Taxes on Selling Properties in Chiang Mai: A Seller's Guide

 

Gaining a comprehensive understanding of the tax implications when selling properties is vital for property owners, particularly in Chiang Mai. This vibrant city in Northern Thailand boasts a bustling real estate market. Taxes play a significant role in shaping financial outcomes, and overlooking their importance can result in unforeseen expenses, legal complications, and penalties. By familiarizing themselves with the taxes associated with property sales, sellers can accurately assess their obligations, plan their finances, and ensure a seamless transaction. It is advisable to seek professional advice to navigate the intricacies of property selling, optimize outcomes, and make well-informed decisions. In this article, we will delve into property selling taxes, consider additional costs and factors, and explore the concept of capital gains tax for property sellers.

Property Selling Taxes

In Chiang Mai, Thailand, there are several property selling taxes that sellers should be aware of:

1. Transfer Fee

• Explanation of transfer fee: The transfer fee is a tax levied on the transfer of property ownership from the seller to the buyer. It is based on the appraised value of the property.
• Calculation method: The transfer fee is calculated as a percentage of the appraised value of the property, typically ranging from 2% to 5%.
• Who is responsible for paying the transfer fee? In Chiang Mai, it is common for the buyer and seller to share the transfer fee equally, unless otherwise negotiated in the sales agreement.

2. Specific Business Tax

• Definition of specific business tax: Specific Business Tax is a tax imposed on the sale of properties within five years of ownership or properties sold by a business entity. It is applicable to both individuals and companies.
• Applicable scenarios for specific business tax: Specific Business Tax is applicable when selling a property within five years of ownership or when the property is owned by a business entity.
• Calculation method: The specific business tax is calculated based on the appraised value or the actual selling price of the property, whichever is higher. The tax rate is fixed at 3.3% of the value.

3.Stamp Duty

• Purpose and scope of stamp duty: Stamp duty is a tax imposed on the execution of certain legal documents, including property sale agreements. It serves as proof that the document has been officially registered and stamped.
• Calculation method: In Chiang Mai, the stamp duty for property sales is fixed at a rate of 0.5% of the appraised value or the actual selling price, whichever is higher.

4.Withholding Tax

• Overview of withholding tax: Withholding tax is applicable when selling a property to a buyer who is not a Thai citizen or not a Thai tax resident. It is deducted at the point of sale and submitted to the Revenue Department by the buyer.
• Applicable scenarios for withholding tax: Withholding tax applies when selling a property to a non-Thai buyer, excluding Thai tax residents.
• Calculation method: The withholding tax rate is progressive and depends on the appraised value or the actual selling price of the property. The rates range from 0.1% to 5% of the value.
• Seller's role in fulfilling withholding tax obligations: The seller's responsibility is to ensure that the buyer deducts the appropriate withholding tax amount from the sale proceeds and remits it to the Revenue Department on their behalf.

Understanding these property selling taxes in Chiang Mai is crucial for sellers to accurately estimate their financial obligations and fulfill their tax responsibilities during the sale transaction. It is advisable to consult with tax professionals or legal advisors to navigate the specific details of each tax and ensure compliance with the local regulations.

Additional Costs and Considerations

When selling a property, there are additional costs and considerations that sellers should keep in mind:

1.Agency Fees: If you choose to work with a real estate agent to sell your property, they will charge a commission fee for their services. Typical agency fees in Chiang Mai range from 3% to 5% of the property's selling price. It's important to discuss and negotiate these fees with the agent before entering into an agreement.
2.Legal Fees: It is recommended to engage a lawyer or legal representative to handle the legal aspects of the property sale. Legal fees can vary depending on the complexity of the transaction including the services provided. Typically, legal fees range from 1% to 2% of the property's selling price.

