Registration Fees and Taxes in Property Transactions
June 26, 2009
An issue that frequently arises in property purchase transactions in Thailand is who should be responsible for the registration fees and taxes payable upon the transfer of property title. The registration fees and taxes can amount to a significant premium on the purchase price and consequently the point is well worth negotiating with the Seller.
The purchase contract provided by the Seller will often state that all registration fees and taxes shall be paid by the Buyer and impress upon the Buyer that they have been given a really great deal and that the Seller could not possibly absorb the costs of registration fees and taxes in addition to the great deal offered. Any such clause is too wide and exposes the Buyer to the risk of paying registration fees and taxes which are the sole responsibility of the Seller.
According to the Thai Revenue Code and other regulations, certain registration fees and taxes are the sole responsibility of the Seller, these include (but are not limited to) corporate withholding income tax and special business tax which can amount to thousands of US dollars. It is important that if such taxes are payable, the purchase contract clearly states that they are the sole responsibility of the Seller.
All negotiations with the Seller should be limited to registration fees and taxes which are not the seller's sole responsibility. Generally speaking, these relate to land transfer fees relating to the transfer of land, buildings and condominiums (which amount to 2 percent of the of the officially assessed land value) and lease registration fees (which amount to 1 percent of the assessed rental value).
It is also acceptable for the Buyer and Seller to share the cost of any stamp duties payable upon registration. Thai law and the Thai Revenue Code provide no guidance to Buyers or Sellers as to who should bear these fees and consequently, this is a commercial point to be negotiated between Buyer and Seller. A fair compromise would be that Buyer and Seller bear these fees equally.
It is also important that both the Buyer and the Seller are individually responsible for their own legal fees in relation to the transaction. Any attempt by the Seller to pass on its own legal fees to the Buyer should be strongly resisted.
It is important that any negotiations with the Seller are conducted and concluded prior to the purchase agreement being signed and payment of the deposit being made to the Seller. The Buyer's scope to negotiate changes to the purchase agreement are significantly reduced after the agreement has been signed and the initial deposit has been paid.
Desmond Hughes is a partner in Belmont Limcharoen.
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