Government Crackdown on Thai Company Property Tax Payments

Wanrapa Boonsu 02.03.2011 02:11

If you own property in a Thai company there are now more taxes to be paid.

Thai companies owning property must pay more taxes than before. The commercial tax rate is 12.5% of the actual or assessed gross rental value of property owned by a Thai company limited used as the registered address of a company or used for rental or any other business and Revenue Department agents are now auditing companies to see if these taxes are being paid. Additional taxes are also being demanded for Thai companies owning property to reduce the number of foreigners buying properties in Thai company names.

At a recent polo event Felicity (Foo) & Graham Smith brought startling information to the attention of the Pattaya Times. The Smiths said their accountant had told them of a new tax they have to pay because their house is in a Thai company name.

The sub-district they live in Pong out past Maprachan Reservoir is alleged to be taxing homes where foreigners reside which are owned by Thai companies (which the occupants may own). There are also structure usage taxes and rental income taxes due by other agencies.

Pattaya City and the “dark side”as far as about six kilometers east of Sukhumvit highway are in the sub-district of Nongprue, not Pong. Horseshoe Point Resort, for example, is in Pong. However, Banglamung District and Pattaya City also asses taxes on property.

Days later the largest Thailand publication, the Bangkok Post, to which the Pattaya Times is affiliated, ran an article by Dexter Norville entitled "Holiday Homes for Fun and Profit" in which it is clearly stated, "It is important that tax rules governing holiday properties [like in Pattaya] are followed. Here are some of the points owners should be aware of: Structure usage tax: This applies to commercially used properties. The rate is 12.5% of the actual or assessed gross rental value of the property..... [Additionally] If the property is purchased through a company, corporate tax is higher than personal tax. Tax on rental income: This tax is charged at between 10% and 30% of the rental income."

For years PAPPA Co., Ltd. Law Office in Pattaya has been warning foreigners on the internet, at Expat meetings and in the Pattaya Times and Pattaya Mail that buying property in a Thai company name may "Come back to bite you in the bum," says Drew Noyes, Managing Director, who also offers alternatives.

Pong sub-district was contacted by the Pattaya Times on behalf of the Smiths and further clarification is needed which we will report on once provided as the staff available seemed confused.

However, valuable information was received from the Office of Finance Pattaya from Khun Nittaya Yindee and from the Banglamung Revenue Office and there are taxes that apply to most properties that must be paid.

Properties that get taxed:

1. Shop houses, tower buildings, shops, corporate offices, banks, hotels, cinemas, hospitals, schools, flats, apartments, condominiums, dorms, horse racecourses, boxing stadiums, warehouses, houseboats, golf courses, tennis courts and parking lots

2. Improvements to land that are fixed such as bridges, piers, swimming pools.

Land tax is a tax by the local government. Land tax is collected under Act, BE 2475 Amendment (No. 4) Act 2534 in Bangkok by the Pattaya City office.

The person having the duty to pay taxes (owner or Managing Director) must pay to the employee at the district office where the house or building is located.

For example if the house is under the owners name and he/she lives there but is renting out rooms in the house to other people, they will not be exempt from tax because the property is generating revenue.

But, if the house is used as a home and not for business to generate money then you don’t have to pay tax to Pattaya City.

Property owners pay tax once a year according to the annual fee which requires the annual value of the preceding year to be used as a basis for calculating tax in the following year.

If the property owner does not pay tax during that period then they must pay a surcharge of 2.5 percent per month on the outstanding taxes.

-First month 2.5 percent.

-5 percent the second month

-7.5 percent third month

-10 percent on the fourth month, the highest value added.

Calculate the assessed value and annual tax rate;

Annual property tax is 12.5 percent of the annual rental income. For example, if a house is rented out a house for 10,000 baht per month, the annual income is 120,000 baht (10,000 x 12 months x 12.5%) then the tax is equal to 15,000 baht per year.

"All property owners must pay the tax regardless of ownership by a person or a company. If the property is owned by a company tax must be paid on the rent is collected from the occupants. If the dwelling is listed as the registered address of the company than it is also subject to the commercial tax," said KhunNittaya.

"Properties are going through a review process now and taxes will be assessed on all properties this year with special emphasis on Thai companies that are dormant," said Khun Nat, an auditor at the Banglamung Revenue Office.

"There are ways to protect yourself from unexpected taxes by restructuring your company and we have been helping many foreigners combat any problems, but they must see us before they are audited or billed," said Drew Noyes of PAPPA co., Ltd. Law Office.