Taxation of real estate agents
Real estate agents, when providing services to the seller to find buyers and close the transaction, receive a fee in the form of a commission - this is income that will be taken into account when calculating the company's income tax at the end of the year, as well as when paying VAT for the reporting month (if the company is a VAT payer ).
When concluding the contract, the buyer confirms his intention to purchase the property by paying a deposit - in case of canceling the transaction, the deposit remains with the seller. If the seller refuses the transaction, the deposit is returned to the buyer (together with penalties, if provided by the contract).
Often, when making a deposit, the parties involve a real estate agent to act as a kind of guarantor - the buyer transfers the deposit to the agent, and the agent will either offset it into the value of the real estate, or, if the transaction did not take place, transfer the amount of the deposit to the innocent party.
It is important to prepare the necessary documents before receiving the money to the agent's account, excluding the possibility of determining the amount received as the agent's income.
This will help avoid the forced registration of the company by a VAT payer (when the turnover reaches 1.8 million baht, the company must apply for a VAT certificate within 30 days), or, if the company is already registered, payment of VAT on the amount of the deposit received.
In addition, in the absence of documentary justification for receiving a deposit, the specified amount of someone else's money at the end of the year will be taken into account by the auditor when calculating the profit tax of the agent company.
An escrow account is a temporary account held by a third party (agent) for use in settlements between parties to a real estate purchase agreement.
After all the terms of the agreement are fulfilled by the buyer and the seller, the funds will be paid from the escrow account in accordance with the agreement, and the account itself will be closed.
According to the Escrow Account Act, only commercial banks and financial institutions can act as escrow agents.
Thus, the services offered by law firms and real estate agencies - to accept money from the buyer and send them to the seller upon the registration of the transaction with the land department - can be called "escrow services" only conditionally. Escrow is a purely financial service that requires an appropriate license.
The essence of the services of an agent or a lawyer is to simplify the procedure for settlements between a buyer and a seller of real estate, to receive credit advise for the buyer when sending money from abroad.
In order not to go beyond the permitted types of activities, as well as to exclude the payment of taxes on other people's money, in essence, the agent must take into account the following:
1. Do not use the term "escrow" in communication with the client, so as not to mislead him about the nature of the services provided.
2. Exclude from the contract for the provision of services the terms "escrow", "financial services" and other terms that may raise suspicion that you are providing services that require a special license.
3. Specify exactly the list of actions that the agent performs.
4. Indicate exactly how much will be received from the buyer and how and when the buyer wants to dispose of it.
5. Indicate the amount of the agent's remuneration - which will be his actual income.
Services, like escrow services, imply strict accountability - to the penny (satang). Your accountant should receive documents on the basis of which it will be clear where your income is, and where is the money of the buyer and seller.
If you have any doubts, it is better to contact a lawyer. At least to draw up a contract for the provision of services, or to provide the services themselves and shift all responsibility to a lawyer.
Taxes when an agent works with a developer
The agent's commission when working with a developer will definitely be included in the company's income. If the company is a VAT payer, 7% of the amount received must be paid by the 15th day of the next month.
Important: VAT must be indicated separately from the basic cost of services. For example, agent commission is 100,000 baht excluding VAT, VAT 7,000 baht. Only 107,000 baht. But as far as services are concerned, the developer must deduct and pay to the tax office a withholding tax of 3%, which is also calculated on the principal amount and is 3,000 baht. Total payable: 100,000 + 7,000 - 3,000 = 104,000 baht.
All taxes must be correctly displayed on the invoice and this is the agent's job.
However, in most cases, developers are not willing to pay VAT for the agent. After all, developers are not VAT payers, which means they have no such thing as a tax credit and paid VAT is not refundable.
The developer protects his interests by including VAT in the agent's commission, which in the contract will look something like this: "the agent's commission is 5%, including VAT" or "the commission is 100,000 baht, including VAT" or "the commission is 93 460 baht, plus VAT 6,540 baht ".
Considering that the real estate agent's main expenses - office rent, salary, bonuses to employees - do not include VAT, VAT refunds are also highly questionable. This means that the most profitable option is to be a VAT non-payer.
For all matters of taxation of real estate business, please contact us: + 6687-348-57-03.
Author: Alexandra Agapitova
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