Tax breaks boost Thai property market


The Thai government recently adopted several tax breaks for real estate transactions as part of a broader effort to improve macroeconomic conditions in Thailand following the military coup in May 2014.

While the tax reductions were intended primarily to increase domestic property transactions for the benefit of local developers and Thai buyers, the fee reductions apply equally to international developers and foreign investors. The reduction in Land Department fees can be viewed within the broader context of policies adopted by the military government to improve economic conditions in Thailand. Other such policies include infrastructure development, small business loans, and community based micro-finance initiatives.

Generally, when registering the sale of a house or condominium in Thailand, the local Land Department collects taxes and fees totaling (approximately) 6.3%, including a two percent (2%) “transfer fee.” In addition, when registering a mortgage over a house or a condominium, the Land Department collects a registration fee equal to 1% of the mortgage amount.

On October 13th, the cabinet approved a resolution to boost the real estate market by reducing transfer fees and mortgage registration fees. Subsequently, on October 28th, the Ministry of Interior (which has jurisdiction over the Land Department) issued a proclamation to reduce transfer fees from 2% of the assessed property value to 0.01%. Similarly, mortgage registration fees were reduced from 1% to 0.01%.

Under the ministry of interior proclamation, the fee reductions apply to three categories of immovable property:
1. Residential buildings (either with land or without land), including detached homes, townhouses, duplexes, etc…
2. Land and/or houses located in residential housing developments regulated under the “Land Allocation Act” (the legislation which regulates large residential housing developments);
3. Condominium units in licensed condominium buildings under the Condominium Act.

In Thailand, mortgage registration is not just for banks. Rather, any person or corporation (including foreign citizens and foreign corporations) may register mortgages over immovable property (including mortgages over land and buildings).

Mortgages are registered as property rights – printed on the back side of land title deeds – and cannot be cancelled or revoked without the written consent of the mortgagee. Therefore, a mortgage provides a cost-effective means to secure a property investment. In addition, a mortgage can be a valuable tool for prudent estate management, particularly for foreign citizens investing in the Thai property market.

The fee reductions took effect on October 29th, 2015 and continue in force for a limited period of 6 months until April 28th 2016. Presumably, transfer fees will then revert back to 2%, and mortgage registration fees will revert back to 1%.

For more information, contact:
Siam ADR Limited
109/5 Moo 1
Bophut, Koh Samui
T: 077 427 437

By Daniel Chernov & Pachara Limjantra

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