What taxes do you have to pay if you own real estate?

The Land and Building Tax is levied on the owners of land and buildings, calculated based on the total value of the land and the structures on it. This is an annual tax, and the primary purpose is to use the revenue for local area development, such as building roads, parks, or improving public utilities.

Types of Land Taxes

Land taxes are categorized into different types with varying tax rates. Here’s a summary of the details:

1. Agricultural Land: Land designated or used for agricultural purposes, such as farming, livestock raising, or other agricultural activities. The tax ceiling for this type of land is as follows:

• Individuals:

• Land valued up to 50 million THB: Tax-exempt

• Land valued between 50 – 125 million THB: Tax at 100 THB per million or 0.01%

• Land valued between 125 – 150 million THB: Tax at 300 THB per million or 0.03%

• Land valued between 150 – 550 million THB: Tax at 500 THB per million or 0.05%

• Land valued between 550 – 1050 million THB: Tax at 700 THB per million or 0.07%

• Land valued over 1050 million THB: Tax at 1000 THB per million or 0.1%

• Legal Entities:

• Land valued up to 75 million THB: Tax at 100 THB per million or 0.01%

• Land valued between 75 – 100 million THB: Tax at 300 THB per million or 0.03%

• Land valued between 100 – 500 million THB: Tax at 500 THB per million or 0.05%

• Land valued between 500 – 1000 million THB: Tax at 700 THB per million or 0.07%

• Land valued over 1000 million THB: Tax at 1000 THB per million or 0.1%

2. Residential Land: Land designated or used for building houses, residential buildings, including detached houses, townhouses, condominiums, or housing estates. The tax rates for this type of land are:

• Individuals owning both land and a single building:

• Land valued up to 50 million THB: Tax-exempt

• Land valued between 50 – 75 million THB: Tax at 300 THB per million or 0.03%

• Land valued between 75 – 100 million THB: Tax at 500 THB per million or 0.05%

• Land valued over 100 million THB: Tax at 1000 THB per million or 0.1%

• Individuals owning only a single building:

• Land valued up to 10 million THB: Tax-exempt

• Land valued between 10 – 50 million THB: Tax at 200 THB per million or 0.02%

• Land valued between 50 – 75 million THB: Tax at 300 THB per million or 0.03%

• Land valued between 75 – 100 million THB: Tax at 500 THB per million or 0.05%

• Land valued over 100 million THB: Tax at 1000 THB per million or 0.1%

• Individuals owning two or more properties:

• Land valued up to 50 million THB: Tax at 200 THB per million or 0.02%

• Land valued between 50 – 75 million THB: Tax at 300 THB per million or 0.03%

• Land valued between 75 – 100 million THB: Tax at 500 THB per million or 0.05%

• Land valued over 100 million THB: Tax at 1000 THB per million or 0.1%

3. Commercial Land: Land designated and used for business activities such as trade, services, production, or leasing of office buildings, shopping malls, factories, or other retail spaces. The tax rates are as follows:

• Land valued up to 50 million THB: Tax at 3000 THB per million or 0.3%

• Land valued between 50 – 200 million THB: Tax at 4000 THB per million or 0.4%

• Land valued between 200 – 1000 million THB: Tax at 5000 THB per million or 0.5%

• Land valued between 1000 – 5000 million THB: Tax at 6000 THB per million or 0.6%

• Land valued over 5000 million THB: Tax at 7000 THB per million or 0.7%

Income tax from property sales is the tax that property owners must pay when selling or transferring ownership of the property. According to the law, there are fees and taxes to be paid as follows:

• Withholding Tax: For individuals and legal entities selling property, the withholding tax calculation varies, divided into three categories:

1. Income from property sales acquired by inheritance or as a gift:

• If the property is located outside Bangkok, municipalities, sanitary districts, or Pattaya City, a tax exemption is granted for the first 200,000 THB of sales throughout the year.

• If the property is located within Bangkok, municipalities, or Pattaya City, it does not receive the same tax benefits.

