'actual sale price' is higher.
b) Stamp Duty (in leiu of SBT) - still at the old rate of 0.5% of the land offices property'appraised value', or the 'actual sale price' whichever is higher.
Specific Business Tax (SBT) is not applicable and replaced by Stamp Duty, this is due to your land having been registered over 5 years ago and/or because I'm assuming your wife's name has been registered in the Blue Book for the property for over 1 year.

2) Personal income tax withheld by Land Office (aka capital gains/profit tax):
Strangely this is not a tax of any actual gain made, but is taxed on the land office's full property 'appraised value', irrespective of whether the 'actual sale price' is higher, then less deductable allowances based on the amount of years owned. I haven't heard of people being charged this at the land office though and would challenge it, by all accounts it's designed for people selling properties as a business rather than selling your main home, regulations say this tax is applicable if ...
- "the sale is made for a commercial purpose"
- "an exemption applies from the sale of one's place of residence provided that a new residence is purchased within 1 year"

BUT if personal income tax is withheld it's based on the land offices 'appraised value' only:
The deductable allowances based on how long you've owned the house is ... for 1 year 92% is deductable, 2 years 84%, 3 years 77%, 4 years 71%, 5 years 65%, 6 years 60%, 7 years 55% and 8 years a maximum of 50%. The system is based around the government thinking you would have made a 100% gain after 8 years.

So using an example based on an 'assessed value' of 10M Baht, based on your 6 year possession period would result in a total taxable amount of 4M Baht (60% allowance deducted from the 10M Baht).
You divide the 4M over the 6 years = 660,000 Baht/year, less 30,000 Baht personal tax allowance, which leaves a yearly taxable amount of 630,000 Baht.

Then apply the normal personal income tax rates of:
First 0 to 150k = tax exempt,
Then 150k upto 500k is at 10% = 35,000 Baht
The remaining 130k is at 20% = 26,000 Baht
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Therefore 61,000 Baht/year x 6 years = 336,000 Baht personal (profit) tax bill.
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The Transfer tax of 0.01% based on hypothetical on 10M Baht = 1,000 Baht
The Stamp Duty of 0.5% based on hypothetical on 10M Baht = 50,000 Baht


I've probably got all that horribly wrong, so best check it all out with someone a bit competent

SJ

[hhfarang]

Thanks again SJ. Now it is very clear. You are definitely the guru of this kind of information on this forum imo!

I am taking your advice will send the wife on an advance trip to the land office to make an appointment and get the tax and fee (assessment) details ahead of time.

If the sale goes through, dinner and beers are on me!

[Super Joe]

You're welcome hhf.

Just to be clear to others, these are just the latest regulations as I see them, and my interpretation and experiences. People need to check their own situation out with a lawyer, because as with everything (immigration is a great example), different officials sitting next to each other can interpret the rules and regulations their own way for whatever reason.

Also by speaking to them before hand in the right way can make things go a lot smoother and to the benefit of all parties

Good luck,

SJ

[hhfarang]

Well, thanks again SJ but it looks like the deal is unraveling. It doesn't make sense to me but it seems that these people (supposedly Bangkok Thais) have been jerking us around for six days and were not really serious (even thought we had agreed on a price and were down to friendly haggling over furniture and who pays what transfer costs). It's strange to me why people waste their own time playing games unless they were actually trying to scam us in some way (which is quite possible, but that's another story).

[Spinnaker]

When are the various taxes required to be paid ?

From my understanding the Property Transfer Tax of 2% needs to be paid on the day of the actual transfer. Is this so ?

[Super Joe]

When are the various taxes required to be paid ?

From my understanding the Property Transfer Tax of 2% needs to be paid on the day of the actual transfer. Is this so ?

You'd be best checking everything with a lawyer who specialises in Real Estate, but I believe it's:

At Land Office on day of transfer:
Transfer fees of 2%
Specific Business Tax of 3.3% (3%+10% local municipal tax).
Stamp Duty of 0.5% (Not due if SBT is charged).
Withholding tax (Seldom applied I think).

Then the yearly property taxes due in Jan/Feb:
Either of these, if they apply:
Land and House tax, or
Local Development tax

But these last two are as confusing as hell, as seem not to be applied very uniformly, see this thread: http://www.huahinafterdark.com/forum/vi ... 20&t=14096

Then there could be personal income tax due on income from leasing, rental, profit from a sale etc, but best see a lawyer/accountant about them.

SJ

[Spinnaker]

Thanks SJ. My wife does have a lawyer, just checking up on him.

There has apparently been a negotiation with the buyer of the land to partial share the 2% Transfer Fee, however this still comes to a lot of cash that the seller needs to initially come up with.

The whole annual Land tax issue is still very cloudy and appears very subjective. Will have to put my trust in the appointed lawyer.

Thanks again.

[crazy88]

Land tax depends on location and size. Paid 10 baht for 100 TW 400 sqm last year. Just round the corner from Hin Lek Fai. The other plots and the neighbours ones were equivalent. 10 Baht was for the whole plot. Just a question. Why would the "Seller" have to come up with any cash? Simply submit the paperwork to the land office after due diligence applied and pay on the spot as agreed once the deed comes out in the relevant name either in cash, by certified cheque, transfer or whatever.

Crazy 88

[Super Joe]

There has apparently been a negotiation with the buyer of the land to partial share the 2% Transfer Fee, however this still comes to a lot of cash that the seller needs to initially come up with.

Yes, it's quite common to agree at negotiating stage to split the land office 'one-off' taxes 50/50. But as Crazy88 said, it might not be too much because the transfer tax is applicable to the 'assessed value' of the land, not the 'actual sale value'. The Land Office's assessed values are usually much lower than the actual values, sometimes 50%, but then they are supposedely being re-assessed this month, valid for the next 4 years


The seller shouldn't really need to come up with any cash, as by the time you're given the tax bill by the land office official, she has already passed all the papers and Chanote to the clerks who will be getting the buyers name typed on the back of the land title, so most sellers will already have gotten 100% of the money by then. or if in the situation of a bank official being there with a loan cheque, then at least a substantial deposit should have been given over. But not every case has to be that way.

Good luck with it all,
SJ