VAT or Specific Business Tax on a new-build purchase? What actually applies, and where the confusion comes from

Do you pay VAT or Specific Business Tax (SBT) when buying a new-build villa or condo from a developer on Koh Phangan? The transfer of the land and building itself is SBT, at the same 3.3% rate that applies to any commercial resale — not VAT. The confusion buyers run into is real, though: an off-plan land-and-build package usually bundles a separate construction-service contract, and construction services are taxed differently from the land transfer. Both can appear on the same project's paperwork, at different rates, without being the same tax.

The legal basis: why property sales sit outside VAT

• Revenue Code Section 91/2(6) makes the sale of immovable property "in a commercial or profitable manner" one of the categories subject to Specific Business Tax, with the detail of what counts as commercial set out in Royal Decree No. 342 (B.E. 2541) — the same decree that governs the individual-seller exemptions covered in Specific Business Tax's 5-year exemption clock.
• Revenue Code Section 91/4 provides that a business already subject to (or exempt from) Specific Business Tax under Section 91/2 is not also subject to VAT on that same transaction — the two systems are designed not to overlap. Real estate was deliberately placed inside SBT rather than VAT when SBT was introduced, precisely because valuing the "added value" in a land sale is impractical.
• A developer selling new-build units is squarely inside this rule. Whether the seller is an individual, a Thai company, or a licensed property developer, the transfer of land and any building on it is taxed as SBT (or, for a qualifying seller, exempt from SBT and taxed as 0.5% stamp duty instead) — never as VAT on the transfer itself.

What SBT actually costs on a developer sale

SBT on a commercial sale — which a developer's new-build sale always is — runs at 3% of the higher of the government-appraised value or the actual price, plus a 10% municipal surcharge on that 3%, for a combined 3.3%. This is paid at the Land Office on the day of transfer, alongside the 2% transfer fee, and is calculated the same way regardless of whether the seller is an individual reselling a villa or a developer selling its first unit — the 5-year holding exemption that lets an individual reseller drop to 0.5% stamp duty essentially never applies to a developer, since a company selling newly built stock has not held the land for five years.

Where 7% VAT genuinely applies on a new-build purchase

• A standalone construction-service contract. On Koh Phangan it's common to buy raw land, then sign a separate build contract with a construction company. Building is a supply of services under the Revenue Code, not a sale of immovable property — a VAT-registered contractor charges 7% VAT (the current reduced rate, extended to 30 September 2027) on its invoices for that work, entirely separate from any SBT due later when the land itself is registered in your name.
• Furniture, appliances and movable fittings sold separately from the land-and-building package are goods, not immovable property — a VAT-registered seller charges 7% VAT on these regardless of how the underlying real estate is taxed.
• Professional and agency fees — a VAT-registered law firm, architect, or agent's commission is a service, billed with 7% VAT on the fee itself, again distinct from the SBT or stamp duty due at the Land Office.
• A developer's own VAT registration matters here, not for the land transfer, but for whether the construction, design and furnishing components it bundles into a "turnkey" price are separately VAT-invoiced or quietly absorbed into a single figure — ask for a breakdown.

Reading an off-plan land-and-build quote

A turnkey off-plan quote on Koh Phangan typically has at least two tax lines hiding inside one headline price: the land-and-building transfer (SBT 3.3%, paid at the Land Office) and the construction-service portion (VAT 7%, invoiced by the builder as work is completed, typically against staged payments). Ask the developer or contractor to itemise which figure already includes VAT and which is the pre-transfer SBT estimate — a quote that states a single all-in number without separating these is not wrong by default, but it makes it impossible to verify either tax was calculated correctly. For the staged-payment and contract-review side of an off-plan purchase, see Buying off-plan on Koh Phangan; for the full cost stack at transfer, see The full cost of buying on Koh Phangan.

The short version: the land and the building you end up owning are taxed as SBT, not VAT, when you buy them from a developer — the VAT you may also see on the same project belongs to the services and goods that built and furnished them, not to the real estate itself.