How to Calculate Tax

For properties acquired by inheritance or as a gift, a 50% fixed cost deduction from the appraised value is applied. The calculation formula is as follows:

Formula:
((Appraised Value - 50% Fixed Cost Deduction) / Number of Years Held) x Average Annual Income Tax Rate

Example:
You sell a property inherited 5 years ago for 2,800,000 THB, with an appraised value of 2,000,000 THB. The income tax calculation is as follows:

Average Annual Income / Number of Years Held:
((2,000,000 - 1,000,000) / 5) = 200,000 THB

Income Tax Rate Calculation:

• First 100,000 THB: Tax at 5%

• Excess amount between 100,000 – 500,000 THB: Tax at 10%

• Excess amount between 500,000 – 1,000,000 THB: Tax at 20%

• Excess amount between 1,000,000 – 4,000,000 THB: Tax at 30%

• Excess amount over 4,000,000 THB: Tax at 37%

Tax for the First Portion:
100,000 x 5% = 5,000 THB

Tax for the Excess Portion:
100,000 x 10% = 10,000 THB

Total Average Annual Income Tax:
5,000 + 10,000 = 15,000 THB

Once you have the average annual income, multiply it by the number of years the property was held, which is 5 years. Income tax payable: 15,000 x 5 = 75,000 THB

2. Income from the sale of real estate acquired by means other than inheritance or gift:
   
   

For the sale of real estate acquired by means other than inheritance or gift, deduct expenses according to the rate specified by law. Then, divide the net income by the number of years the property was held to determine the average annual income. Next, calculate the tax on the average annual income according to the specified rate, and multiply it by the number of years the property was held to find the total tax payable. Additionally, if the sale of real estate is not intended for commercial purposes, the maximum tax rate is capped at 20% of the sale price.

Rates for deductible expenses based on holding period as specified by Royal Decree:

Held for 1 year: 92% of income

Held for 2 years: 84% of income

Held for 3 years: 77% of income

Held for 4 years: 71% of income

Held for 5 years: 65% of income

Held for 6 years: 60% of income

Held for 7 years: 55% of income

Held for 8 years or more: 50% of income

Tax calculation method: 

You sold a property that you have held for 5 years at a price of 2,800,000 THB, but the official appraised value is 2,000,000 THB. The real estate tax payable is as follows:

Appraised value x deductible expense rate = 2,000,000 x 65% = 1,300,000 THB

Income after deducting expenses: 2,000,000 – 1,300,000 = 700,000 THB

Annual income / number of years held: 700,000 / 5 = 140,000 THB

Calculate average annual income tax:

Calculate the average annual income tax:
100,000 x 5% = 5,000 THB

Income exceeding the first portion: 40,000 x 10% = 4,000 THB

Total: 5,000 + 4,000 = 9,000 THB

Then multiply by the number of years held: Tax payable: 9,000 x 5 = 45,000 THB

3. Income from Sales for Legal Entities : 

    Value Added Tax (VAT) is a property tax levied by the government on specific business operators who generate income through services such as maintenance fees or renting space for exhibitions, including daily rentals. If a business operator earns more than 1.8 million THB per year, they must register for VAT and pay a 7% tax annually.

• Stamp duty:

Stamp duty must be paid when buying or selling real estate because registration with the land office is required. The seller must issue a document for the transfer of real estate, and the stamp duty rate is 1 THB per 200 THB of value or 0.5%. The land office will charge stamp duty based on the actual sale price. For example, if the actual sale price is 10,000,000 THB, the stamp duty will be 50,000 THB, even if the appraised value is 1,000,000 THB.

• Ownership transfer tax:

Ownership transfer tax is one of the costs the buyer must bear when transferring ownership of real estate. This tax is levied according to the value of the property being transferred, and the transfer tax rate is divided into two cases:

- General case: The ownership transfer tax rate is 2% of the appraised value. When calculating, if the amount is less than 1 THB, round up to the nearest whole number.

