Thailand does not have a real property tax system and, for the time being, there are two local taxes applicable to people who own immovable property.

The first tax is the Local Development Tax imposed upon people who either own or possess land. This tax rate varies according to the estimated land value as appraised by the local authorities. Allowances may be granted if the owner utilizes the land for personal dwellings, animal husbandry and/or the cultivation of crops. The extent of these allowances depends upon the location of the land. It is said that the rates are so low that officials don’t usually bother to collect on a yearly basis. This tax is also levied on houses, buildings or any other improvements built on the land.

Then there is the House and Land Tax, which applies to the owner of a house, building, structure or land that is either rented or put to commercial use. Taxable property under the House and Land Tax includes houses not occupied by the owner, industrial and commercial buildings and land used in connection therewith. The tax rate is 12.5% of the estimated annual rental value of the property or the actual rental value, whichever is the highest. Owner occupied residences are exempt from this tax. Note, however, that this exemption applies only to individuals, not to juristic persons, because juristic persons are deemed to use their property commercially. In other words, a company that purchases an office has to pay the tax, even if the company uses the premises to serve its own offices. There is a project to replace the House and Land Tax with a real property tax within 2 years, wherein the rate would be from 0.01% up to 1% of the estimated value of the property, depending upon the property type. The rate would be 0.01% on agricultural land, 0.1% on personal residences; 0.5% on commercial buildings and 1% on undeveloped land.

Note that it is possible to mitigate the cost of the House and Land Tax. If, for example, you rent condominium in Pattaya fully furnished, you may choose to execute two agreements with your lessee. The first agreement will be for the rental of the condominium unit and the second agreement will be for the rental of the furniture and/or additional services (if any are provided). This will reduce the cost of the House and Land tax because the tax only applies to the yearly rent received from renting out the property, but not on the rental income received from renting out the furniture, etc.

If the rental agreements are executed between two individuals, there is no VAT applicable on the furniture or service agreements. If, however, the owner of the condominium is a company and if the company is registered for the VAT, then the VAT will apply at 7% on the furniture or service agreements executed between the lessor and the lessee.

For example, if you rent out condominium in Pattaya fully furnished for a rental fee of THE 60,000 per month and only make one agreement with your Lessee, then you’ll have to pay a yearly House and Land Tax as follows: 60,000 x 12 x 12.5% = THE 90,000. You can save on taxes legally by simply breaking the rental fee down into two agreements. For example, the rental fees may be THE 35,000 per month for renting out the condominium and THE 25,000 for renting out the furniture. If you break the rent down in this way, the Land and House Tax will be only THE 35,000 x 12 x 12.5%= THE 52,500. If, however, the owner of the condominium is a company registered for VAT, then it will have to apply the VAT to the furniture lease agreement. Even so, the company owning the property will save money on taxes, because the Lessee supports the cost of the VAT.

The matter of the withholding tax also applies when renting out. If an individual leases a property to another individual in Thailand, the payment of the rent is not subject to withholding taxes. However, when a company is renting a property, then the company will have to deduct a withholding tax from the amount of the rent paid to the owner (whether an individual or a company). The amount withheld must be paid to the tax administration on behalf of the owner who will use the withholding tax as a tax credit against the yearly income tax. The rate of the withholding tax is 5% in Thailand. Note that when a rental fee is paid outside Thailand, the amount of the tax to be withheld from the payment is 15%. Furthermore, if you are a non-resident offered a rental guarantee by a developer, never forget to take the withholding tax into account when calculating your potential income.

Thailand is one of the most picturesque countries of Asia which is a top-notch global tourist hotspot. Be it the coastal lifestyle or the mainland Thai locales, the entire country is full of amazing spots that allure you no end. Thailand’s major USP is tourism and the government knows this fact and has always promoted it on a global scale.

Like so many countries situated in the Asia area, Thailand is steeped in history and tradition, which has only recently been opened up to the western world. The country covers an area of some 500,000 square kilometres offering one of the most diverse of climates and landscapes. Thailand offers an array of high mountainous regions in the north, with hundreds of smaller islands in the south, and vast areas of beautiful beaches, active nightlife, and laid back atmosphere in between.

