Usufruct and Thai Taxes: Registration Fee, Rental Income and Withholding

Reviewed by ThaiLawOnline, a licensed Thai law firm practising in Thailand since 2006. Thai lawyer of record: Wichuda Atthamethakon, LL.M., Thai Bar Licence 3149/2556.

Last updated on September 5, 2026

Key Takeaways

• Registration Fee:1% fee plus + 0.5% stamp duty calculated on the consideration amount. If no consideration, a fixed fee per plot is charged about 100 baht.Paid once at Land Department registration.
• Income Tax Liability: The usufructuary is taxed on the income the usufruct produces, but only where the usufructuary is the person legally entitled to it. Under Supreme Court Decision 575/2560 rent under a lease belongs to the party who made that lease.
• Property Tax (Annual): The usufructuary pays land and building tax: 0.02% (agricultural) or 0.1 to 0.3% (non-agricultural).
• Death Advantage: No transfer tax when usufruct ends at death. Property reverts automatically with no inheritance complications.
• Sequence Decides Attribution: Register the usufruct before the property is let, and make the usufructuary the party to the lease. That order is what Decision 575/2560 turned on.
• Income Splitting: Adult children as usufructuaries are taxed on the income where they are the persons legally entitled to it, under a usufruct registered before the lease and with the children as lessors.

Written by Sebastien H. Brousseau and Wichuda Atthamethakon. ThaiLawOnline.com: Practicing usufruct law since 2006

Tax is only one part of the picture. For how the right itself works, how it is registered and what it costs to set up, see our complete guide to usufruct in Thailand.

Last reviewed: 3 September 2026. Everything this page says about Supreme Court Decision 575/2560 was rewritten in this review, after the judgment was read in full in Thai to its disposition. The page had said the case established that tax follows economic substance rather than formal title, and it gave the reader the test who actually collects or controls the income. The case decides neither. The three grandchildren did collect the money and the tenant did withhold tax in their names, and the Supreme Court still held the income was the owner’s, because she was the party to the lease and the usufruct was registered only after the lease was made. The test the page previously gave would have decided the case the other way. What this review did not re-check, said rather than implied: the registration fee and stamp duty figures, the land and building tax rates, the withholding rates, and the comparison table outside its two income-tax cells.

Registration Fees and Transfer Taxes

Creating a usufruct right involves several one-time fees at the Land Department. Unlike property ownership transfers (which incur substantial transfer taxes), usufruct creation has relatively modest upfront costs.

Understanding the fee structure helps with budgeting. It also lets you compare usufruct to alternative property arrangements such as leases or direct ownership transfers.

Registration Fee: 1% of Consideration Value

The primary fee for registering usufruct is 1% of the consideration amount of the contract. The Land Department collects this fee at registration. This fee is one-time and non-recurring. It is actually 1% fee plus + 0.5% stamp duty calculated on the consideration amount. If no consideration, a fixed fee per plot is charged about 100 baht. For most of our clients, maybe 90%, the usufruct is done without compensation for cost is only about 100 baht.

The assessed value is based on the official land valuation by the Land Department. The declared value in the usufruct agreement is used if higher. For example, if a property is valued at 5,000,000 baht, the registration fee is 50,000 baht.

This 1% fee contrasts favorably with other property transaction taxes. Land and building transfer tax ranges from 2 to 3.3% depending on transaction type. Usufruct registration at 1% is substantially lower. This cost advantage makes usufruct attractive for establishing long-term property rights at minimal upfront tax burden.

Stamp Duty

A nominal stamp duty applies to usufruct registration documents. The stamp duty on the usufruct agreement is calculated on the contract value or the consideration value. Current rates typically range from 20 to 40 baht for property rights documents.

This duty is minimal compared to other property taxes. It is usually paid at the Land Department during registration.

Fee Type	Rate	Frequency	Notes
Usufruct Registration Fee	1% + 0.5% of stated consideration (usually nil, so ~more or less 100 baht)	One-time (at creation)	Paid to Land Department
Stamp Duty	0.5%	One-time (at registration)	Nominal amount
Land and Building Tax (Annual)	0.02% to 0.3% of value	Annual (recurring)	Paid by usufructuary; agricultural vs. non-agricultural rate. These amounts are very low and often never requested to the usufructuaries.
Personal Income Tax (on rental income)	0% to 35% progressive	Annual (on earned income)	Paid by the person legally entitled to the income; a corporate tenant withholds 5% and remits it to the Revenue Department.

