Sort By

Thailand Rental Properties / Save Tax

Foreign investors looking to purchase rental properties inThailand will often have the choice of purchasing the property in their own name or in an offshore company. The preferred ownership structure will require a careful analysis of the respective costs and benefits, taking into account the particular circumstances of the owner.
From a tax perspective, this will require consideration of the tax laws in Thailand as well as the tax laws in the owner’s home jurisdiction and an analysis of the impact on the investment returns after tax if an offshore company is interposed between the owner and the property. An important tax issue to consider is the taxes payable on rental income.
Taxes on rental income Foreign individuals will be subject to Thai personal income tax on rental income generated from real estate situated in Thailand. In most cases,15% withholding tax will be deducted from rental receipts paid to foreign individuals that are not tax residents of Thailand. The tax withheld is not a final tax. On the other hand, if the property is held in a foreign company’s name and the rents are similarly taxed at 15% at source, the withholding tax is considered a final non-refundable tax payment
for the company.


How to pay less than 15% tax.
A foreign property owner residing outside Thailand could actually end up paying much less
than 15% tax in Thailand if he has purchased the property in his own name. For a foreigner to pay less than 15% tax on rental income, the first step will be to file personal
income tax returns with the Thai Revenue Department to declare the rental income. The
withholding tax deducted from rents can then be used as a tax credit to offset the tax payable on the return. The reward for fi ling a tax return is that the taxpayer can then request a refund of surplus withholding tax credits from the Thai Revenue Department.
Preparing and fi ling a personal income tax return in Thailand is not a difficult exercise. Rental income is normally assessed on a cash basis and should be easily determined from the property manager’s rental reports. A property owner is allowed a standard deduction
of 30% against rental income, no questions asked. A personal taxpayer does have the option of claiming the actual expenses incurred in deriving the rental income which are necessary and reasonable, but the expenses claimed must be supported by documentary evidence, which may very well need to be furnished for audit before the tax refund is approved.


Tax rates
A personal taxpayer can earn net income up to Baht 150,000 (approx. USD 4,500) in a tax year and not pay income tax in Thailand. Unlike some countries that seek to tax foreigners at higher rates or deny them the tax free threshold, the tax scales for residents and non-residents are the same in Thailand.


Individuals are liable to personal income tax in Thailand on their net income, after deduction of expenses and allowances, at the following rates:


Net taxable income                                       Marginal rate 
(Thai Baht)


1 – 150,000                                                                 0%
150,001- 500,000                                                       10%
500,001- 1,000,000                                                    20%
1,000,001- 4,000,000                                                 30%
More than 4,000,000                                                  37%


As the rates of tax are greater than 15% for net income over Baht 500,000 (approx USD 15,000), there will come a point where the tax payable will be greater than the withholding tax credits.
By my reckoning, the property would need to be generating around USD 90,000 per annum in gross rentals before it came to the point where the withholding tax credits would not be enough to cover the income tax payable when the personal income tax return is filed. The benefit of filing a tax return is best illustrated by an example. Let’s take the case where a property generates gross rental income of Baht 1,000,000.00 (approx USD 30,000) for the tax year.


The following tax calculation for a typical property owner illustrates the potential tax refundable in this case.


Taxable net income                                                               Thai Baht
Gross rental income                                                                 1,000,000.00
Less: rental expenses (30% standard deduction)                          (300,000.00)
Less: taxpayer allowance                                                             (30,000.00)
Total deductions and allowances                                                  (330,000.00)
Net income                                                                                 670,000.00


Tax calculation
Tax payable on net income                                                          69,000.00
Less: withholding tax credits (15% of gross rental income)           (150,000.00)
Tax payable (refundable)                                                            (81,000.00)


The tax payable in this case is equal to 6.9% of the gross rental income, resulting in more than half of the withholding tax deducted from rents during the year being refundable.
The figures speak for themselves and clearly demonstrate one distinct tax advantage for foreigners owning Thai rental properties in their own name.


This article was written by Paul Ashburn, Senior Partner, BDO Advisory Limited.


 


Visit the BDO website at www.bdo-thaitax.com.

Pattaya Rental Condos / Save Tax

Foreign investors looking to purchase rental properties inThailand will often have the choice of purchasing the property in their own name or in an offshore company. The preferred ownership structure will require a careful analysis of the respective costs and benefits, taking into account the particular circumstances of the owner.
From a tax perspective, this will require consideration of the tax laws in Thailand as well as the tax laws in the owner’s home jurisdiction and an analysis of the impact on the investment returns after tax if an offshore company is interposed between the owner and the property. An important tax issue to consider is the taxes payable on rental income.
Taxes on rental income Foreign individuals will be subject to Thai personal income tax on rental income generated from real estate situated in Thailand. In most cases,15% withholding tax will be deducted from rental receipts paid to foreign individuals that are not tax residents of Thailand. The tax withheld is not a final tax. On the other hand, if the property is held in a foreign company’s name and the rents are similarly taxed at 15% at source, the withholding tax is considered a final non-refundable tax payment
for the company.


