Key takeaways
- When selling land to repay debt, look at the net proceeds after SBT, fees, commission and income tax, not the selling price.
- In the example, an immediate sale at THB 170 m yields net proceeds of THB 150.2 m. Waiting 12 months pays off only if the land sells for more than about THB 187.1 m.
- Debt restructuring buys time. It pays off only when that time genuinely adds value and there is a plan if the land does not sell.
Cash is getting tight. A buyer is interested in the main plot of land at a price below what the owner had in mind. The owner is deciding whether to sell and pay off the debt, or to talk to the bank and ask for more time. Both routes have a cost. Selling quickly means giving up price and opportunity. Waiting means interest costs and the risk that the market does not improve. The right question is: what are the net proceeds, and how high must the future price be to make waiting worthwhile?
Checks before choosing
- Collateral If the land is mortgaged, the lender must agree to release the mortgage, and the sale proceeds may first have to go towards repaying that loan.
- Contract terms Selling a significant asset usually requires consent.
- Role of the land Is it raw material for the next project, or a secondary asset that is not being used?
- Speed of cash When is the buyer actually ready to transfer, and what conditions precedent apply?
- Accounting status Land held for development and sale is inventory under TAS 2. When prices fall, it must be tested against net realisable value (NRV).
Costs when a company sells land
| Item | General principle | Characteristics |
|---|---|---|
| SBT | 3.3% including local tax, on the selling price or the appraised value, whichever is higher | Expenses |
| Transfer fee | Normally 2% of the appraised value; the buyer and seller agree how to share it | Cost according to the agreed share |
| WHT for juristic persons | 1% of the selling price or the appraised value, whichever is higher | A tax credit, but it affects cash on transfer day |
| CIT | 20% of taxable profit, after combining the full year's results and any usable accumulated losses | Corporate income tax (CIT) |
Fees and relief measures may change over time and are often limited to qualifying transactions, such as certain residential price bands. Before calculating, check the current announcements with the land office.
Example: sell now or wait 12 months
Hypothetical example Total debt THB 300 m at 8% interest. Land cost THB 120 m, appraised value THB 150 m. The seller bears half of the transfer fee. Commission 3%. No accumulated losses to offset. Figures in THB million.
| Item | Sell now 170 | Sell within 12 months 200 |
|---|---|---|
| Selling price | 170.00 | 200.00 |
| SBT 3.3% | (5.61) | (6.60) |
| Transfer fee 1% of appraised value | (1.50) | (1.50) |
| Commission 3% | (5.10) | (6.00) |
| CIT 20% of profit | (7.56) | (13.18) |
| Net proceeds | 150.23 | 172.72 |
The 1% WHT deducted on transfer day, THB 1.70 m and THB 2.00 m respectively, is a tax credit and so is not counted as an additional cost. However, cash received on transfer day is lower until the credit is used.
Cost of waiting 12 months, after 20% tax Interest that should be saved from the net proceeds: 150.23 × 8% = THB 12.02 m. Debt restructuring fee of 1% of 300 = THB 3.00 m, and other holding costs, assumed at THB 1.00 m. The total before tax is THB 16.02 m, or THB 12.81 m after tax.
| Net proceeds from an immediate sale | 150.23 |
| Add: after-tax cost of waiting | 12.81 |
| Net proceeds required in 12 months | 163.05 |
| Break-even selling price | 187.10 |
A sale at THB 200 m would beat selling now by THB 9.67 m. But if there is a 70% chance of getting that price and a 30% chance of having to sell at THB 150 m, giving net proceeds of THB 135.24 m, the expected value is THB 161.48 m, which is THB 1.57 m below the threshold. The decision therefore depends more on the probabilities than on the hoped-for price.
Either way, the land sale proceeds do not cover the THB 300 m debt. Even with an immediate sale, THB 149.77 m of debt remains, so there must also be a plan for the remaining debt.
How to choose
| Situation | Approach that usually fits |
|---|---|
| The land is unrelated to the core business, there is a real buyer, and the price is close to break-even | Sell and use the proceeds to reduce debt |
| The land is central to the project and the problem is temporary liquidity | Restructure the debt, together with a provable revenue plan |
| Large plot of land that can be sold in parts | Sell part of it, request a plot-specific mortgage release, and reschedule the remaining debt |
| Debt exceeds total asset value and income is insufficient | Consult a lawyer on the legal options, including business rehabilitation |
A middle path worth considering is to ask the bank for a short-term waiver on the condition that the company carries out the sale in agreed steps. This buys time to find a buyer at a better price, and the bank sees a clear route to repayment. Sale and leaseback, or a joint-venture partnership on the land, are also options, but tax and legal restrictions must be checked.
Next steps
- Calculate the net proceeds from the sale at several price levels
- Find the break-even price of waiting based on the actual time period
- Check the current appraised value and fees with the land office
- Ask the bank for written confirmation of the mortgage release conditions
- Check the sale restrictions in every loan agreement
- Assess whether the buyer is genuinely ready to transfer or just negotiating on price
- Prepare a plan for the remaining debt before deciding to sell
- Have a tax adviser calculate the tax based on the company's actual facts