What Is Real Estate Specific Business Tax (SBT)?
Specific Business Tax, or SBT, is a type of taxation levied on the profits of certain business activities outlined in Chapter 5 of the Thai Revenue Code, real estate being one of them. The tax was introduced in 1992, replacing Business Tax and targeting those businesses where Value Added Tax does not apply.
All immovable property transfers considered a trade (done for profit) are subject to SBT according to Section 91/5 of the Revenue Code. In those cases, the taxation rate is 3% of the sale price or the property appraisal price, whichever is higher. However, the sum of that 3% SBT calculation is then subject to a 10% local tax, meaning that the amount owed on a Specific Business Tax property transaction is actually a total of 3.3%.
Real estate SBT applies to many forms of real estate based on Thai tax and property law, regardless of how they were acquired, as long as they were sold for profit. The list includes:
- Commercial real estate
- Condominiums
- Vacant land
- Townhouses
- Houses
- Villas
How To Calculate Property Specific Business Tax
Property specific business tax is calculated by taking either the sales price or the appraisal price of the real estate (whichever is higher) and multiplying it by 3.3%. Here are some real life examples of what the SBT might be for different property types.
| Specific Business Tax on Condominiums | For a condominium in the Watthana neighborhood with a sales price of 6.4 million Baht and an appraisal price of 6 million Baht, you would take the higher amount and calculate the SBT as 6,400,000 x 3.3% = 211,200 Baht. |
| Specific Business Tax on Houses | For a house in the Huai Khwang neighborhood with a sales price of 60 million Baht and an appraisal price of 55 million, you would take the higher amount and calculate the SBT as 60,000,000 x 3.3% = 1,980,000 Baht. |
| Specific Business Tax on Vacant Land | For 2848 square meters of vacant land in the Sathon neighborhood with a sales price of 650,000,000 Baht and an appraisal price of 680,000,000, you would take the higher amount and calculate the SBT as 680,000,000 x 3.3% = 22,440,000 Baht. |
Who Is Liable To Pay Specific Business Tax Upon the Transfer of Property?
The person liable to paying Specific Business Tax upon the transfer of property in Thailand is the seller of the property. However, this is negotiable, and sometimes buyers will make full or partial SBT payments based on the sale and purchase agreement.
During Thai property ownership transfers, it’s common for the buyer and the seller to discuss and agree to this before completing a real estate transaction.
How To Pay Specific Business Tax at the Land Office?
To pay Specific Business Tax at the Land Office, the seller must pay the total in front of the Registrar of Rights and Legal Deeds. The process involves the seller filling out and submitting form P.T.40 (Phor.Thor.40) along with making both the SBT and withholding tax payment. The total SBT due will include the base 3% along with a 10% local tax applied to that SBT, making the total 3.3%.
What is the Procedure for Paying SBT at the Land Department?
The procedure for paying SBT at the Land Department involves 3 main steps:
- Filling in the P.T.40 form, using the higher value between the selling price and the appraisal value as the basis for SBT.
- Submitting the form along with supporting documents that prove the purchase price. This could include a mortgage contract if applicable or a sale and purchase agreement.
- The seller must then pay the SBT along with the local tax (total of 3.3%) and any applicable withholding tax.
Is Under-Declaring the Selling Price for a Reduced SBT Legal?
No, under-declaring the selling price of a property for a reduced SBT is not legal. The SBT needs to be based on either the agreed-upon price in the sales and purchase agreement or the appraisal price, whichever is higher. Under-declaring the purchase price is illegal and can lead to a fine from 2,000 to 200,000 Baht according to Section 37, paragraph 2 of the Thai Revenue Code.
What Documents Are Needed When Paying SBT?
The main supporting documents needed when paying SBT include:
- Proof of Ownership such as a land or condo title deed
- ID such as a national ID card or a passport
- House Registration Book or ‘Tabien Baan,’ if applicable
- Marriage or divorce certificate, if applicable
- Sale and Purchase Agreement
Conditions for Property Specific Business Tax Exemption
There are 4 main conditions for property Specific Business Tax exemption, some of which are accessible to almost any property owner in The Kingdom.
1. Registration of the Property as Primary Residence
Registering a property as your primary residence for at least 1 year is one way of becoming exempt from SBT. To list a property as your primary residence, you’ll need to make a trip to the Land Office and register yourself in the Tabien Baan (house registration book) associated with that piece of real estate.
Thai nationals and permanent residents can aim for registration in the blue house registration book (Thor.Ror.14), while temporarily visiting (foreigners) property owners and must use the yellow one (Thor.Ror.13). This will officially associate that property as your primary residence which will eliminate SBT when transferring the real estate in the future.
2. Maintaining Ownership for 5 Years
Maintaining ownership of a property for 5 years or longer proves that you weren’t simply holding the property as a short-term profit vehicle. The government treats these as residential ownership and does not apply SBT.
Ownership begins from the day after registering the transfer of ownership or possession rights. For example, a condo purchased and registered as owned on April 22nd, 2015 would be eligible for SBT exemption if it were transferred and registered to a new owner on April 23rd, 2020 or later.
3. Transfer of Ownership Through Inheritance
Transfer of ownership through inheritance generally means that the property is not subject to Specific Business Tax. Instead, inherited property may be subject to an inheritance tax depending on the type of transfer.
According to Thailand inheritance law, inherited property is divided into that which is transferred while the former owner was alive and dead. In the case where the former owner is alive, the following categories exist:
- Legitimate children do not owe SBT on inherited property.
- Non-legal children owe SBT if the owner held the property for less than 5 years or didn’t register it as their primary residence, otherwise stamp duty of 0.5% of appraisal value.
- Relatives other than children also owe either SBT or stamp duty.
If the former owner is deceased, Specific Business Tax does not apply to whoever rightfully inherits the real estate.
Is There an Alternative Tax in SBT-exempt Cases?
Yes, there is an alternative tax in SBT-exempt cases, known as a stamp duty of 0.5%. This stamp duty is applied to the sale or appraisal value of the property (whichever is higher). So, if you’ve managed to avoid paying the larger 3.3% SBT, you’ll still have to pay the smaller stamp duty.
To pay stamp duty in Thailand, you must visit a Revenue Department Office (or district office if not in Bangkok) and file form Or.Sor.4. While submitting the form, you’ll pay the related stamp duty.
Buying or selling real estate and finding property taxes like Specific Business Tax confusing? Contact PropertySights Real Estate today to consult with a team of experts that can help you through the process.
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