Sumet Mingmongkolmitr (Senior Partner) and Warumporn Chaosanguan (Associate)
In cases where a party pays an owner for installation of advertising banners, service kiosks, or other self-service facilities on the owner’s premises, the arrangement is commonly referred to as a “lease of space”. However, for tax purposes, the applicable Thai tax treatment is not determined by the terminology used by the parties, but by the legal rights and obligations created under the agreement.
Under such an arrangement, the party is granted the right to use a specified area for an agreed purpose, such as displaying advertising banners or installing service kiosks. In addition, the owner does not transfer possession or grant exclusive control over the area to the party. In this regard, the party does not obtain the right to occupy or possess the specified area.
On this basis, the arrangement would not constitute a lease under Thai law. Instead, it would be regarded as the provision of service, where the owner grants the party the right to use or derive commercial benefit from a specified area in exchange for consideration.
Accordingly, the space usage arrangement should be subject to the Thai tax treatment applicable to the provision of services, rather than the Thai tax treatment applicable to the lease of immovable property. In this regard, the relevant parties should carefully review the contractual terms and underlying facts to ensure that the Thai tax implications are correctly determined.