Income Tax During Usufruct

Income tax treatment of usufruct is one of the most complex and litigated issues in Thai tax law. The basic principle: the usufructuary holds the right to use, enjoy, and collect income from the property. The usufructuary is entitled to the fruits of ownership and thus bears corresponding income tax obligations.

Who is taxed is settled by who is legally entitled to the income rather than by who banks it. Where the property is let, that is the person who contracted as lessor, which is the point Decision 575/2560 turns on and is set out below.

Who Pays: The Usufructuary (Section 1426)

Thai Civil and Commercial Code Section 1426 states: the usufructuary “bears all expenses of management and repairs, and all taxes and other burdens relating to the property.”

This provision establishes that the usufructuary is the primary taxpayer. If a property is leased by the usufructuary, the rental income received is taxable income of the usufructuary.

The usufructuary must file annual personal income tax returns or corporate tax returns (depending on their status). They declare the income from the property. Rental income is taxed at progressive personal income tax rates: 0% to 35%. Corporate usufructuaries pay flat 20% corporate tax.

Rental Income Obligations

When the usufructuary collects rent from tenants, the usufructuary must:

1. Declare gross rental income in their annual personal or corporate income tax return
2. Deduct allowable operating expenses: maintenance, repairs, property management fees, insurance
3. Calculate net income and apply personal or corporate income tax
4. Ensure the landlord (bare owner) withholds or remits withholding tax if the tenant is a company (typically 5% withholding tax on rent)
5. Request tax certificates from the tenant for income tax reporting purposes

The question that decides who is taxed is who is legally entitled to the income, not who physically receives it. Where the property is let, that is the person who contracted as lessor; a usufructuary who is not a party to the lease is treated as receiving the owner’s rent for the owner.

Supreme Court Decision 575/2560: Who Is Taxed on the Rent

Decision 575/2560 is a judgment of the Supreme Court sitting in its Tax Division and it is the case usually cited on this question. It decides which of two people is taxed on the rent when a property is let and a usufruct over the same property is given to someone else: the lessor who made the contract, or the usufructuary who is paid the money.

Supreme Court Decision 575/2560: Case Analysis

Facts: On 7 July 2011 Mrs P, the owner of a titled plot in Bang Na, Bangkok, let it to Company B for thirty years, the term running from 1 January 2014, against key money of 87,500,000 baht payable in five instalments. On the same day she signed a written agreement giving a usufruct over that land, for their lifetimes, to her three grandchildren, who were minors, and Company B agreed to pay the key money and the rent to them as usufructuaries and to withhold tax. The company did pay them, withholding 828,750 baht for the first grandchild and 804,375 baht for each of the other two in the 2011 tax year. The usufruct was registered at the Land Office only on 29 March 2012, after the lease had been made and after those payments. The three then spread the key money over the thirty-year term, prepaid income tax on it in advance under the Ministry of Finance announcement of 19 February 1985, and asked for the tax withheld by the company back. The Revenue Department refused.

Taxpayers’ Argument: The grandchildren argued that the usufruct made them the persons entitled to the income, that the tenant had recognised their right by agreeing to pay them directly, and that under Section 1417 of the Civil and Commercial Code a usufructuary holds, uses and takes the benefit of the property. Having prepaid tax on the key money themselves, they said the tax withheld at source was an overpayment they were entitled to recover.

Revenue Department Position: Mrs P had let the land in her own name, so the income from the letting was hers under Section 61 of the Revenue Code. The clause directing the tenant to pay the grandchildren was only a division of money she was entitled to receive. The usufruct had not been registered when the payments were made, so their real right was not yet complete and they received the money on her behalf.

