In our tax article for April 2017, we noted that the Thai Revenue Department issued Notification of the Director-General of the Revenue Department No. 4 which sets out the rules that exempt taxes from the transfer of an individual’s property to a company or legal partnership, and the sale of goods by that individual to such a company or partnership.
Keywords: Mazars, Thailand, Tax, Revenue Department, Incentives, Register, Company, Legal Partnership
03 July 2017
As one of the conditions for tax exemption, the property must be transferred at market value to a company or legal partnership that is registered for incorporation from 10 August 2016 through 31 December 2017. The transferred property must be used as the registered capital of the company or legal partnership.
In June 2017, the Thai Revenue Department issued Notification of the Director-General of the Revenue Department No. 5, which adds the following statement to the above condition:
“For the transfer of land or land with a building, the transfer value must be: (1) the appraised value, as at the transfer date, for the purpose of collecting an immovable property transfer fee under land law; or (2) the purchase price of the land or land with a building as set out in the sale or purchase agreement that was made at the Land Office, whichever is higher.”
This law shall be effective and apply to the transfer of property on 5 June 2017 onward.
Therefore, as a result of this amendment, if the individual were to transfer such immovable property to the company or legal partnership, the transferee must record the transferred property at the value mentioned in the above paragraph. The subsequent sale of that immovable property is likely to result in higher taxable gains for the company or partnership, compared to where the transferred property was recorded at market value as under the previous law, as that sale must be at market value.