Tax Man Hitting Phuket's Rental and Leasehold Properties
Cherngtalay Municipality (Or Bor Tor) has initiated a comprehensive campaign on the collection of tax on leasehold and rental properties. Covering leased land, buildings, or apartments the amount is calculated at 12.5% a year on the annual lease or rental amount recorded in the subject agreements. This tax has been largely overlooked and not widely applied in the past, but given the rise in holiday rentals of villas and apartments as well as leased property sold to foreigners the tax is now being more widely applied.
Building and land tax applies to all municipalities in Phuket and throughout Thailand, and typically is targeted at rental type properties. Given the relative vagueness between the terms "rent" and "lease" in Thai, leasehold ownership falls into this category as well. With the growing number of properties being rented and competing with hotels on daily, weekly and longer term rentals, Municipalities are now looking to tap into this income stream.
When speaking to estate management groups and rental agencies the subject of the effective use of the tax in terms of quality services was brought up and certainly putting these funds to good use remains to be seen. In the meantime expect this issue to gain more attention as new tax bills start popping up throughout Phuket. The tax remains controversial from the standpoint that many foreigners investing in property have elected to go the legal route versus nominee and use leasehold as the ownership option, and under this tax there is a considerable cost over the initial 30 year term.