Court Ruling: The Supreme Court, Tax Division, held that the person with the income under the lease was Mrs P, because she was the contracting party to it. The three grandchildren were not parties to the lease and were merely receiving her rent for her. Its reasons:

• Mrs P was the lessor under the lease and the grandchildren were strangers to it
• They acquired the usufruct by juristic act after the lease had already been made, and registered it at the Land Office later still
• The key money was therefore Mrs P’s assessable income and the withholding certificates should have been issued in her name
• Certificates issued to the wrong taxpayer give that taxpayer no right to a refund

Tax Consequence: The refund was refused and the dismissal of the claim by the Central Tax Court was affirmed. The Supreme Court did not agree with the Tax Court on the route to it: the Tax Court had held that the grandchildren were the persons with assessable income under Sections 39 and 40 (5) of the Revenue Code, and the Supreme Court held they were not.

What the case does and does not decide. The grandchildren did receive the money and the tenant did withhold tax in their names, and neither fact made them the taxpayers. So the case lays down no test of who controls or economically enjoys the income. It turns on the order of events and on who signed the lease: the usufruct came after the lease and the usufructuaries were not parties to it. The practical lesson is the sequence. Register the usufruct first, then let the property, and make the usufructuary the party to the lease.

Property Tax: Land and Building Tax

Beyond income tax, the usufructuary incurs annual property tax. This is known as land and building tax. This recurring annual tax is calculated as a percentage of the assessed property value.

The rate varies depending on whether the property is agricultural or non-agricultural.

The Usufructuary Bears the Burden

The usufructuary is normally responsible for paying all annual land and building taxes unless contracts state otherwise.

This obligation runs with the usufruct right. As long as the usufruct is valid and in force, the usufructuary must remit annual tax payments to the local land authority.

The Land and Buildings Tax Act is administered through local government mechanisms. The CCC allocates the burden between parties, but the bill often lands on the registered owner in practice unless arranged otherwise. The obligation rests entirely on the usufructuary. This is fundamentally different from property ownership, where the owner bears the tax burden throughout the holding period.

In practice and until now, it is extremely rare for the usufructuary to be approached to pay taxes by local tax authorities. Because taxes are changing quickly recently, maybe it will be more verified in the near future.

Current Rates (2026)

Land and building tax rates in Thailand are progressive. They depend on the classification and use of the property. As of 2026, the standard rates are:

Property Classification	Tax Rate	Applied To
Agricultural Land	0.02%	Land used for farming, forestry, or aquaculture. Assessed value under 100,000 baht is exempt. 100,000 to 1,000,000 baht is taxed at 0.02%.
Non-Agricultural Land (Residential)	0.1% to 0.2%	Residential property. Rate depends on assessed value.
Non-Agricultural Land (Commercial)	0.2% to 0.3%	Commercial, industrial, or business property. Higher rates for premium locations.
Building (Structures on Land)	0.02% to 0.1%	Residential buildings. Rate depends on assessed value and location.

For example, if a non-agricultural residential property is assessed at 5,000,000 baht, the annual land and building tax would be approximately 10,000 baht (0.2% rate).

This annual obligation must be budgeted into the usufructuary’s expenses. Over multi-year periods, it significantly impacts the real cost of holding usufruct.

Tax at Termination

Usufruct rights do not last forever. They expire or terminate under various circumstances. Tax treatment at termination differs markedly depending on the cause of termination.

This offers both advantages and pitfalls for tax planning.

On Death: No Transfer Tax (Major Advantage)

One of the most significant tax advantages of usufruct is termination at death. When the usufructuary dies, the usufruct right automatically terminates. The property reverts to the bare owner (Section 1433, Thai Civil and Commercial Code).

Crucially, no transfer tax is imposed on this automatic reversion.

If instead the bare owner died and property transferred to heirs, the transfer would incur substantial inheritance tax and transfer tax. By contrast, when a usufructuary dies, the property simply returns to the original owner. No tax is imposed. This is a major economic advantage, especially in family planning contexts where usufruct is granted to younger generation members.

However, if the deceased usufructuary’s estate includes accumulated rental income not yet declared or paid to the tax authorities, the estate will remain liable for income tax on that income. The termination of the usufruct right itself triggers no tax. Pre-termination income tax obligations survive.

On Expiry of Fixed Term

If the usufruct is created for a fixed term (e.g., 30 years), property reverts to the bare owner upon expiration with no tax consequence. The usufructuary ceases to have any right or obligation. Similarly, no transfer tax is assessed at the expiry date.

