Withholding Tax for Sale of Property with Co-Owners
According to Thai Revenue Department regulations1, when the immovable property, such as land, with co-owners is sold, then payment of withholding tax when the transaction is registered at the Land Office shall apply as if the co-owners are engaged in an ordinary partnership according to Section 1012 of the Civil and Commercial Code2; in other words, the payment of withholding tax applies jointly to all co-owners, rather than separately. However, the regulations are not clear as to how this rule applies when the co-owners sell their portions of the immovable property at separate times. In one instance, a plot of land in Lat Krabang, Bangkok was originally acquired in co-ownership in 1993 by five members of a family, A,B, C, D, and E. Later in 2012, the family registered a limited company and sold their land to the company, but had done so in two separate transactions. A, B, C, and D sold their portions of the land together, while E sold his portion of the land in a transaction occurring two days later.
- In the first transaction, the sales price was 81,631,200 baht and the Land Office collected withholding tax calculated on the basis of the appraised value of 25,655,520 baht.
- In the second transaction, the sales price was 20,407,800 baht and the Land Office collected withholding tax on the basis of the appraised value of 6,413,880 baht.
The Revenue Department considered the facts and held that in determining who has the duty to pay taxes, the intention of the parties must be considered along with the applicable law. The Revenue Department held that the actions of the five family members in acquiring the property together had the characteristic of an action whereby two or more persons unite together for a common undertaking with a view of sharing profits which may be derived therefrom, which would be considered an ordinary partnership within the meaning of Section 1012 of the Civil and Commercial Code. Furthermore, the family sold both portions of the land to the same buyer, which was their own company, and the time period between the two transactions was only two days apart. Therefore, it can be determined from the aforementioned facts that the family members intended to sell the entire plot of land as a single whole. In this case, the family members should have been taxed as an ordinary partnership in both transactions.
Thai tax law is complex, especially as it applies to real estate matters. Real estate investors are advised to consult with competent Thai Lawyers.
1 Clause 4(2) of the Order of the Revenue Department No. Por 100/2453 Re: Payment of Personal Income Tax and Stamp Duties In the Case of Sale, Transfer of Ownership, or Transfer of Right of Management in Immovable Property, entered on 24 November 2000.
2 This rule only applies when the co-owners had acquired their ownership of the immovable property at the same time.
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