Most property buyers in Phuket are not aware that their rental income is subject to tax. Whether this is wilful ignorance or simply negligence doesn’t change the fact that the tax liability is real.
Whether you live in Thailand or overseas, any Thailand-sourced income you earn is taxable, and that includes rental income from Phuket real estate. But while the tax is based on the income tax bracket in which you fall, the permitted deductions mean it is actually not that punitive.
The rate of withholding tax does change depending on where you live, and it should be paid as and when your rental income is collected. If you are a tax resident of Thailand, 5% of any income paid to you by a “juristic person” must be withheld, whereas no withholding tax is payable on rent paid by an individual. If payment is made to individuals who are not tax residents of Thailand, a 15% withholding tax applies across the board. (Please Note: not only landlords are liable for withholding tax. The tenant is jointly liable, so any renters or lessees must be aware of this!)
If you own the property you may deduct a flat 30% for expenses and upkeep, but if there is a chance that your bills will run higher than this, deductions can itemised. (Be sure to save your receipts for everything related to the property!) Please note this deduction only applies to owners. If you have a leasehold villa, which you are renting out, you are not the owner. Technically speaking, you are only sub-letting it, and therefore not able to claim any such deduction.
While on the topic of villas, it is mind boggling how many people don’t know that living in a villa owned by a Thai company creates a separate income tax liability. A number of foreigners are directors of the company which owns their home. Unless they are paying rent to the company, that home becomes a perk of the job. Not only is the amount of fair market rent taxable as income to the individual, it is also taxable as rental income to the company. (This does not apply only to villas, but also to condos, bungalows or any property.)
As in any country, failure to pay your tax also brings penalties. And ignoring the tax on your rental income is not just a fine of a few baht, but can actually be equal to the unpaid tax bill itself. This means you owe the tax AND the fine, which basically doubles your tax bill. On top of that, there is a surcharge of 1.5% per month for the period the tax remains unpaid.
Now that you’ve been sufficiently scared into action, how do you actually go about paying the tax?
You must file your taxes each year before the end of March (e.g. 31st March 2020 for income earned in calendar year 2019).
Most people don’t enjoy doing their income taxes, so they seek out an experienced accountant.
If you are not intimidated by tax forms and want to try it yourself, there is an English language website from The Revenue Department, complete with guidelines and downloadable forms. Click here.
Phuket also has four Revenue Department offices: two in Phuket Town (which includes the main office for Phuket Province), plus one in both Kathu and Thalang. For contact numbers for each office, click here.
Of course the big question on everyone’s mind is this: how much tax do I really need to pay? Albert Einstein once said of income tax that it was the hardest thing in the world to understand. Thankfully, you don’t need to hire a theoretical physicist to figure out how much tax you owe on your Thai rental income.
Assuming your Phuket condo brings in an income of US$ 1,500 per month (US$ 18,000 per year), after deductions your tax bill would come to only about 3%. On a larger property such as a villa, assuming income of $144,000 per year (US$ 12,000 per month), your tax bill would still come in under 16%.
Is conning the tax man really worth it for a bill that could be under $1,000 per year?