Large property developers buying up land in Krabi, Koh Samui and Phuket use fake Thai owners to avoid taxes.
TAX EVASION: Crackdown on foreign nominee land sales by Wichit Chantanusornsiri and Kanana Katharangsiporn
The Excise Department will strictly inspect land transactions in highly popular tourist destinations in the South where tax evasion is said to be widespread.
According to a senior official, property sales in Krabi, Koh Samui and Phuket have mushroomed in recent years, skyrocketing land prices in some areas 100-fold from a decade ago.
This is mainly because property developers are attempting to accumulate land banks to develop hotels, resorts and residential projects to serve high demand from foreigners, who use Thai nominees, the source said. Foreign nationals are not allowed to own land in Thailand.
A corporation selling land to a nominee that then resells to another company saves both companies a lot of taxes.
The withholding tax rate for land sales between an individual and a company is calculated based on the appraisal value of the Land Department, while a company-to-company sale is based on the transaction amount, which is usually higher than the appraisal prices.
"Any transactions executed through nominees violate the Excise Act," said the source.
The department assigned Regional Excise Bureau 11, which covers eight southern provinces, to upgrade their IT systems to be more efficient at inspecting and tracing nominee transactions.
The bureau plans to inspect each transaction that indicates an unusual transfer, such as between three parties, and compare the sale price with the state land appraisal. If a transaction is proven illegal, the bureau can reassess the tax payment.
Amy Koh, shop manager of property consultant Engel & Volkers, said tax evasion is usually committed by small or new property firms because listed developers are audited. The withholding tax rate for land sales between individual and company is calculated based on the appraised value of the Land Department while transactions between companies are based on actual deal prices, which could be much higher than the appraised prices.
Land prices in Phuket reached 200 million baht a rai or 500,000 baht a square wah on Patong Beach in 2008, but appraisals by the Treasury and Lands Departments were much lower.
Land transactions between corporations include transfer fees, special business tax and corporate income tax, which involves step-up rates. The transfer fee and special business tax are based on appraisal prices, but the corporate income tax is based on net profit.
Stricter scrutiny on actual sales prices between companies would help prevent the department's revenue loss.
(Source: Bangkok Post, TAX EVASION, Crackdown on foreign nominee land sales, 17/05/2011, Wichit Chantanusornsiri and Kanana Katharangsiporn, link)
crackdown - strong action that someone in authority takes to stop a particular activity การใช้กำลังเข้าปราบปรามของเจ้าหน้าที่, การใช้กำลังสลายผู้ประท้วง
nominee - a legal arrangement whereby investments are held by a person or company on behalf of the real owner ผู้รับถือหุ้นให้บุคคลอื่นที่ไม่ต้องการจะเปิดเผยตัวตน
foreign nominee - when a foreign person or company uses citizens of a country (here: Thai citizens) to pretend to be the legal owners of the land (but the foreigner actually owns the land)
strictly - very exactly or correctly; completely อย่างเข้มงวด
inspect - to look at something carefully ตรวจสอบ
transaction - a business dealing การติดต่อทางธุรกิจ the process of buying and selling something
land transaction - the process of buying and selling one piece of real estate (land, building, home, etc)
tourist destination - place where a lot of tourists go, a popular place for tourists
evasion - avoiding (doing something you must do) การหลีกเลี่ยง
tax evasion - the crime of not paying the taxes that you owe the government
widespread - happening or existing in many places, or affecting many people อย่างแพร่หลาย
mushroom - increase by a large amount very suddenly
skyrocket - same as "skyrocket"
100-fold - 100 times (bigger, smaller, more valuable, etc)
decade - a period of ten years ทศวรรษ, ระยะเวลา 10 ปี
accumulate - to get more and more of something over a period of time สั่งสมมานาน
residential - houses for families to live in (not businesses) บริเวณที่พักอาศัย
demand - the need and desire to buy goods and services by households and businesses
source - someone who gives information แหล่งข่าว
withholding tax rate - the percentage taken by the government from an employee's pay check as payment for income tax
rate - the level or speed at which something happens or changes, or the amount or number of times it happens or changes in a particular period อัตรา
individual - a person (considered separately from their society or community) บุคคล
appraisal value - the value given to the real estate by the government (for the purposes of taxation)
appraisal price - same as "appraisal value"
violate - to do something that is against a law, rule or agreement ฝ่าฝืนกฎหมาย
upgrade - improve; make new, modern, and up-to-date
efficient - produces a lot from few resources; doing a task with no waste of time, money or energy
bureau - a government organisation สำนักงาน
transfer - to official arrange for someone else to be the owner of something โอน
parties - people or companies entering into a business arrangement or deal
state - government รัฐ
illegal - against the law ผิดกฎหมาย, นอกกฎหมาย
reassess - think about it again and possibly change what you think about something
commit a crime - break a law
audited - to have your accounting records examined for accuracy
actual - real; existing in fact จริง
corporations - a large company (registered with the government as separate legal entity, owned by many shareholders) (See Wikipedia)
fee - money that you pay to be allowed to do something ค่าธรรมเนียม
transfer fee - money you pay the government as a tax, in order to sell or transfer your real estate to a new owner
income - money that people receive from work or some other source, used for household consumption and savings
income tax - a percentage of a person's income paid as tax to the government every year
step up rate - increasing rates (perhaps as the value of the land goes up, but note stated)
profit - money that you make from selling goods and services after all your costs have been paid กำไร
scrutiny - careful examination of someone or something การใคร่ครวญอย่างละเอียด
revenue - income from taxes or business activities รายได้
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