4 Taxes Related to Factory and Warehouse Rental in Thailand

4 Taxes Related to Factory and Warehouse Rental in Thailand

4 Taxes Related to Factory Rentals and Warehouse Rental 

Currently, many entrepreneurs and business people are renting factories and warehouses for their business operations because of their many advantages. One key benefit is flexibility, which allows business people to respond to changing business environments readily. Another advantage is tax reduction-the factory and warehouse rental fees are considered business expenses, and, in their profit and loss statements, business owners can record this expense in full to lower their companies' income taxes.

 Despite their many benefits, there are various taxes related to factory and warehouse rentals. We divide this article into two main themes. First, we will quickly pore over the benefits of renting a factory or a warehouse.

Second, we summarize and discuss crucial taxes associated with factory and warehouse rentals.

In this section, we shall present the advantages of renting a factory or a warehouse over owning a property.

 Factory and Warehouse for Rent Thailand

1. Free up Your Investment Capital

 One crucial significant advantage of renting a property is the better allocation of your investment capital. When you compare the rental cost with the factory or warehouse construction cost, the rental fee is much lower. As a result, the business operators feel at ease and have more room in their working capitals, which is vital when starting a new business venture or when they engage in business expansions.

2. Faster and Easier to Move.

Renting a factory or a warehouse allows business owners to respond quickly to changing business needs. Since the complexities companies face, renting a property provides the freedom to move locations or expand their factories and warehouses rapidly. Moreover, they do not worry about escalating budgets in relocations or expansions. You can neglect the wild construction costs.

3. Savings on Maintenance Costs (No Repair and Maintenance Costs)

When you rent a factory or warehouse from Pro Ind, you can be confident that your rented property is always in minted conditions. When your factory or warehouse requires some repairs, you do not need to allocate your cash for repair or maintenance fees. Also, you do not have to search yourselves for technicians for these repairs. We offer this exclusive service- Free Maintenance and Repair Service-to all of our tenants. In the property rental market in Thailand, the repair responsibilities would differ from landlords to landlords. Moreover, for those who rent elsewhere, you may need to negotiate with your landlords for similar services.

4. Less Start-up Time for Business

Since the construction of a factory or warehouse takes a long time to complete and requires a very high budget, renting premises helps you save time and money. During this construction period, business owners can miss many valuable business opportunities.

However, with renting, you can easily navigate through the offered properties. With such extensive available offered rental factories and warehouses, you can quickly assess these properties and find one best suit your operation.

Hence, renting allows business owners to start or expand their business immediately, without any interruption. They would not have to miss valuable business opportunities

We have discussed in detail the crucial benefits of renting a factory or warehouse in our article: Article 8 Advantages of Renting a Factory or Warehouse.

If you wish to learn more, please follow the link here.

 https://en.proindsolutions.com/17379000/8-advantages-of-renting-a-factory-or-a-warehouse

From here on, we would examine the four taxes related to factory and warehouse rentals.

 

4 Taxes Related to Factory Rentals and Warehouse Rental 

factory and warehouse rental taxes in Thailand

1. Withholding tax

1.1 Withholding Tax in Rental Fees

The first type of charges applied to rental properties is the withholding tax in rents. When a company or a person rents a factory or a warehouse from another party, the Lessee has the legal obligations to process the withholding process and provides a withholding-tax certificate to the Lessor (xxx). The withholding rate is 5% of the monthly rental fee, and the rentee has to pay this amount to the Revenue Department within the 7th of the subsequent month. Moreover, when there is a service fee, such as a common fee or a maintenance fee, the renter needs to deduct 3% tax, which is different from the rental rate.

 Please follow the example below for clarification.

Example 1: Company A rents a factory in its business, and the rental rate is 100,000 baht per month.

The renter must withhold 100,000 x 5% = 5000 baht of tax, submit this amount to the local Revenue Department, and finally issues a withholding-tax certificate to the Lessor.

 Therefore, the net rental payable to the Lessor is 95,000 baht (100,000 baht - 5,000 baht the withholding amount.)

 

1.2 Withholding Tax in Service fees

The second type of taxes applicable to factory and warehouse rentals is the withholding tax in service fees. When there is a service fee, the renter has the legal duty to deduct  3% from the service fees, and submit this retained amount to the relevant Revenue Department. The withholding rate here differs from the withholding rate in rents. Also, for the service charges, the rentee has to pay the Value Added Tax(VAT) of 7%.

