THAILAND Law and Practice Contributed by: Olaf Duensing, Jerrold Kippen and Weeraya Kippen, Duensing Kippen, Ltd.
8.3 Municipal Taxes Municipal taxes do not apply specifically to business premises. However, real estate is subject to property tax, which is a local tax. 8.4 Income Tax Withholding for Foreign Investors Withholding taxes apply to the rental and sale of immovable property. A “tax resident” of Thailand is any person staying in Thailand for a period or periods aggregating 180 days or more per year. However, it is important to note that the duty to pay tax on rental income in Thailand does not depend on being a tax resident of Thailand or whether the income is received in Thailand. Rental income is considered taxable income regardless of Thai tax residency under the Thai Revenue Code. The relevant law states that a taxpayer (ie, “anyone”) who in the previous tax year derived assessable income from a property situated in Thailand must pay tax, whether such income is paid within or outside Thai - land. Thus, anyone, tax resident or not, who earns rental income from a property in Thailand, must pay tax on that income, no matter whether the rental income is paid on-shore or off-shore. It is the duty of the payer of the rent to deduct with - holding tax from the rental payment and submit it to the local revenue department. However, both the les - see and the lessor are jointly liable for the payment of this withholding tax. The amount of withholding tax depends on whether the lessor is a tax resident of Thailand and also wheth - er the lessee is a juristic person or an individual. If the lessor is not a tax resident of Thailand, the withholding tax rate is 15%. The legal status of the lessee does not matter if the owner is not a tax resident of Thai - land. If the lessor is a tax resident of Thailand and the lessee is a juristic person, the withholding tax rate is 5%. If the lessor is a tax resident of Thailand and the lessee is a natural person, there is no withholding tax applicable. The taxation of a “capital gain” on the sale of real estate in Thailand depends on whether the seller is a natural or juristic person.
Juristic Person or Company When a corporate entity sells an immovable property, withholding tax at the rate of 1% of the sale price is required to be deducted from the sale price and paid to the authorities on transfer. This is a prepayment of the corporate seller’s income tax for that tax year, and it will be credited against any tax owed for that year. However, both parties – the seller and any buyer – jointly bear the legal duty to withhold and pay this tax. A surcharge on any late or inadequate payment of the withholding tax at a rate of 1.5% per month of the late amount is applicable. Any gain realised on the sale of immovable proper - ty must be declared by the selling company in the accounting period when the sale took place. Section 65 of the Revenue Code defines “net profit” as the result of income from business or arising out of busi - ness in one accounting year, less certain expenses. In other words, the net profit of the whole accounting year is the basis of taxation and not a single taxable event, such as the sale of immovable property. Natural Person or Individual When an individual sells an immovable property, the withholding tax is generally calculated based on the official appraised value of such property, less certain deductions. The deductions depend on the duration of ownership of the property to be transferred. The calculation is done using a specific formula created by the legislature which takes into account how long the property has been owned and the progressive tax rates applicable to individuals, but may be calculated without including any of the seller’s other annual tax - able income. It should be noted that even if the trans - fer of immovable property is without consideration (ie, a gift) by an individual, it will be deemed a sale subject to personal income tax. 8.5 Tax Benefits The following maximum depreciation rates apply. • Permanent buildings – generally 5% per year; however, under certain conditions, 25% in the first year and 5% per year in the following years for the remainder of the value. • Temporary buildings – 100%.
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