Part 5: Tax and compliance with Thai law

Chapter 15 VAT for real estate businesses

The main issue in this chapter is managing input VAT. Selling real estate as a trade or for profit is subject to SBT and falls outside the VAT system, whereas construction work and materials carry VAT. Input VAT on units held for sale therefore cannot be reclaimed and must be included in WIP cost, which directly affects cost per unit.

Businesses within the VAT system, such as hotel services, building management services, spas and other services, must issue tax invoices and file PP 30 monthly. Condominium unit sales use ordinary receipts. Leasing and services must be separated by type of transaction, because the exemptions and the VAT treatment differ.

A company with both activities must first separate the input VAT that can be directly identified, then apportion the shared input VAT using the statutory criteria, and review the split once actual full-year revenue is known. The recording logic is: debit input VAT only for the eligible portion; debit non-reclaimable input VAT to the related cost or expense; and at month-end debit output VAT, and credit input VAT and VAT payable.

Prohibited input VAT, such as entertainment expenses or passenger cars, cannot be claimed in any case. For room deposits or services within the VAT system, check the point of liability, which generally arises when payment for the service is received, not when the service is performed. Prepare a schedule separating each activity, with supporting documents, for every period, so that you can answer the officers and auditors.

Chapter 16 Specific Business Tax (SBT) and stamp duty

SBT on sales of real estate as a trade or for profit is 3%, plus local tax of 10% of the SBT, giving a total of 3.3% of revenue or appraised value, whichever is higher. It is paid at ownership transfer registration.

Total SBT = higher tax base × 3.3%

Developers pay SBT regardless of the holding period. The exemptions for holding for more than 5 years or being named in the house registration apply to individuals under the statutory conditions, so they matter most to developers when buying land from individuals. SBT and 0.5% stamp duty are not charged together on the same transaction.

When buying land, if the company pays on the seller's behalf under the contract, consider whether this is part of the purchase price or a deduction from the amount paid to the seller, and record it to match the agreement. On the unit sales side, the recording logic is, on the registration date, to debit SBT as a selling expense and credit the bank deposit used to pay the land office. It is not included in COGS and is not recognised gradually before the transfer day.

This chapter focuses on cash planning, because SBT arises as a lump sum in step with the transfer schedule, even though profit is recognised in the same period. The CFO should therefore set aside cash for the peak transfer period, calculated from the selling price and appraised value of each unit. Checking cases where the selling price is below the appraised value is very important, because the SBT base and other bases on the transfer day may differ from the contract price.

Chapter 17 Withholding tax (WHT)

This chapter summarises the duty to withhold and remit tax on common transactions. The WHT base for service fees is generally the amount before VAT. Contractors, designers, consultants and domestic corporate service providers use a rate of 3%, advertising fees are generally 2% and rent is 5%. The actual rate depends on the type of income and the status of the recipient, so check it every time before paying.

The recording logic is to debit the cost or expense item in full, credit the net amount payable to the creditor and WHT payable, and then clear WHT payable when the return is filed. PND 1 is used for salaries, PND 3 for individuals, PND 53 for juristic persons and PND 54 for overseas recipients. The payer must issue a withholding tax certificate to the recipient.

Commission on unit sales must be recorded separately for accounting and for tax. For accounting purposes, commission that is an incremental cost of obtaining a contract is debited to a Contract Cost Asset under TFRS 15 and expensed when the unit is transferred. It should not be expensed immediately unless it meets the practical expedient in the standard. WHT, by contrast, is withheld according to the payment terms, which may arise before the expense is recognised.

Interest paid abroad has a general rate of 15% and may be reduced under a double tax treaty if the residence documents are complete. Filing through e-Withholding Tax may reduce paperwork, but the conditions and special rates change over time, so check the current announcements.

Chapter 18 Corporate income tax (CIT)

CIT has a standard rate of 20% and is calculated on taxable profit. This starts from accounting profit, adds non-deductible expenses and taxable income not yet recognised in the accounts, then deducts exempt income and expenses that the law allows.

CIT = net taxable profit × 20% (unless an exemption or a specific rate applies)

For developers, the most common differences are allowances and estimates recognised in the accounts before actual payment, such as warranty provisions and impairment allowances, as well as depreciation and unrealised exchange differences. Non-deductible expenses require a reference schedule to Section 65 ter and complete documents. Shareholder loans should carry interest that can be explained, and you should check the specific restrictions of BOI privileges or loan conditions.

The logic of deferred tax under TAS 12 is to compare the carrying amount with the tax base and then recognise a deferred tax asset or liability. For example, when a warranty provision is set up, debit DTA and credit tax expense; when the actual payment is made, reverse the entry. NPAEs are not required to record this.

PND 51 is filed within two months after the end of the first half of the accounting period, and if the estimated profit falls short of more than 25% of actual profit without reasonable cause, a surcharge may apply. PND 50 is filed within 150 days after the end of the accounting period. The year-end entry is to debit income tax, credit prepaid tax, credit WHT deducted, and credit cash for the difference. A business with BOI privileges must separate exempt profit from ordinary profit and allocate shared expenses with supporting evidence.

Chapter 19 Transfer fees and mortgage registration

The standard transfer fee rate is 2% of the appraised value, and the standard mortgage registration rate is 1% of the mortgage amount. The source text states a cap on the mortgage registration fee of THB 200,000, so check the rate and cap with the land office before applying them to large facilities.

The fee burden is not fixed and depends on the sale and purchase agreement. Market practice is usually to split the transfer fee between buyer and seller, with the seller bearing SBT and the borrower bearing the mortgage registration fee. On the developer's side, the portion of fees borne by the company is a selling expense on the transfer day, recorded by debiting the fee account and crediting the bank deposit. The mortgage registration fee on the project loan is a loan arrangement cost, amortised using the effective interest rate.

A free-transfer-fee promotion is economically a price reduction, so consider treating it as a reduction of the transaction price under TFRS 15. Recording it as a selling expense needs a supporting rationale and a consistently disclosed policy.

In profit planning, taxes and fees on the seller's side are a real cost of several percent of revenue, for example SBT of 3.3% plus the portion of fees borne by the seller, so they must be deducted when assessing operating margin and NRV.