3.Other Costs: There are several other costs associated with selling a property that sellers should consider, including:

• Property Inspection Fees: Before listing your property for sale, it's advisable to have a professional property inspection conducted to identify any potential issues or repairs needed. The cost of a property inspection will depend on the size including condition of the property.
• Valuation Fees: In some cases, a property valuation may be required to determine the market value of the property. Valuation fees vary based on the property's size, location, and complexity. It's important to discuss these fees with the valuation service provider.
• Title Search Fees: Conducting a title search is essential to ensure that the property has a clear and marketable title. Title search fees cover the cost of verifying the ownership history, any liens or encumbrances on the property, and any potential legal issues. The fees for title searches can vary.

By considering these additional costs and factors, sellers can accurately estimate their expenses and plan accordingly. It's recommended to discuss these costs with professionals involved in the sale process, such as real estate agents, lawyers, property inspectors, and valuation service providers, to ensure transparency and make informed decisions.

Tax Exemptions and Reliefs in Chiang Mai

Tax Exemptions and Reliefs in Chiang Mai can provide certain benefits for property sellers. Here are some key points to consider:

1. Exemptions for Thai citizens and specific categories of sellers:

• Thai citizens selling their primary residence may be eligible for a tax exemption on capital gains from the sale.
• Certain categories of sellers, such as individuals selling inherited property, may qualify for tax exemptions. It is advisable to consult with a tax advisor or legal professional to determine eligibility.

2. Reliefs for long-term leasehold agreements:

• Sellers of properties with long-term leasehold agreements may be eligible for tax reliefs, including reduced tax rates or exemptions. The specific requirements and benefits vary, so seeking guidance from a tax advisor or legal expert is recommended.

3. Tax benefits for investment purposes:

• Chiang Mai offers tax benefits to individuals and entities investing in designated areas or industries.
• These benefits may include tax incentives, exemptions, or reduced tax rates on property sales.
• Conduct research or consult with tax professionals to understand the specific tax benefits applicable to your investment activities.

It is important to note that tax exemptions and reliefs may be subject to certain conditions and eligibility criteria. Consulting with tax advisors, lawyers, or relevant authorities is crucial to obtain accurate and up-to-date information tailored to your specific situation. They can provide guidance on available exemptions, reliefs, and benefits that align with Chiang Mai's tax regulations.

Capital Gains Tax and Property Ownership Period

Capital Gains Tax (CGT) is a tax imposed on the profit earned from the sale of a property. In Chiang Mai, Thailand, the CGT is calculated based on the property's selling price and the duration of ownership. The property ownership period plays a significant role in determining the tax liability. Here are some key points to understand:

• Short-term Ownership: If you sell a property within five years of ownership, it is considered a short-term ownership. In such cases, the profit from the sale is subject to Specific Business Tax (SBT) instead of CGT. The SBT rate is fixed at 3.3% of the property's appraised value or actual selling price, whichever is higher.
• Long-term Ownership: If you hold the property for more than five years before selling it, the profit is subject to CGT. The CGT rate for individuals in Thailand varies based on the property's appraised value or selling price and the duration of ownership. The longer you hold the property, the lower the tax rate may be.
• Progressive Tax Rates: Thailand's CGT follows a progressive tax rate structure, where the tax rate increases with higher profits. The rates can range from 0% to a maximum of 20%.

It is essential to consult with a tax advisor or legal professional to understand the specific CGT rates and exemptions applicable to your property sale in Chiang Mai. They can provide guidance on calculating the tax liability based on the property's selling price, ownership period, and other relevant factors.

Conclusion

Gaining a comprehensive understanding of the various taxes involved in selling a property is of utmost importance for sellers in Chiang Mai. This includes familiarizing themselves with the Transfer Fee, Specific Business Tax, Stamp Duty, and Withholding Tax. Armed with this knowledge, sellers can make informed choices, accurately forecast expenses, and ensure strict adherence to tax and legal requirements throughout the property selling process in Chiang Mai. For additional guidance and information, it is highly recommended that sellers seek professional advice from experienced real estate agents, knowledgeable lawyers, and proficient tax advisors. Their expertise will help sellers effectively navigate the intricacies of the property selling journey and ensure a smooth and successful transaction.

List With Us