Tax Rules clarifications (from our Law firm office)

I’ve read the article about the tax. It was also posted on Thai visa, and many foreigners think it is a new tax, but actually it’s just the end of the reduced rates. Many do not understand this. There was many confusion among foreigners following this article because they think it is a new tax of 6,5 or a new sales tax of 6,5% for companies selling property.

The confusion is that many think it is a new tax of 6,5% in addition to current tax and fees.

I wrote a short article today following this article you sent for our websites copied below:

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Transfer Tax and fees when transferring real estate in Thailand

The temporary reduction on specific business tax from 3.3% to 0.11% on commercial or profitable sale of immovable property, issued March 28 2008, will end March 28 2010. Also the reduced transfer fee for specified real estate properties in the same period from 2% to 0.01% will end 28 March 2010. The current rate reductions have not been extended by the government and will go back to the previous levels of before March 28 2008.

The transfer of real property after March 28 2010 is again subject to a transfer fee of 2% on the government assessed value of the property. There will be stamp duty at 0.5% when the real property is transferred, except in cases where the seller is subject to a specific business tax. Specific business tax will again be charged at the previous rate of 3%, plus a municipal tax of 10% bringing this tax to 3.3%. The transfer of real property is (among others) not be subject to the specific business tax if the seller is an individual and has possessed the property more than five years before the transfer. The transfer is also exempt from specific business tax if the real estate is transferred by inheritance.

In addition to transfer fee, specific business tax and stamp duty withholding tax is charged when transferring real estate property over the registered sale price or appraised value whichever is higher. Withholding tax for companies is remains at 1% over the actual sale price or government appraised value. For individuals withholding tax is charged at a progressive rate with some specific deductions and exemptions and depending on the number of years of possession. Reduction of withholding tax was not part of the governments program to stimulate the economy and will not change after March 2010.

The situation is as follows in case of the transfer of a Condominium by a private owner with 3 years ownership and a value of 5 million baht (this is a sample and the actual calculation by the land department could be different):

Transfer before March 29 2010 (under the temporary rate reduction):

1.Transfer fee 0.01% over 5,000,000 THB = 500 THB

2.Specific Business Tax & Local Tax 0.11% = 5,500 THB

3.Individual Withholding Tax approx 100,000 THB

4.Application fee and others approx 300 THB

Total: 106,300 THB

Transfer of a condominium (value of 5 million) under the normal rates:

1.Transfer fee 2% over 5,000,000 THB = 100,000 THB

2.Specific Business Tax & Local Tax 3.3% = 165,000 THB

3.Individual Withholding Tax approx 100,000 THB

4.Application fee and others approx. 300 THB

Total: 365,300 THB

Before buying real estate in Thailand and before buying property it is recommended to obtain legal advice from legal professionals on the transfer taxes and fees calculation and how these costs should be divided. Too often foreign buyers end up paying more than they should or the end up paying taxes and fees that the seller should pay.

TOURISM FUND RAISER ACCOR Race to Survive For Yim Kids

From March 22-25 leading French hotel chain ACCOR will be holding it’s Race to Survive for Yim Kids here in Phuket. ‘Yim’ in Thai means smile. Teams from hotels all over the region are competing in the event which includes mountain biking, swimming, running and kayaking on Koh Lon island.

One of our good friends General Manager Shane Pateman from the Novotel Kowloon in Hong Kong has set up a page at fundraiseonline.com.au, and those wishing to support the charity can do so online at:

Novotel Nathan Road Kowloon Dragons

This is a great example of tourism putting something back into Thailand and kudos to ACCOR for bringing the teams to the island and focusing on children’s education and homes here in the Kingdom.

FOREIGN BUSINESS ACT PWC Phuket Seminar Slated March 12th

Leading multinational tax advisory firm PWC (PriceWaterhouseCoopers) will be conducting an English language seminar updating developments in the Foreign Business Act on Friday March 12 at Royal Phuket City Hotel. Topics to be covered include the FBA, Ministry of Commerce’s current investigations on possible violations, land code and an update on proposed changes to the Foreign Business Act and Civil and Commercial Code.

Venue will be the Bon Maiton Room on the 2nd floor from 8:30 am to 4:30 pm with a cost of THB 4,000.

MATCH DAY Democracy Versus Kleptocracy

While Thaksin Shinawatra broods in his karma infused Exile on Shame Street I can’t help but harken back to those not so distant memories of his Camelotian-like kleptocracy. Though surely Khun Potjaman is no Jackie O and the antics of those guys wearing red shirts look to stir up more trouble than the running of the bulls in Pamplona on March 14th.

As the nation waited, yes waited and still waited in the depths of Friday night for the Supreme Court’s decision, unfortunately the conclusion came to be that Thailand’s battle for self identity, good versus perhaps good for just a few ended in a 1-1 draw. No sudden death, no penalty shootout, and no clear winner. While we all love an outcome, the fact remains that the road to self determination is a long hard struggle and ultimately a journey with no end.

