In the world of real estate investment and business, maximizing land utilization is key to generating worthwhile returns. Currently, two interesting legal tools allow landowners and investors to access and utilize land more flexibly and diversely: Rights over leasehold asset and Leasehold Rights.
Although both models primarily aim to grant others the right to utilize land, there are significant differences in terms of law, rights characteristics, and flexibility of use. This article will explore the differences between Rights over leasehold asset and Leasehold Rights hence the client is able to choose the right choice that suits your needs and objectives.
Rights over leasehold asset: A New Form of Land Rights for Agile Investment
Rights over leasehold asset is a new form of land rights created under the Rights over leasehold asset Act 2019 (B.E. 2562), featuring flexibility and agility in investment. Landowners can register their land to issue rights over leasehold asset, which can be bought, sold, transferred, mortgaged, or used as collateral in business transactions.
Holders of Rights over leasehold asset have the right to utilize the land as specified in the rights over leasehold asset contract, which may include building construction for commercial activities, industrial use, or even residential purposes. The duration is as specified in the contract, generally not exceeding 30 years.
Leasehold Rights: Rights to Possess and Utilize Land Under Contract
Leasehold rights is granted by landowners (lessor) to tenants (lessee) to possess and utilize land as specified in a lease contract, with a clearly defined duration. Tenants are obligated to pay rent to the landowner as agreed upon in the contract.
Leasehold rights can be divided into two main types: leases under the Civil and Commercial Code and leases under the Act on Lease of Immovable Property for Commercial and Industrial Purposes 1999 (B.E. 2542).
Key Differences Between Rights over leasehold asset and Leasehold Rights
Both Rights over leasehold asset and Leasehold Rights are legal tools that help landowners and investors utilize land to its full potential. Each model has different advantages and limitations. Choosing the right tool depends on the needs and objectives of each individual.
If you are looking for a flexible option, Rights over leasehold asset might be an interesting choice. But if you only need the right to possess and utilize land under a contract, Leasehold Rights are also a worthwhile option.
Before deciding on any tool, it is advisable to do some research and consult with legal experts to fully understand the details and requirements of each model, ensuring you can utilize your assets to their fullest efficiency and value.
Rights over leasehold asset and Taxation
1. Land and Building Tax
- Rights over leasehold asset Grantor (Landowner): Still liable for land and building tax at the normal rate as they retain ownership of the land.
- Rights over leasehold asset Holder: Not directly liable for land and building tax but will have an indirect tax burden through the compensation paid to the grantor.
2. Income Tax
- Rights over leasehold asset Grantor: Compensation received from granting Rights over leasehold asset is considered as income under Section 40(4) of the Revenue Code and is subject to pay personal income tax or corporate income tax, depending on the type of grantor.
- Rights over leasehold asset Holder: Compensation paid to the grantor can be deducted as an expense in calculating income tax.
3. Specific Business Tax
- Transfer of Rights over leasehold asset: Transferring Rights over leasehold asset is considered a sale of leasehold rights, subject to a 3% specific business tax on the appraised value or the purchase/sale price (whichever is higher).
- Mortgage of Rights over leasehold asset: Mortgaging Rights over leasehold asset is subject to a 1% specific business tax of the mortgage value.
4. Stamp Duty
- Rights over leasehold asset Contract: The investment asset contract is subject to a 0.1% stamp duty of the value of the property used as Rights over leasehold asset or the total compensation (whichever is higher).
Note: Tax rates and details are subject to change according to relevant laws.