One of our tax clients asked us on how to revalue the land and houses in Thailand. Normally, land ownership is not possible to foreigners but there are certain ways on how foreigners can own land in Thailand. Our client has set up a Thai majority owned company.

If the company is engage in the business of real estate (buy and sell of land and houses), the land and houses are treated as inventory so the appreciated amount will be income to the company. Thus, when the company revalues the land and houses, it has to book the gain/loss into the company’s profit and loss statement, whereas there are taxes to be paid in case of profits.

However, if the company is not selling real estate, the land is just a normal fixed asset. In summary, if you get the revaluation report and it shows that the land’s value has appreciated and you want to book the appreciated amount in the company’s accounting, it will be booked in the shareholders’ equity section of the Balance Sheet, not as an income in the Profit and Loss Statement. That means no tax to pay yet.

To explain it further, according to the Thai Revenue Department’s Revenue Code Section 65 Bis, value of assets other than value of stock on the last day of an accounting period shall be calculated in accordance with the cost or market price, whichever is lower, and such value shall be deemed to be the value of stock carried forward into the new accounting period, shall use the normal purchase price of such asset and in the case of appreciation in the value of the asset, such appreciation shall not be included in the calculation of net profit or net loss. If any item of assets is entitled to depreciation or depletion, depreciation and depletion shall be deductible in the calculation of net profit or net loss in accordance with the rules, procedures, conditions and previous rates applicable before the appreciation in the value of assets by deducting and only the remaining period and remaining cost of capital of the assets shall be deducted.

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