Kleptocracies are a strange brew, described most often as a ‘rule by thieves’, often used to define government corruption on an epic scale. What was clear during Friday’s proceedings were that the rule of law, the acknowledgment of a system failed and courage of Thai men and women of try to improve their country was at play.

This in itself was a remarkable victory and perhaps far more than anything bodes well for the challenges in the troubled days ahead. Despite being a foreigner in a country I’ve lived in for nearly 10 years, it was a day to be proud of Thailand and one which warmed my heart.

The Tribe has spoken Mr. Thaksin.

Shaking off the blues in Phuket

After a miserable economic year globally, Phuket shook off the blues with the launch of Andara Resort & Residences over the Chinese New Year weekend, drawing glitterati from all corners of the world who enjoyed a spectacular party complete with dancers, fire-eaters and fireworks.

While there is no denying that the resort island was affected by last year’s economic woes, Andara’s developer Allan Zeman, says projects that struggle in difficult times are ones that lack quality or are priced too high for what they are offering.

“Those developments that people come in and appreciate, those have continued even in the face of a bad economic market, I think they have done okay.

“It’s really what you have built here that drives the market so if you have built a quality product at the end of the day you will be okay,” said the Canadian entrepreneur, who lives in Hong Kong and developed the Lan Kwai Fong entertainment district, which has thrived and where he has made a good name.

While the majority of Andara’s buyers are from Hong Kong, others come from various parts of the world including the UK, Russia, Scandinavia and Taiwan.

Although the price tags of a luxurious project like Andara would astound the average Thai, with an apartment starting at 27 million baht and a villa at 150 million baht, they are low by Hong Kong standards.

“In Hong Kong a 1,200-square-foot (112 square metre) apartment will cost you more than the most beautiful villa,” Dr Zeman said.

“Hong Kong is just crazy. In all the 40 years I have been there, it has always been expensive and it just continues to thrive. It goes through booms and busts but it always comes back because there is limited land out there.”

Dr Zeman said Hong Kong’s property boom was being fuelled by mainland Chinese who are snapping up all the new offerings in the market and driving up the prices.

“The property market, even in a bad economy last year, was very, very strong, especially because of mainland China. China itself is going through a tremendous economic boom. I am doing a lot of projects down there as well, but it’s just the retail market in China is very, very strong, I think that will continue.”

Dr Zeman believes that Asia is the right place to be at the moment because with US and Europe experiencing problems it will grow from strength to strength the next 10 to 15 years if those who govern these countries and run their businesses play their cards right.

Financially strong Hong Kong residents already tend to have second homes with Phuket a big favourite because of many daily flights by several airlines. Transport on the island is also good.

It is likely that mainland Chinese will eventually also start coming to Phuket and turn into a strong buyers’ market.

A question arises as to why Phuket eclipses Samui, which is in fact closer to Hong Kong. In Dr Zeman’s opinion, this could be because the culture of the local people on the smaller island differs from Phuket, and Phuket is more international and better known worldwide.

“It’s strange that adversity helped Phuket. The tsunami helped put Phuket on the map because almost everyone around the world who had never heard of Phuket suddenly understood the tragedy that happened here and became aware of the place.”

Dr Zeman, whose roots were in the fashion business, was drawn to develop real estate on the island seven years ago when he flew in to recuperate from a bout of pneumonia rather than going on a skiing holiday.

“I was recovering, staying at a hotel and I thought I want to build a house here for myself and then we came up with this beautiful piece of land in Surin after that we came up with what I have been told is one of the most beautiful houses in the world – Chandara.”

Once that was done, Dr Zeman bought a small piece of land in Surin town and with the help of his chief architect Branko Pahor built a boutique shopping mall called Plaza Surin.

After that, a piece of land on Kamala beach where Andara stands today, right across the bay from Chandara, became available when another developer from Bangkok ran into problems with his hotel project.

“So we came here and looked at the land and the first thing I saw was that beautiful view overlooking the Andaman Sea and I thought, What a special piece of property, really something special.

“You know, land is land, all land to me is the same, it’s what you put on the land that gives it some life, some energy.

“And so Branko and I sat down and asked about what we want to put on this land and we started off with villas.”

After he finished with the villas he decided to build a hotel, and apartments.

Buyers were able to join a rental pool for a return on their investment, with this offer also open to the villa owners.

As this part of the development is virtually sold out, Dr Zeman is moving on to build a bigger mall on a land plot opposite Plaza Surin which he owns.

He is also looking around for other plots to develop more residential properties.

“Again depending on what the land is, design according to the contours and what you feel is the right thing to put on that land.” While he is open-minded about developing property in other parts of Thailand, Dr Zeman pointed out that he is not looking to have 10 projects rolling at once and would rather concentrate on one or two at a time. He would do a better job on them, he believes, than if he was forced to divide his attention between many spots.

“I have learned that you can’t dance at 10 weddings with two feet, so it’s important that you concentrate on an area.

“Otherwise you will be flying around everywhere, you won’t do it well, so we will always be kind of focused on this part if possible.”