How to pay less than 15% tax.
A foreign property owner residing outside Thailand could actually end up paying much less
than 15% tax in Thailand if he has purchased the property in his own name. For a foreigner to pay less than 15% tax on rental income, the first step will be to file personal
income tax returns with the Thai Revenue Department to declare the rental income. The
withholding tax deducted from rents can then be used as a tax credit to offset the tax payable on the return. The reward for fi ling a tax return is that the taxpayer can then request a refund of surplus withholding tax credits from the Thai Revenue Department.
Preparing and fi ling a personal income tax return in Thailand is not a difficult exercise. Rental income is normally assessed on a cash basis and should be easily determined from the property manager’s rental reports. A property owner is allowed a standard deduction of 30% against rental income, no questions asked. A personal taxpayer does have the option of claiming the actual expenses incurred in deriving the rental income which are necessary and reasonable, but the expenses claimed must be supported by documentary evidence, which may very well need to be furnished for audit before the tax refund is approved.


Tax rates
A personal taxpayer can earn net income up to Baht 150,000 (approx. USD 4,500) in a tax year and not pay income tax in Thailand. Unlike some countries that seek to tax foreigners at higher rates or deny them the tax free threshold, the tax scales for residents and non-residents are the same in Thailand.


Individuals are liable to personal income tax in Thailand on their net income, after deduction of expenses and allowances, at the following rates:


Net taxable income                                       Marginal rate 
(Thai Baht)


1 – 150,000                                                                 0%
150,001- 500,000                                                       10%
500,001- 1,000,000                                                    20%
1,000,001- 4,000,000                                                 30%
More than 4,000,000                                                  37%


As the rates of tax are greater than 15% for net income over Baht 500,000 (approx USD 15,000), there will come a point where the tax payable will be greater than the withholding tax credits.
By my reckoning, the property would need to be generating around USD 90,000 per annum in gross rentals before it came to the point where the withholding tax credits would not be enough to cover the income tax payable when the personal income tax return is filed. The benefit of filing a tax return is best illustrated by an example. Let’s take the case where a property generates gross rental income of Baht 1,000,000.00 (approx USD 30,000) for the tax year.


The following tax calculation for a typical property owner illustrates the potential tax refundable in this case.


Taxable net income                                                               Thai Baht
Gross rental income                                                                 1,000,000.00
Less: rental expenses (30% standard deduction)                          (300,000.00)
Less: taxpayer allowance                                                             (30,000.00)
Total deductions and allowances                                                  (330,000.00)
Net income                                                                                 670,000.00


Tax calculation
Tax payable on net income                                                          69,000.00
Less: withholding tax credits (15% of gross rental income)           (150,000.00)
Tax payable (refundable)                                                            (81,000.00)


The tax payable in this case is equal to 6.9% of the gross rental income, resulting in more than half of the withholding tax deducted from rents during the year being refundable.
The figures speak for themselves and clearly demonstrate one distinct tax advantage for foreigners owning Thai rental properties in their own name.


This article was written by Paul Ashburn, Senior Partner, BDO Advisory Limited.


Visit the BDO website at www.bdo-thaitax.com.

Loading
Suche
0 - 0 (THB)
erweiterte Suche
x
A Pool Villa in Koh Samui For Sale
Ref: KSH005348 - This outstanding villa is situated on Koh Samui between Choeng Mon and Chaweng. The view is breathtaking and it can be enjoyed from the spacious terrace. The architect put great effort in to the details and the building quality is top of the line.
A Pool Villa in Koh Samui For Sale
Ref: KSH005349 - This Villa, located on Koh Samui, has been build at the top of a gently sloping mountainside, just a few minutes away from Chong Meon beach. From the villa you have an amazing view over the floating temples of Wat Plai Laem and out to the ocean.
Villa Verai
Ref: PHH005333 - Villa Verai is one of the most exclusive villas on Phuket, located at the Cape Yamu coastline. This luxury villa offers incredible features like a 100m beach front, a 40m swimming pool and an incredible view over the ocean to the Pha Nga Bay.
Villa Chan Grajang
Ref: PHH003360 - Villa Chan Grajang is situated on one of the sloped mountain side plots on Phuket, offering an incredible view over the bay to the ocean. The villas design is modern and with its 2,272 smq it offers an incredible living space for bigger families.
Malaiwana Estate
Ref: PHH003356 - The Malaiwana Villas are located on Phuket at the Naithon beach. The building quality and details of the villas are outstanding and brought them already two prestigious awards. The project stretches over 28 rais and offers breathtaking views over Naithon’s Bay.
A Pool Villa in Koh Phangan For Sale & For Rent
Ref: KGH005360 - This villa was build on a sloped land plot on Koh Phangan, and offers therefore a fantastic sea view. The modern design, the open floor plan and the spacious terraces make this villa a very attractive residence.
Springfield Villa
Ref: CAH005184 - This villa is the most luxurious villa in Cha Am. It is located on the Springfield Golf Course and compromises a 9,600 sqm land plot. The view from the pool over the Golf Course is impressive and opens up the estate’s living area.
Immobilien
Region
Herausragende Immobilien
Copyright © 2017 Siam-Property Co.,ltd