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Sales & Payment Procedures & Capital Gain Tax Fact Sheet*Ownership & General Information Foreign ownership of Condominium Property. According to Thai Law, foreigners may own 49 percent of the aggregate saleable unit space of a condominium building while the remaining 51 percent must be owned by either Thai nationals or majority owned Thai Companies. For foreigners to be eligible to purchase a condominium unit in Thailand they must present proof to the Department of Land that the funds have been remitted from overseas in foreign currency. Without such proof, the Department of Lands will not register the transfer of ownership to the foreign buyer. The Sales Process – Illustration of 20% - 80% payment scheme1. Pre-completion payments (20 percent) 1.1 Reservation: Make a deposit of THB 20,000 which is completely recoverable by deduction from the final payment. 1.2 Signing: The Sales and Purchase Agreement is to be signed within 1 week following the reservation. A five percent payment of the unit price is required upon the signing of the agreement. 1.3 Installments: The remaining pre-completion payment will be divided into regular installments over the construction period of the project-typically every 30 days. 2. Balance on transfer remaining (80 percent) Money Transfer: There are three options to transfer money. 2.1 Set up local non-resident bank account in Thailand in the name of purchaser and forward funds into the said account, then make payments into Chewathai account from this said account. 2.2 Transfer funds into Chewathai account and Chewathai shall organize all appropriate paperwork / certificate. 2.3 In the case the property is purchased via a Thai company, transfers can be made directly from the company bank account into Chewathai account. 3. Taxes & other Expenses 3.1 Land Registration (Transfer fee) - Calculated as 2% of the assessed sales price. 50% paid by Chewathai 50% paid by Purchaser to the Land Department upon transfer of title deed (ie. on date of transfer of title deed). 3.2 Stamp Duty/Fee of 0.5% of the assessed value or the sale price - whichever is higher. 50% paid by Chewathai 50% paid by Purchaser to the Land Department upon transfer of title deed (ie. on date of transfer of title deed). 3.3 Specific Business Tax of 3.3% of the assessed value or the sale price - whichever is higher, 100% paid by Chewathai to the Land Department upon transfer of title deed* (ie. on date of transfer of title deed). 3.4 Sinking Fund - One time payment. The amount of payment will be according to the unit size. It is payable to Chewathai Ltd upon transfer of title deed (ie. on date of transfer of title deed). Chewathai will subsequently transfer this payment to the juristic person’s account. 3.5 Advance Juristic Fees - Paid in advance on a per square meter per month basis. It is payable to Chewathai Ltd upon transfer of title deed (ie. on date of transfer of title deed). Chewathai will subsequently transfer this payment to the juristic person’s account. 3.6 In case the fees and expenses connection with mortgage registration guarantee of loan 1% with Financial institution shall be borne by Purchaser Note : The juristic fee or management/maintenance fee is used for general monthly maintenance of the building, common areas, security, pool maintenance, etc. * Title Deed is a certificate for ownership of land or condominium unit. A person having their name shown on the deed has the legal right to the land or condominium unit, and can use it as evidence to confirm the right to government authorities Getting a Mortgage Loan In Thailand, foreigners cannot mortgage properties. However, most of the financial institutions provide loans for property purchasing to Thais and Thai companies. Generally, a property developer may help arrange for customers a financing package from a financial institution. In most property development projects, a down payment of up to 30% can be done in installments from 10 to 24 months. Then, on transfer, the balance amount is paid through the loan which is financed from a financial institution after the down payment has been paid. A buyer is required by the financial institution to mortgage the property with it as collateral against the loan. Land Appraisals and Valuations It is difficult to find the exact appraisal price for land because there are there different appraisals rates: the government rate, the appraisal company's rate and the fair market value of the land Property Taxes in Thailand In Thailand, there are no property taxes that are exactly equivalent to the property taxes in the western countries. However, the most comparable taxes on properties are the Land Tax and the Structures Usage Tax which is collected by the municipal office or district office, and applied to properties used for commercial purpose. What Taxes and Costs are Applicable to Purchasing a Property? In Thailand, whenever a property in Thailand is bought and sold, there are four kinds of tax that need to be taken into account: A. Land registration (transfer fee) of 2.0% of assessed value of the land. B. Stamp Duty/Fee of 0.5% of the assessed value or the sale price - whichever is higher. C. Specific Business Tax of 