Thailand was known as Siam until 1939, and seemed to come to life as a major economy in the later part of the 20th century. While economic growth has continued, the country has managed to retain that mystical feel with beautiful architecture, and reminders of the great tradition at every turn. Steeped in history, yet showing an appreciation of western values, the country covers both ends of the spectrum, which is a major plus point for tourists. A can do rather than cannot do attitude has seen the respect for the Thai workforce increase throughout Europe, with many Western companies investing in the region.

Contrary to popular belief Thailand is one of the safest countries in the world, although the image of the Asia region tends to be dominated by some of the more volatile countries. The people are renowned for their friendly nature and good mannered approach to visitors from a far. As the popularity of the country grows, everyone seems to have realised the massive potential of the growing tourist market, which can be central to many of the more rural economies.

Property Market

While many countries would have faltered after facing one of the worst Tsunamis of modern times, the Thai authorities have used this as a positive, rebuilding the devastated areas in double quick time, and using the “fresh start” to restructure the landscape and facilities. This has resulted in a massive influx of overseas investment which has seen the price of Thailand property recover, with particular interest from Europe and powerful neighbour, China. The recovery is still ongoing, however the country now has one of the fastest growing economies in the world.

The price of property in Thailand is benefiting from this new found interest from foreign investors, which is opening vast areas of the country which until recently were relatively undiscovered by western visitors. The major increase in the economy of recent years has been fuelled predominately by the massive increase in tourist activity, with Thailand now on the radar of all major travel companies. This untapped region is commonly known as the “Spain of Asia” by observers of the international tourist market.

The increase in tourist numbers has opened up a new buy to let market which in turn has opened many eyes to the potential for long term property price appreciation in this ever expanding, ever popular area of Asia. Current property value appreciation of between 10% and 15% per annum is less than some of the more volatile “tiger” economies, however the Thai economy is no where near as volatile, and offers a greater degree of transparency in property transactions than most countries in the area. Even the Tsunami did not dent the property market, and deals were still being closed the day after the disaster, although obviously areas effected by the Tsunami had to start again.

Areas of specific interest in the Thai property market take in cities such as Phuket, Bangkok, Koh Samui, Chiang Mai, Pattaya, Krabbi and Pang Nang. Overseas employers have been showing particular interest in Thailand properties, as they look to house there growing workforces.

While there are restrictions on foreign land ownership (although not over onerous) the creation of a simple Thailand Trading Company will simplify the situation, and open up the possibility of local partnerships for a closer “feel” of the local property market characteristics.

Why Invest in Thailand

Thailand has always been seen by many in the west as one of the hubs of the Asian economic scene, showing a great ability to adapt and reinvest in order to attract quality overseas investment. The liberal tax laws and lack of capital gains tax payments are a great incentive for overseas investment. Indeed the recent event of the tragic Tsunami demonstrated amply, the ability of the authorities to act in a swift, well thought out manner, which was the main reason for the country remaining so economically strong.

Thailand is also awash with areas of great natural beauty, with the mountainous areas contrasting against the western style beach resorts which are proving ever more popular. An ability and willingness to continually invest in the nations infrastructure has again paid great dividends, and opened up many of the more rural areas to potential economic improvement. Against this western attitude to business and investment, the authorities still hold a great appreciation of the origins of the country, the culture and the people.

For the older generation looking for an overseas retirement opportunity, visas are available to people over 50 year of age with very few questions asked. As the quality properties for sale in Thailand are quickly snapped up, this band of investors could be a major influence in the future.

Outlook

Thailand has surprised many around the world with the speed at which it has recovered, and rebuilt after the Tsunami. The country continues to distance itself form the more volatile and radical countries in the region, embracing a liberal yet controlled attitude to economic development and overseas investment. This bodes well for both the flourishing tourism industry, and the potential to attract further overseas investment. Quality properties in Thailand are much sought after as the market continues to struggle to balance supply against demand.

The economy has proved resilient in some of the most testing of situations, with the ever flexible work force adapting and constantly improving their output. While the cost base of the area remains low in comparison to western countries, this will always be a natural attraction to foreign investors. The country is also well placed for international trade from all areas of the world, receiving significant employment and investment from the neighbouring powerhouse of China.

Thailand’s markets have experienced a slowdown in recent months. However, these are few and far between and the authorities have shown themselves to be more than capable of adapting and reacting to most situations. This beautiful land that is Thailand is proving to be one of the more controlled of the so-called “Tiger” economies, and striving to narrow the gap between the stronger economies of the west. While there is still some way to go, there is no doubt that the country is on the right path.