A Guide for Property Owners
Investing in international real estate can yield excellent returns, but it is important to understand the tax obligations in different countries. This article provides a complete overview of taxes on rental income in Bali (Indonesia), Phuket (Thailand) and Georgia, detailing the rates, the impact of residency and the Double Tax Treaty (DTT).
Bali (Indonesia)
Rental income tax rates
- Non-residents (foreigners without local tax residency):
– 20% withholding tax on rental income in accordance with Article 26 of Indonesian law.
– This tax is withheld by the tenant or property manager at the time of payment.
– DTT may reduce this rate depending on the investor’s country of residence. - Residents (persons with local tax residency):
– Final tax on rental income of 10%.
– Rental income must still be declared on the annual income tax return, although the 10% withholding usually covers the tax liability.
– You must spend more than 183 days in Indonesia within a 12-month period to obtain a residence permit. - Additional taxes and expenses
– VAT (11%): Applies if the landlord is registered as a VAT payer.
– Capital Gains Tax: 2.5% of the sale price of the property (with possible reduction under DTT).
– Land and Building Tax (PBB): 0.3% of the taxable value of the property.
Phuket (Thailand)
Rental income tax rates
- Non-residents (foreigners without a Thai tax ID card):
– 15% withholding tax on rental income.
– Income must be transferred to a foreign bank account if the landlord does not have a Thai tax ID. - Residents (persons with TIN or local propiska):
– 5% tax on rental income, with registration with the Thai Tax Department.
– Deductions: Up to 30% of rental income can be expensed.
– Income is taxed on a progressive scale from 5% to 35% depending on total earnings. - Additional taxes and expenses
– VAT (7%): Required if the landlord’s annual income exceeds THB 1.8 million (about USD 50,000).
– Land and property tax:
– 0.3% for investment properties.
– 0% to 0.02% for personal residences, depending on the value of the property (for properties worth more than 10 million THB, or about USD 280,000).
Georgia
Rental income tax rates
- Non-residents (foreigners without local tax residency):
– 10% flat tax on rental income, with no additional tax liability.
– Non-residents are generally not required to file annual tax returns if tax is withheld at source. - Residents (persons with local tax residency):
– 5% tax on rental income under the simplified entrepreneur regime.
– Residents must report rental income in their annual tax returns, which may be subject to progressive income tax rates (0% to 20%).
– Residents must spend more than 183 days in Georgia during a calendar year to qualify for residency. - Additional taxes and expenses
– VAT (18%): Applies if annual rental income exceeds 100,000 GEL (about 37,000 USD).
– Real Estate Tax: 1% of the property value, applies to expensive real estate.
Impact of double tax treaties (DTTs)
Double tax treaties allow for lower withholding tax rates on rental income and capital gains for foreign investors. To qualify for the program, a tax residency certificate from the investor’s country of residence must be submitted to the local tax authorities.
Residency status and its impact on taxes
Non-residents (foreigners without local residency):
– Higher withholding taxes: 20% in Bali, 15% in Phuket and 10% in Georgia.
– Income is taxed at source, with minimal deductions and exemptions.
– Can take advantage of preferential rates under DTT.
Residents (with local tax residency):
– Lower tax rates: 10% in Bali, 5% in Phuket and 5% in Georgia.
– Eligible for deductions and exemptions such as personal and living expenses.
– Required to file annual worldwide income tax returns.
Conclusion
Navigating taxes on rental income in Bali, Phuket and Georgia is key to maximizing income and ensuring compliance. Non-residents are subject to higher withholding taxes, but they can claim DTT benefits. Locals enjoy lower tax rates, deductions and exemptions. Working with a local tax advisor and a reliable property management company can help investors comply with legal requirements and maximize the benefits of their real estate investments. This guide will help you prepare well for the tax landscape in these markets and make informed decisions for your international real estate portfolio.