3.3% of the assessed value or the sale price - whichever is higher - this will be applied to all sales by companies and to any private sales that occur within 5 years of the date of purchase. D. Income Tax which is calculated on a very complex formula according to the assessed value of the property, the length of time owned and the applicable personal income tax rate. In practice, this will work out to under 2% of the price for low to medium value properties, and up to 3% for higher value properties. Because of the local system of taxing property on an arbitrary assessed value as determined by the Land Department, rather than true market value, these taxes could amount to a considerable percentage of the purchase price. Therefore, if you haven't determined during the negotiations that the seller will pay the taxes upon transfer, you could get a nasty shock when a tax bill arrives - often some two or three months after the sale is completed. As in all business transactions anywhere, caveat emptor (let the buyer beware) rules. There are no set rules on who pays for which taxes and it is just another part of the bargaining process - make sure you discuss it with the agent and your own lawyer. Money Transfer Currency: Any foreign currency can be used to purchase a condominium unit. The foreign currency MUST be transferred into Thailand as foreign currency and exchanged into Thai Baht by a local bank in Thailand. As mentioned earlier, there are three options to transfer money. A. Set up local non-resident bank account in Thailand in the name of purchaser and forward funds into the said account, then make payments into Chewathai account from this said account. Transfer the funds into a local non-resident bank account of the buyer in Thailand and execute a domestic transfer of this amount onwards to the Developer. In this case, the buyer must request the local bank of the buyer to issue the Foreign Exchange Transaction Form*. Amounts transferred should be at or greater than $20,000, in order to automatically qualify for a Foreign Exchange Transaction Form. (The buyer has to request by telephone or by written notice, according to the procedure of the relevant local bank) for obtaining the Foreign Exchange Transaction Form from the local bank as soon as the funds has been transferred. If the amount remitted is less than USD $20,000, the buyer is required to send a letter to the bank that will in turn send you a letter confirming the purpose of the remittance is for purchasing a condominium unit. Presently, either the Foreign Exchange Transaction Form or the Letter from the bank can be used as evidence when providing proof of fund remittance at the Department of Lands. Without providing either the Foreign Exchange Transaction Form or the letter from the bank, the Department of Lands will not register the transfer of the condominium unit into your name. For the avoidance of any doubt, we recommend wherever possible all buyers arrange for their local bank to issue the Foreign Exchange Transaction Form for all remittances. * Foreign Exchange Transaction Form, or FOREX Transfer Form is known in Thai as a Tor Tor Sam (3). It is an official bank document issued by the receiving bank upon the receipt of foreign currency into your bank account in Thailand. You must request a Tor Tor Sam from your bank when you are remitting funds to Thailand for the purpose of purchasing a condominium, and the Tor Tor Sam must specify that the remittance is solely for the purpose of purchasing a property B. Transfer funds into Chewathai account and Chewathai shall organize all appropriate paperwork / certificate including the Foreign Exchange Transfer Form. C. In the case the property is purchased via a Thai company, transfers can be made directly from the company bank account into Chewathai account. Further Recommendations: 1. For the buyers convenience, we strongly recommend that you should transfer the funds directly to the Developer’s bank account. 2. Remittances must be sent in exactly ("to the letter") the same name as appearing on the purchase contract, i.e. if Tom Smith is the buyer then the name Tom Smith must appear on the remittance advice. T. Smith or Smith Enterprises are unacceptable. If the buyers are two individuals, then two names should appear on the contract and two separate remittances should be made by such two persons, in equal amounts. 3. Transfers of funds MUST be made in FOREIGN CURRENCY only and NOT in Thai Baht, i.e. if you are working in US Dollars then remit in US Dollars. Do not remit in Thai Baht. 4. The purpose of the remittance MUST be stated on the remittance advice. This should be "FOR THE PURCHASE OF BUYING A CONDOMINIUM, UNIT #____ IN _______ PROJECT". The Bank of Thailand's transaction purpose code for this is (381069.) Documents needed to take transfer from Chewathai Ltd. Thai Citizens: 1. Census/House registration copy 2. ID card copy Foreigners: 1. Passport 2. Passport copy 3. Foreign Exchange Transaction Forms ( Tor Tor Sam ) from oversea to buy property in Thailand All documents must be translated in Thai by approved translation agencies Sales of right during pre-completion period During pre-completion period (ie before the transfer of condominium title deed), the purchaser may request to make changes to the contract. Most changes can be made free of charge and these include address, passport numbers, etc. However, for changes pertaining to the person of purchase - including addition or deletion of co-purchasers - Chewathai charges 1% of the unit’s contracted sales price. In case of sales of right resulting in revenue, the person who receives the revenue is subject to income tax in Thailand. The following are procedures of sales / transfer of right during pre-completion period: 1. Inform Chewathai about the intention to sell / transfer the right of purchase and make appointment for both the transferor and transferee, or their respective proxies to meet with Chewathai’s legal representative in Bangkok. 