Taxes on Rental Income from Real Estate in Thailand

Who Pays Tax on Rental Income

Income from renting out real estate located in Thailand is assessable income under the Thai Revenue Code. Both Thai nationals and foreigners are required to pay tax on such income, regardless of whether the rent is transferred to a bank account inside Thailand or abroad. If the property is physically located in Thailand, the income derived from it is considered Thai-sourced and is taxable here.

The key reference point is tax residency status. Under Section 41 of the Revenue Code, a person is considered a tax resident if they have spent a cumulative total of 180 days or more in Thailand during a calendar year. In practice, for rental income this distinction makes little difference: both residents and non-residents pay tax on income derived from Thai real estate. The residency distinction matters more in the context of foreign-sourced income and the application of double taxation agreements (Russia and Thailand have such an agreement in force).

Rental Income Is Taxed as Ordinary Income

Thailand does not have a separate 'rental tax.' Rental payments form part of an individual's total annual income and are taxed under the progressive Personal Income Tax scale. The same approach applies, incidentally, to gains from the sale of real estate: there is no separate capital gains tax in Thailand, as appreciation in asset value is included in ordinary income.

Progressive Tax Rate Scale

Personal income tax rates are progressive, ranging from 5% to 35%. Income is divided into brackets, with each portion taxed at its own rate (this is a marginal scale, not a flat rate applied to the entire amount).

Tax is not applied directly to the gross rental amount; rather, it applies to income after deductions and personal allowances. For rental income, an expense deduction is permitted: either based on actually documented costs of maintaining the property, or as a standard percentage of the gross amount (for residential property, typically around 30%). In addition, a basic personal allowance of 60,000 THB applies, along with any other personal deductions to which the taxpayer is entitled.

Two Returns Per Year

A specific reporting procedure applies to rental income, requiring not one but two returns per year:

• Annual return (PND 90/91) - filed by the end of March of the year following the tax year.
• Mid-year return (PND 94) - mandatory specifically for 'passive' income such as rent, fees, income from construction, and sale of goods. The deadline is the end of September of the current tax year, and it covers income earned in the first half of the year. Tax already paid under this return is then credited against the annual tax calculation.

This means that an owner renting out an apartment or villa will, as a rule, file twice: in September for the first half of the year, and in March as a final return for the full year.

Withholding Tax

If the tenant is a legal entity (for example, a Thai company renting accommodation for an employee, or renting office space), it is required to withhold tax at source when paying rent and remit it to the Revenue Department. For real estate rental, the withholding rate is generally 5%. This is not an additional tax but rather a prepayment: the withheld amount is credited against the property owner's final tax liability under the annual return. Where an individual rents from another individual, withholding generally does not apply, and the landlord declares and pays the tax directly.

Penalties for Non-Compliance

Tax compliance in Thailand is backed by significant sanctions:

• Failure to file a return: a penalty equal to twice the amount of tax due, plus a surcharge of 1.5% per month.
• Filing an incorrect (understated) return: a penalty equal to the amount of tax due, plus the same monthly surcharge of 1.5%.

The surcharge accrues for the entire period of delay, so postponing payment is financially disadvantageous.

Double Taxation Agreement

A tax treaty is in force between Russia and Thailand. Income from immovable property is, as a general rule, taxable in the country where the property is located, that is, in Thailand. This does not eliminate tax obligations in the country where the owner is a tax resident, but it does allow the tax paid in Thailand to be credited and prevents the same amount from being taxed twice. The specifics should be verified against the current text of the agreement and the owner's particular residency status.

What to Check and What to Pay Attention To

• Count your days. 180 or more days in Thailand during a calendar year equals tax resident status (Section 41). This affects the taxation of foreign-sourced income and the application of the tax treaty.
• Do not miss the mid-year PND 94 filing deadline at the end of September - for rental income it is mandatory, not optional.
• Choose your method of expense deduction - actual documented costs or the standard percentage - and compare which is more advantageous.
• Obtain a Thai Tax Identification Number (TIN) and file a return even on modest income where required - this eliminates the risk of a penalty.
• Retain the lease agreement and payment records as proof of income and expenditure.
• Clarify who the tenant is. A legal entity withholds 5% at source; obtain a withholding certificate for the credit.
• Consider foreign exchange controls. For future repatriation of funds abroad, it is important that the FET form (formerly Tor Tor 3) was correctly completed when the money was brought into Thailand.
• Cross-reference the Russia-Thailand agreement to avoid being taxed twice on the same income.
• Where rental turnover is at all significant, it is advisable to engage a Thai accountant - this is cheaper than penalties and surcharges.