Tax on the sale of condominiums (Part 2)

If the seller is a company, the sit¬uation is simple. The withholding tax payable is 1 per cent of either the governmentappraised value, or the actual selling price, whichever is greater. If the seller is an individual however, the situ¬ation is much more complicated.

A total of five steps must be completed to calculate the with¬holding tax payable on the sale of a condominium by an individual seller.

The first step is to ascertain the governmentappraised value of the property. Secondly, the deemed cost to be deducted from the governmentappraised value is determined based on the num¬ber of years of ownership. If the property has been owned for up to one year, a 92percent deduc¬tion is available. The percentage of deduction decreases from 92 per cent to 50 per cent gradually for each year of ownership up to eight years. The net amount is the deemed taxable income.

The third step is to divide the deemed taxable income calculat¬ed in step two by the number of years of ownership, to a maxi¬mum of 10, to arrive at an aver¬age annual deemed income. The progressive income tax rates of 5 per cent to 37 per cent are then applied to the average annual income to deter¬mine the tax payable for each year of owner¬ship. The fifth and final step is to multiply this annual tax payable by the number of years of ownership, to a maximum of 10, to arrive at the total withholding tax payable.

As an example, let's say that Mr A sells a condominium for Bt12 million, having bought it 12 years ago for Bt7 million. The govern¬mentappraised value is Bt10 mil¬lion. The with¬holding tax payable is calcu¬lated as follows:

 Governmentappraised value                 10,000,000.

 Allowable deduction 50% (> 8 years)    5,000,000.

 Deemed income                                    5,000,000.

Average annual deemed income              5,000,000 divided by 10

                                                           =     500,000.

 Annual tax payable  100,000 @ 5%                             5,000.

                                400,000 @ 10%                           40,000.

                                500,000                                         45,000.

 Total withholding tax payable

  10 x Bt45,000                     Bt450,000.

This withholding tax is normally a final tax, however in certain cir¬cumstances an individual seller must include the actual gain on the sale in his or her annual income tax return. In cases where the seller's name appears in the household registration for the property, the gain must be declared in the annual tax return only if the period of ownership is less than one year. If the seller's name is not in the household reg¬istration of the property, the gain must be declared unless the peri¬od of ownership is greater than five years. Foreign owners of con¬dominiums should take note of this fiveyear requirement, as generally foreigners' names do not appear on a household regis¬tration document.

This information is intended as a general guide only. Tax law is complex and professional advice should be taken before acting on the information provided.