2. In case of sales, whether resulting in profit or not, the seller (ie transferor) should have a Tax ID number issued by the Revenue Department of Thailand. Sellers (ie transferor) without this Tax ID may contact the Revenue Department of Thailand on a government working day to request for one. 3. Execution of the change in name in the Sales Agreement can be done by Chewathai’s legal representative within 30 minutes if all documents are in order. Chewathai does not involve itself in any sales of rights and the transferor and transferee are to make proper sales agreement among themselves. 4. The transferee, whether natural or juristic person, shall with-hold 15% tax on the profit of the transferor. The transferee shall issue a with-holding tax form to the transferor, and within the seventh day of the following month of sales, the transferee shall submit to the Revenue Department of Thailand this with-held tax amount together with the with-holding tax transfer form. 5. In the case of seller (ie transferor) who is a non-Thai Tax Resident during that year of assessment and in case the transferor wishes to exercise his tax credit rights under the Double Tax Agreement between his tax resident country and Thailand, he may thereafter contact the Revenue Department of Thailand to request for an official English copy of the with-holding tax form. The transferor may then make tax credit in his tax resident country where applicable. 6. In the case of seller (ie transferor) who is a Thai Tax Resident during that year of assessment, he shall combine this revenue and expenses (and therefore profit taxable) in his Phor Ngor Dor 90 submission at year end to re-calculate his taxable income for the entire year of assessment. He may use the 15% tax with-held as a tax credit in his tax calculations. Documents required to change contract name (Thai tax resident) 1. ID card copy 2. Census/House registration copy 3. Original Contract agreement 4. Evidence of all payments to Chewathai 5. Thai Tax ID Number Document required to change contract name (Non- Thai Tax Resident) 1. Passport and Passport copy 2. Original Contract agreement 3. Evidence of all payments to Chewathai 4. Thai Tax ID Number Sales of Condominium Unit after taking transfer of unit For sales of condominium unit after the purchaser has taken transfer from Chewathai, the taxes and fees involved are the same for Thai Tax Resident and non-Thai Tax resident. In this case, the purchaser has thus become the owner of the condominium unit and holds the condominium title deed. In any subsequent sales, the interested seller and buyer should contact the Land Department District Office with the relevant documents. The district officer will execute the transfer, calculate the taxes and fees payable, prepare and witness the execution of the sales agreement (Land Department’s format), change the name of the condominium title deed to that of the buyer, and witness the sales payment. The procedure usually takes less than a day if all documents are in order. The following are taxes and fees payable on day of transfer at the Land Department district office, and is usually assessed by the officer: A. Land registration (transfer fee) of 2.0% of assessed value of the condominium. B. Stamp Duty/Fee of 0.5% of the assessed value or the sale price - whichever is higher. C. Specific Business Tax of 3.3% of the assessed value or the sale price - whichever is higher - this will be applied to all sales by companies and to any private sales that occur within 5 years of the date of purchase. D. Income Tax which is calculated on a very complex formula according to the assessed value of the property, the length of time owned and the applicable personal income tax rate. In practice, this will work out to under 2% of the price for low to medium value properties, and up to 3% for higher value properties. It is common practice for buyers and sellers to pre-negotiate who bears which of the above taxes and fees. However, it is only rightful that item C and D be borne by the seller. Document required (Thai tax resident) 1. ID card copy 2. Census/House registration copy 3. Original Contract agreement 4. Evidence of all payments to Chewathai 5. Thai Tax ID Number Document required (Non- Thai Tax Resident) 1. Passport and Passport copy 2. Original Contract agreement 3. Evidence of all payments to Chewathai 4. Thai Tax ID Number *Information contained in this document is subject to contract and change without prior notice. |