Example 2: For example, Company A rents a factory for their business venture. On top of the rental fees of 100,000 baht per month, the landlord also levies a common fee of 10,000 baht per month to the renter.  In this case, the rentee has to apply two types of withholding taxes: one for rent, and another for the service fee.

 For the calculation of the withholding tax for the rental charge, please follow the previous example in Example 1.

 The withholding tax for service fee will be as the following:

 The common cost is 10,000 baht per month. Therefore, the renter has to withhold 300 (10,000x 3%) baht, pays this amount to the Revenue Department and issues a withholding tax certificate to the Lessor.

 Also, the lesser must add the VAT of 7%. In this case, the VAT would be 700 (10,000x7%.)

 Accordingly, the net service fee payable to the Lessor is 10,400 (10,000 - 300 + 700)  baht.

 Finally, the total rental and service fees liable to the Lessor is 105,400 baht (the net rental amount of 95,000 baht plus the final common fee amount of 10,400 baht)

 

2. Value Added Tax (VAT)

According to Thai regulations, real estate rentals, such as buildings, factory, and warehouse rentals, are exempt from VAT.  However,   rental contracts would typically contain the rental payments along with other fees-service fees, common payments, maintenance costs, or additional mischievous charges. 

When the Lessor's revenue is more than 1.8 million baht per year, then the VAT charge must be accrued under Thai law. Currently, the rate is 7 percent. Please refer to Example 2 for the detailed illustration of the VAT calculation.

3. Stamp Duty

For all factory and warehouse rentals, the lease contracts require proper stamp duties to be legally valid. In which the stamp duty will be at the rate of 0.1 percent of the rental fee throughout the contract. The party, who is liable to this tax, would depend on the arrangement between the tenant and its landlords.

For example, Company A entered into a factory-lease agreement for the rent of 100,000 baht per month, and this agreement has a three-year term.

The total rental fee throughout is 100,000 baht x 12 months x 3 years, totaling 3,600,000 baht.

As a result, the stamp duty, at the rate of 0.1 percent of the rental throughout the lease, is 3,600 baht (3,600,000 baht x 0.1 percent.)

 

4. Land and Property Tax

The Thai government has recently enforced a new type of real estate tax: the Land and Property Tax, and this law sets into motion from 2020 onwards. For land or buildings outside of agriculture and housing purposes, the related individuals have to pay this tax. Therefore, all properties for commercial pupposes, including retail land plots, buildings, stores, offices, factories, warehouses,

etc. are subject to this new tax. With the primary stage (first two years: 2020-2021), the government has applied the  following scale: 

For a property with a value of less than 50 million baht, the tax rate is 0.3% annually.

For a property with a value of 50-200 million baht, the tax rate is 0.4% annually.

For a property with a value of 200-1,000 million baht, the tax rate is 0.5% annually.

For a property with a value of 1,000-5,000 million baht, the tax rate is 0.6% annually.

For a property with a value of over 5,000 million baht, the tax rate is 0.7% annually.

Accordingly, before signing a rental contract, you should clarify with the property owner who is accountable for this payment. If you wish to learn more about this recent tax, please follow the link below on our thorough explanation in our article: Thailand's New Land and Property Tax. Click! Of us

 

5. Finally, the tax in property rental is the withholding tax in deposits. In most instances, real estate rentals would require some form of deposits as guarantees for the leased property. Often, people mistakenly regard deposits as incomes, and thus applied withholding taxes. However, following the Revenue Department, the deposit is not considered as income of the Lessor, and therefore the Lessee does not have to apply withholding charges. The rentee has to pay the deposits in the entire amounts when signing the agreement.

Despite many benefits in factory and warehouse rental, business operators have to be vigilant on applicable taxes. This article aims to provide insights on these charges so that you can make informed decisions.

 If you are interested in renting a high-quality factory or warehouse that comes complete funtions, please feel free to contact us anytime. Our projects are in excellent locations, and we offer free repair service throughout the rental contract. Our projects have very high security with 24-hour security guards and CCTVs. Please click on the link below for more information.

 

Factory for Rent Thailand

 

Warehouse for Rent Thailand

 

Sources: 

https://www.pattanakit.net/index.php?lay=show&ac=article&Id=538702709&Ntype=134

https://youtu.be/MCMZl5518zE

http://bit.ly/3a4hvIG

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