This clarity makes fixed-term usufruct an efficient and predictable property planning tool.

The usufructuary must still file a final income tax return for the year in which the usufruct expires. They declare any income earned up to the termination date and deduct proportionate expenses for that final year.

On Mutual Cancellation

If the usufructuary and bare owner agree to terminate the usufruct before the fixed term ends, mutual cancellation can occur. The tax treatment depends on whether any consideration is exchanged.

If termination is mutual and without consideration, no transfer tax is imposed. If the bare owner pays the usufructuary to relinquish the right early, the payment may be subject to income tax. This depends on the circumstances and characterization of the payment.

Comparison: Tax Treatment of Property Rights

Investors and property planners often compare usufruct to alternative property structures. Options include leasehold interests, superficies, and outright ownership. Each structure carries distinct tax implications.

Understanding these differences helps you select the most efficient property arrangement for a given business objective.

Tax Factor	Usufruct	Lease	Superficies	Bare Ownership
Creation Tax (One-Time)	1% registration fee	No registration fee (contract-based)	1% registration fee	2 to 3.3% transfer tax + 3.3% SBT
Annual Property Tax	Usufructuary pays 0.02% to 0.3% land and building tax	Lessor (owner) pays land and building tax. Lessee may pay negotiated portion.	Superficiary pays 0.02% to 0.3% land and building tax	Owner pays 0.02% to 0.3% land and building tax
Income Tax on Rent	Usufructuary liable on rent it is legally entitled to. Under Decision 575/2560, rent under a lease the owner made stays the owner’s income.	Lessor liable on rent collected	Superficiary liable on rent collected	Owner liable on rent collected
Withholding Tax on Rent Payments	3% (individuals) or 5% (companies) withheld by tenant	3% (individuals) or 5% (companies) withheld by tenant	3% (individuals) or 5% (companies) withheld by tenant	3% (individuals) or 5% (companies) withheld by tenant
Tax on Termination (Death of Holder)	No transfer tax. Automatic reversion to bare owner. Major advantage.	Lease contract terminates. Tenant’s estate may owe final rent and taxes.	No transfer tax. Reverts to original land owner.	Transfer tax (inheritance) of 5 to 10%. Heirs pay estate duties and property tax.
Transferability	Usufruct can be transferred to third parties. Depends on agreement consent. Transferee inherits tax obligations.	Lease typically non-transferable without landlord consent. Assignee assumes tenant duties.	Superficies can be transferred. Transferee inherits tax obligations.	Ownership freely transferable. Transferee becomes new owner-taxpayer.
Income Splitting Potential	Yes, where the adult children are the persons legally entitled to the income. Under Decision 575/2560 that means a usufruct registered before the lease, with the children as lessors.	Lease can be granted to family members as lessees. Income tax follows lessee.	Yes, if superficiary is independent income earner	Limited. Ownership transfer triggers immediate tax on transfer.
Duration and Security	Fixed or lifetime term. Secure and registered at Land Department. Inherent in property right.	Contract-based. Depends on lease term and renewal. More vulnerable to non-renewal.	Fixed or lifetime term. Registered right. Secure.	Indefinite. Full ownership security.

Tax Planning Strategies

Legitimate tax planning using usufruct requires understanding the interplay between Thai property law and income tax law. While tax avoidance through sham arrangements is prohibited, genuine economic structures that also produce tax efficiency are permissible.

The following strategies are lawful uses of usufruct for tax-conscious planning. Each depends on the usufructuary being the person legally entitled to the income, which is the point Decision 575/2560 turned on.

Income Splitting Through Usufruct

One common tax objective is to split family income across multiple taxpayers in lower tax brackets. This reduces overall family tax burden. Usufruct can facilitate this if structured legitimately.

For example, a high-income parent could grant a usufruct over an income-producing property such as a rental apartment building to adult children. Where the usufruct is registered and the children then let the property in their own names, the rent is their income and is taxed at their individual rates, which may be lower than the parent’s marginal rate.

The order matters more than the degree of control. If the parent lets the property first and grants the usufruct afterwards, the rent under that lease stays the parent’s income and the children cannot reclaim the tax withheld on it. That is what Decision 575/2560 decided, and in that case the tenant was paying the children directly.

