Key takeaways
- Holding land for more than 5 years does not always reduce an individual's tax, because WHT may increase by more than the SBT that falls away.
- A sale through a company is taxed differently, and dividend tax applies when the money reaches the shareholders.
- Sound planning starts from the facts and the acquisition date, not from creating transactions to get around the thresholds.
Landowners have heard that land held for more than 5 years is not subject to SBT, so they intend to wait until the 5 years are up before selling. Some are thinking of moving the land into a company first to "structure" the sale. Both ideas have a rationale, but neither has yet been tested against net proceeds. The right question is how much the seller keeps under each option after all taxes.
Principles by type of seller
| Seller | SBT or duty | Corporate income tax (CIT) |
|---|---|---|
| A developer that subdivides land or registers a condominium | SBT of 3.3% on sales under that business, regardless of the 5-year test | CIT of 20% on taxable profit and WHT of 1% |
| A company selling land outside its main business | The conditions under Royal Decree No. 342 must be checked case by case | CIT of 20% on taxable profit and WHT of 1% |
| An individual who acquired the land without the aim of trading for profit | SBT if sold within 5 years, unless an exemption applies; otherwise stamp duty of 0.5% generally applies | WHT on the appraised value at progressive rates |
| An individual who bought the land to trade for profit | Considered according to the nature of the trading | May have to be included in the tax return, not only subject to withholding tax |
Sales subject to SBT have exemptions, for example where the land was acquired by inheritance, or used as a residence with the owner's name on the house registration for a full year. The details are in Royal Decree No. 342, and should be checked with the land office or the Revenue Department before setting the price.
Example: one plot of land, three situations
Hypothetical example Selling price THB 100 million. Appraised value THB 60 million. The seller bears half of the transfer fee, THB 0.60 million. The individual acquired the land without the aim of trading for profit and no exemption applies. In the company case, the land cost is THB 40 million, SBT is paid and there are no accumulated losses. Figures in THB million.
| Item | Individual, held 3 years | Individual, held 8 years | Company |
|---|---|---|---|
| SBT 3.3% / stamp duty 0.5% | 3.30 | 0.50 | 3.30 |
| Seller's share of transfer fee | 0.60 | 0.60 | 0.60 |
| WHT for an individual | 3.46 | 7.18 | – |
| CIT 20% of 56.10 | – | – | 11.22 |
| Net proceeds before payment to shareholders | 92.64 | 91.72 | 84.88 |
| Dividend WHT 10% of after-tax profit of 44.88 | – | – | (4.49) |
| Net proceeds to the owner | 92.64 | 91.72 | 80.39 |
WHT calculation: the appraised value less the standard deduction of 77% for a 3-year holding leaves 13.80 ÷ 3 = THB 4.60 million per year. Tax per year of 1.1525 multiplied by 3 = 3.46. For an 8-year holding, the 50% standard deduction leaves 30.00 ÷ 8 = THB 3.75 million per year. Tax per year of 0.8975 multiplied by 8 = 7.18. This uses the same progressive rates as this website's calculation page, which does not apply the THB 150,000 exempt band.
The company case does not yet include the dividend tax credit, which may be available subject to the recipient's conditions.
The counterintuitive result is that in this example, holding for 8 years leads to a higher total tax than holding for 3 years, because a longer holding increases the number of years used as the multiplier, even though SBT no longer applies. The result can reverse when the appraised value or selling price differs from this example, so it must be calculated plot by plot. Waiting for 5 years merely to avoid SBT may also not be worth the holding cost.
When considering moving land into a company
There can be good reasons to put land into a company for long-term holding, such as actual development, ring-fencing risk or organising a group of businesses. But the transfer into the company is itself a transaction that may carry fees, income tax, SBT or stamp duty, and the price used must follow the prescribed rules. When the company later sells, there is still CIT and a further layer of dividends.
What to do and what to avoid
Planning that can be explained
- Choose when to sell by calculating actual net proceeds
- Keep evidence of the acquisition date, cost and house registration
- Agree clearly in the contract who bears the tax
- Choose the holder before buying, in line with the business plan
What to avoid
- Stating a price lower than the one actually agreed
- Transferring to a relative or a company temporarily, with no business reason, to change the tax status
- Backdating documents or creating evidence of residence that never existed
- Using a nominee holder to conceal the real owner
Next steps
- Gather the land's acquisition date, method of acquisition, cost and house registration
- Obtain the latest appraised value before setting the price
- Calculate net proceeds for at least 2 selling dates
- If the seller is a company, calculate through to the shareholders' hands
- Add the holding cost while waiting to sell to the comparison
- Have a tax adviser check the exemptions and the possible effects of any transfer