Tax Incentives in Thailand
Low transfer taxes and fees
Currently effective until 28 March 2010, fees to register the transfer or mortgage of real estate in respect of condominium units and houses have been reduced to only 0.01 percent.
Specific business tax (“SBT”) on the transfer of real estate was reduced from 3.3 percent to 0.11 percent for sales registered between 29 March 2008 and 28 March 2009. The cabinet has approved an extension of this tax measure to 28 March 2010.
Deduction for new home purchases
Buyers of new homes will receive a welcome tax break this year. Ministerial Regulation No.271 recently issued under the Revenue Code offers a personal income tax deduction of up to 300,000 Thb for payments made in 2009 towards the cost of purchase of your own residence.
The purchase of a house, house with land or a condominium unit is eligible for the tax deduction. The transfer of ownership of the property must be registered in 2009 and the taxpayer must be registered as the owner of the property for at least three consecutive years from the date the transfer of ownership is registered. A transfer of ownership of the property must never have been previously registered.
Foreigners can access this tax incentive if they purchase freehold property in their own name, such as a condominium unit or house excluding the land on which it is built, and earn taxable income in Thailand that could absorb the tax deduction.
Mortgage interest deductions
For those of us that live in the Kingdom, interest paid on a mortgage to acquire one’s place of residence can be claimed as a tax deduction.
The deduction used to be limited to 50,000 Thb but from the year 2008 onwards the deduction ceiling has been doubled to 100,000 Thb.
There are several conditions to satisfy in order to access the deduction – for most taxpayers the main condition to be satisfied is that the building or condominium unit is being used by the taxpayer as their place of residence. Foreigners should be particularly mindful of the various conditions prescribed, especially if they have arranged finance through special expat mortgage providers rather than a local bank.
The taxpayer must possess documentary evidence issued by the lender to prove the payment of interest – financial institutions will normally issue a certificate every year to confirm the amount of interest paid that can be claimed as a tax deduction, so this will be an important document to retain to support your interest deduction claim.
Incentives on sale
The main tax incentive on the sale of real estate would have to be simply the way the taxable gain on sale is assessed.
For personal income taxpayers, the gain will be calculated based on the official appraised price of the property – the amount actually received on sale is not relevant in computing the tax payable on the gain. The official appraised price of a property can often be much lower than the current market value.
People selling their home and purchasing another one may be able to do so without paying any income tax on the sale. As you might expect, a number of conditions apply to make a tax free gain on the sale of your own home, one of them being that you registered your name in the house’s registration book – not normally something high on the list of priorities for a foreigner living in Thailand.
Overall, the Thai tax system currently offers a number of attractive tax incentives to property owners, which may be accessed with little or no effort by foreign and Thai purchasers alike.