Legal and Tax Obligations: A Misunderstood Reality
A widespread misconception among individual villa owners is that their rental assets are exempt from commercial regulation. The Hotel Act B.E. 2478 (1935) defines the provision of daily accommodation as operating a hotel business. This requires registration, licensing, and compliance with regulatory standards.
Even if the assets are not registered for operating as a hotel business, the short-term rentals derived are subject to tax. If annual income exceeds the statutory threshold of B1.8 million, operators (individual/company) should register for Value Added Tax (VAT), if the income is subject to VAT rules. Once registered for VAT the registrant must meet the necessary compliance requirements which includes issuance of proper tax invoices, filing of monthly tax returns, and so on.
Rental income is further subject to Personal Income Tax as assessable income under Section 40(5), or Section 40 (8) depending on the nature of renting activity, or Corporate Income Tax for a company. Properties used for commercial rental are also liable for Land and Building Tax at commercial rates.
Many owners still treat rental income as informal and remain outside the tax system. This results in lost government revenue and creates unfair competition for licensed hotels that comply with regulatory and operational requirements.
Data Driven Enforcement: A New Chapter for Compliance
The authorities are investigating this matter, and several owners have been assessed for tax payments with substantial fines and penalties. The era of operating unnoticed is coming to an end. The Revenue Department has intensified its enforcement efforts through the use of digital tools and advanced data analytics. Current audits focus on three key areas:
- Data matching and financial trails: Authorities cross-check bank transfers, financial transactions, and hotel registration data to identify unregistered operators.
- Digital footprints from platforms: Revenue and booking records from platforms allows to compare actual earnings with tax filings.
- Withholding Tax Records: Rentals managed through agents or companies are subject to mandatory Withholding Tax, set at 5% for residents and 15% for non-residents, providing additional verifiable data available with the Revenue Department.
Local Impact and the Path Forward
Proper tax compliance is critical for all parties involved. With millions of visitors arriving each year, bringing villa rentals into the formal tax system is increasingly important for sustainable growth.
As stricter audits and advanced technological tools take hold, the risks of non-compliance are higher than ever. Villa owners should maintain accurate records, declare income transparently, and fulfill all tax obligations. Doing so is not only a legal requirement but also an important contribution to Phuket’s long-term stability and fairness within its tourism economy.
For more information, contact: infophuket@bdo.th