Example:

If a piece of land is bought and sold for 10,000,000 THB but has an appraised value of 1,000,000 THB, the ownership transfer tax payable is 20,000 THB.

- Special exemption: In cases of transfer to a spouse who is legally married, an heir, or a parent, the transfer fee is 0.5% of the appraised value. If the calculation results in an amount less than 1 THB, round up to the nearest whole number.

Factors affecting the real estate taxes payable: 

Taxes play a crucial role in driving the country forward, although many people feel that they are a significant burden. Understanding the factors that affect the amount of tax you have to pay can help you plan your tax payments more effectively and reduce your worries. The factors related to paying real estate taxes are as follows:

• Value of the property: 

The value of the property you own is crucial in calculating taxes. The higher the property's value, the more tax you have to pay. Additionally, property improvements or increases in property quantity will result in higher property value and, consequently, higher taxes.

Type of property: 

Different types of properties have different tax rates, whether it's vacant land, commercial buildings, or residential homes. Understanding the type of property you own will help you plan your tax payments correctly.

Use of property: 

The use of the property is also important in planning tax payments. For example, using property for business purposes will incur higher tax rates than using it for general residential purposes. If you use the property for business, whether for leasing or selling, you will have to pay additional taxes.

Government tax policy:

 Changes in government tax policies directly affect the amount of tax you have to pay. Changes in tax rates or increases and decreases in tax deductions in certain cases can cause the amount of tax payable to increase or decrease. Therefore, keeping up with news and policy changes is important.

Property holding period: 

The length of time you hold a property before selling or transferring ownership affects the taxes payable. Generally, holding a property for a long time can help reduce the income tax from the sale or transfer of ownership.

Understanding real estate taxes: Learning and understanding real estate taxes not only helps you manage your tax expenses correctly but also allows you to make more informed decisions about real estate investments.

The ownership transfer tax is one of the expenses that the buyer must bear when transferring ownership of real estate. This tax is charged based on the appraised value of the property being transferred. There are two cases in which the rate of the ownership transfer tax is applied:

1. General Case

The ownership transfer tax is 2% of the appraised value. When calculating the tax, if the amount includes a fraction of less than 1 baht, it should be rounded up to the nearest whole baht.

• Example:

If land is sold for 10,000,000 baht but the appraised value is 1,000,000 baht, then the ownership transfer tax payable is 20,000 baht.

2. Special Exemption Case

If the transfer is to a legally married spouse, direct descendants, or ascendants (parents/grandparents), the transfer fee is 0.5% of the appraised value. If the calculated amount includes a fraction of less than 1 baht, it should be rounded up to the nearest whole baht.

Factors Affecting Real Estate Taxes Payable

Taxes are a key component in driving the country forward, though many may feel they are a considerable burden. Understanding the various factors that affect the amount of tax payable can help in better planning and significantly reduce worry. The key factors that influence real estate tax payment include:

•  Value of the Property

The value of the property you own plays a major role in tax calculation. The higher the value of the property, the higher the tax amount. Also, improvements or additions to the property can increase its value, and consequently, increase the taxes payable.

• Type of Property

Different property types are subject to different tax rates—whether it's vacant land, commercial buildings, or residential homes. Understanding the type of property you wish to own helps in planning tax payments accurately.

• Usage of the Property

How the property is used also affects tax planning. For example, using a property for business purposes incurs a higher tax rate than using it as a regular residence. If the property is used for business—whether for rental or commercial purposes—additional taxes may apply. 

• Government Tax Policies

Changes in government tax policies directly impact the amount of tax you must pay. Adjustments in tax rates or the introduction of deductions or exemptions can increase or reduce your tax burden. Therefore, staying informed about policy changes is crucial.

• Duration of Property Ownership

The length of time you hold the property before selling or transferring it can also affect the taxes due. Generally, holding the property for a longer period can reduce the personal income tax on the sale or transfer of ownership.

Studying and understanding real estate taxes not only helps you manage tax-related expenses accurately, but also enables you to make more informed and careful decisions when it comes to real estate investments.