Selling Chiang Mai Real Estate: A Must-Read Guide on Withholding Tax

Selling a condominium in Chiang Mai can be a profitable investment but it's essential to understand the tax implications involved. This comprehensive guide will walk you through the process of withholding tax when selling a condominium in Chiang Mai, covering tax rates, calculations and strategies to reduce your tax liability.

Withholding Tax Overview

Withholding tax is a tax deducted at the source when making certain types of payments, including when selling real estate property such as a condominium in Chiang Mai. Both individuals and juristic persons are subject to withholding tax when selling property, and it is the responsibility of the buyer to withhold and remit the appropriate tax to the Revenue Department.

Tax Rates for Individuals and Juristic Persons

The tax rates for withholding tax on the sale of condominiums in Chiang Mai depend on whether the seller is an individual or a juristic person. The following are the applicable tax rates:

Individuals

Individuals are subject to a progressive tax rate based on their net profit from the sale:

Juristic Persons

Juristic persons, such as companies or partnerships, are subject to a flat tax rate of 1% on the gross sale price.

Calculating Withholding Tax

To calculate the withholding tax on the sale of a condominium in Chiang Mai, follow these steps:

Scenario:

• Seller: Individual
• Original purchase price: THB 2,500,000
• Selling price: THB 3,500,000
• Expenses related to the sale: THB 100,000 (e.g., legal fees, renovation costs)

Step 1: Determine the net profit

Net Profit = Selling Price - Original Purchase Price - Expenses

Net Profit = THB 3,500,000 - THB 2,500,000 - THB 100,000 = THB 900,000

Step 2: Calculate the applicable tax rate

According to the tax rates for individuals provided earlier, a net profit of THB 900,000 falls within the range of THB 750,001 - THB 1,000,000, which corresponds to a tax rate of 20%.

Step 3: Apply the tax rate to the net profit

Withholding Tax = Net Profit × Tax Rate

Withholding Tax = THB 900,000 × 0.20 = THB 180,000

In this example, the buyer should withhold THB 180,000 from the payment made to the seller and remit this amount to the Revenue Department as withholding tax.

Reducing Tax Liability

There are several strategies to reduce the withholding tax liability when selling a condominium in Chiang Mai:

• Claim deductions: Ensure you claim all allowable deductions, such as legal fees, renovation costs, and any other expenses related to the sale.
• Hold the property longer: For individuals, the net profit calculation considers the holding period of the property. A longer holding period can result in a lower deemed income, which in turn reduces the withholding tax liability.
• Sell through a juristic person: If you own the property through a company or partnership, the withholding tax rate will be a flat 1% on the gross sale price, which may be more advantageous than the progressive tax rates applied to individuals.
• Consider tax planning: Consult a tax professional to explore possible tax planning strategies tailored to your specific situation. Proper tax planning can help minimize your tax liability when selling a condominium in Chiang Mai.

Filing and Payment Process

The buyer is responsible for withholding and remitting the tax to the Revenue Department. To comply with the regulations, follow these steps:

• Withhold the tax: The buyer should withhold the calculated tax amount from the payment made to the seller.
• Submit the tax: The buyer must file the required forms (e.g., Por Ngor Dor 53 or Por Ngor Dor 54) and submit the withheld tax to the Revenue Department within seven days from the end of the month in which the transaction took place.
• Obtain a tax receipt: The buyer should obtain a tax receipt from the Revenue Department as proof of payment. The seller may request this receipt for their records.
• Report the transaction: The seller must report the transaction and the withholding tax paid on their annual personal or corporate income tax return.

Understanding the withholding tax implications when selling Chiang Mai real estate is crucial for both the buyer and the seller. Familiarizing yourself with the tax rates, calculation methods, and strategies to reduce tax liability can help ensure a smooth transaction and compliance with Thai tax regulations. Consulting a tax professional or legal expert is always recommended to ensure the most accurate and up-to-date advice on your specific situation.

List with Us