What puts the income in the children’s hands as a matter of law is the registered usufruct and their own signature on the lease. Their own contracts with tenants and separate bank accounts are worth having as evidence of that position, but they are not a substitute for it.

Using Usufruct for Minor Children

Usufruct granted to minor children for wealth transfer purposes must be managed through a legal guardian or trustee. The usufruct cannot be held directly by the minor. It must be administered on behalf of the minor.

Income from the property is taxable to the minor. Often at a low or zero rate given limited other income. The expenses and investments are managed by the guardian or trustee.

This arrangement can transfer economic benefits to the next generation. It maintains a structured tax result.

Upon reaching adulthood, the child can assume direct control of the usufruct. They continue to benefit from the income at favorable tax rates. This multi-generational planning leverages both the usufruct structure and progressive income tax brackets.

Corporate vs. Individual Usufruct

Usufruct can be held by a corporation (juristic person) or by an individual. A corporate usufruct may be advantageous if the property will be operated as part of a larger business.

Corporate income tax in Thailand is a flat 20%. This may be lower than an individual’s marginal rate if that individual is a high earner. Additionally, corporate deductions for operating expenses, administrative costs, and business-related expenditures may be broader than individual deductions.

Conversely, if the individual usufructuary has lower income and claims few deductions, the individual income tax rate may be lower. The choice between corporate and individual usufruct must align with the specific tax and business goals.

Avoiding Income Attribution Pitfalls: What Decision 575/2560 Requires

Decision 575/2560 shows how income is attributed when a usufruct and a lease sit on the same property. To keep the income with the usufructuary:

• Register First: Register the usufruct at the Land Office before the property is let. In 575/2560 the usufruct was signed on the day of the lease and registered more than eight months later, and that order was decisive.
• Be the Party to the Lease: The usufructuary should sign the lease as lessor. A clause in the owner’s lease directing the tenant to pay the usufructuary did not make the usufructuary the taxpayer.
• Certificates in the Right Name: A tenant who withholds tax must issue the withholding certificate to the person with the income. A certificate issued to the wrong person gives that person no right to a refund, which is what defeated the claim in 575/2560.
• Separate Accounts: Rent should be received in an account in the usufructuary’s name rather than mixed with the bare owner’s.
• Documented Transactions: Lease agreements, rent receipts and property management decisions should be documented in the usufructuary’s name.
• The Burdens Follow Too: Section 1426 puts the expenses of management and repair, and the taxes and other burdens on the property, on the usufructuary. That is an obligation of the right, not an optional way of showing good faith.

Where the sequence is wrong, the Revenue Department will assess the owner on the income and refuse the usufructuary a refund of anything withheld in their name. That is difficult to repair once the lease is signed, so it is worth getting the order right at the outset.

Frequently Asked Questions

Conclusion

Tax on usufruct in Thailand sits where property law and tax law meet: the registration fees at the Land Office, the annual land and building tax, and the question of who is taxed on the income the property produces.

Understanding the registration fee (1%), the annual property tax obligations (0.02% to 0.3%) and who is taxed on the income is essential for property planning. The significant advantage of no transfer tax upon death is a major benefit.

Decision 575/2560 is the case to know before combining a usufruct with a lease. It holds that the income under a lease belongs to the party who made it, so a usufruct granted or registered after the property has already been let does not move the tax, however the rent is actually paid. Any plan to split income through a usufruct has to be built in that order: register the usufruct, then let the property, with the usufructuary as lessor.

For more details on registering usufruct, see our Guide to Registering Usufruct in Thailand. For a comprehensive comparison of usufruct to other property structures, see Usufruct vs. Lease vs. Superficies in Thailand. For inheritance and family planning applications, see our article on Usufruct and Inheritance Planning in Thailand.

Getting Your Usufruct Agreement: Three Routes

All three produce the same underlying document, the bilingual usufruct agreement this firm uses for its own clients. Download the editable template at 890 THB and complete it yourself, let the Document Maker build a finished personalised version if you are a Gold member, with translation available, or send us your details and we draft it around your facts in English and Thai for a fixed 3,900 THB, guiding you through registration at the Land Office. They are compared side by side in our complete guide, with our published fees.