New Land and Building Tax Act in Thailand

Many questions have been raised concerning the new taxes on buildings and land in Thailand. Here is some helpful information.

You might have noticed that your Thai neighbors are planting banana trees on all the empty land areas in your neighborhood. No, the stock of the banana is not picking up!!! The reason they are acting like this may also have implications on your annual budget. Here is some information on the new Land and Building Tax

In case you were not informed. Thailand has implemented a new Tax for land and property and it will be effective this year (2020).
the Land and Building was approved in 2019 and is the first land and building tax to be introduced in Thailand. The Act obligates individuals, corporate entities, or any beneficiaries of land or buildings, to pay land and building tax.
The government’s intentions with this change are to encourage landowners to utilize their land and help reduce the overall tax burden on property owners.  The tax payments will be due in April of every year. The government is estimated to collect 39.4 billion baht from land and property tax in 2020.

Covid 19 tax-relieved for 2020

Act. On 10 June 2020, the Royal Decree Reducing Tax for Certain Types of Land and Buildings, B.E. 2563 (2020) (the “Royal Decree“) was published in the Government Gazette and will become effective from 11 June 2020.

Aimed at relieving the economic impacts of the COVID-19 pandemic, the Royal Decree will reduce the land and building tax by 90% of the amount calculated in accordance with the Land and Building Act, B.E. 2562 (2019) (the “Land Tax Act“).

The main changes that this new act implies are :

  • the change of the tax base from the yearly rent determined by individual district officials to the value of the land, buildings, and condominium units as appraised by the government, which is intended to increase impartiality and reduce the scope of discretion for individuals.
  • the change of the tax rate from the flat rate of 12.5% to different rates, depending on how the property is used.
  • tax collection from residential property, which was not previously subject to property tax.
  •  The collecting agent will now be the local subdistrict administrative organization.

categories of property:

  • Residential (including condominiums)
  • Commercial land
  • Agricultural land
  • Unused/vacant land

Tax exemption

Property owners can be exempted from the land and building tax if they fall under the following categories:

  • Agricultural land worth up to 50 million baht (US$1.5 million);
  • Land or building used for residential purposes and is worth up to 50 million baht (US$1.5 million) (the owner’s name should be on the deed of the property);
  • The building is used for residential purposes and is worth up to 10 million baht (US$318,000) (the owner’s name should be on the deed of the property); and
  • Individual owners of agricultural properties – they will be exempt from land and property tax for the tax period 2020-2023.

Maximum tax rates for land and building tax

The Act sets a ceiling tax rate for the different categories of property.

Appraised ValuesTaxe rate
Commercial Land1.20%
Unused / Vacant land1,20%
Residential land0.3%
Agricultural land0,15%

Transition Period :

The Act provides a two-year transition period, starting January 1, 2020, to allow property owners to adjust to the new law. During this period there will be a reduced tax rate.

Residential Properties

Appraised ValuesTaxe rate
0-50 million Baht0.02%
50-75 million Baht0,03%
75-100 million Baht0.05%
above 100 million Baht0,1%

Commercial Properties

Appraised ValuesTaxe rate
0-50 million Baht0.3%
50-75 million Baht0,4%
75-100 million Baht0.5%
above 100 million Baht0,6%

Unused/vacant Properties

Appraised ValuesTaxe rate
0-50 million Baht0.3%
50-200million Baht0,4%
200 million -1 billion Baht0.5%
1 billion – 5 billion Baht0,6%
Above 5 billion Baht0,7%

Tax reductions

There are further tax deductions in the broad tax deduction clause of the Act. To qualify, property owners should fulfill certain criteria:

For 50 percent tax reduction

  • An inherited property that is used for residential purposes. The owner’s name must be on the deed; or
  • Property used for energy infrastructure projects such as a power plant.

For 90 percent tax reduction

  • Land or buildings that are under development for an industrial estate for no longer than three years;
  • Land or buildings that are awaiting sale for no longer than two years starting March 2019;
  • Land or buildings awaiting sale and is owned by a financial institution. The financial institution must have held the property for no more than five years;
  • Land or buildings under development for industrial or residential purposes; or
  • Land or buildings under development for an educational institute.

Frequently asked.

Who are the taxable persons?
  • An individual or corporate land and building owner; if land and buildings are separately owned by different people, the person having the title over either the land or building is liable for the tax attributable for such properties.
  • A beneficiary to land and building owned by the government. For example, a tenant to the state-owned properties is liable for the tax incurred.
  • Any persons liable to pay tax on behalf of taxpayers under the Act. This provision allows an estate administrator; a legal representative of a minor; a legal guardian of a disabled person; a curator of a quasi-incompetent person; one of the co-owners of the properties to pay tax on their behalf; or a representative or a liquidator of a corporate property owner.
Can I change the property use?

If the use of property changes in any tax year, the taxpayer must notify the SAO within 60 days from the date in which the change occurs. However, the applicable rate corresponding to the new use of property will be levied in the next tax year.

This is due to the nature of the land and building tax, whereby the tax is collected based on how the property is used or who owns the property on January 1 of any given year.

What properties are exempted?
  • state-owned properties that are used non-commercially;
  • private properties that are used for the benefit of the public (subject to criteria under subordinate legislation);
  • properties in which the offices of the United Nations; embassies; consulates; and the offices of the Red Cross are located;
  • properties belonging to religious organizations that are used for religious purposes;
  • common properties under the Condominium Act, such as swimming pools, fitness room, and parks; and
  • other properties as specified in subordinate legislation such as railways; museums; wells; roads; lawns and fences.
What is the official appraisal value

The official appraisal value, as appraised by the Treasury Department, is used as the tax base for land, buildings and condominium units under the Act. The appraisal value is used for the calculation of the registration transfer fee for the transfer or assignment of ownership or right over land or immovable properties under the Land Code; the Land Code further provides that the transfer fee calculation is determined from appraisal values as provided in the appraisal value schedule issued under the Property Appraisal for the State Benefits Act, B.E. 2562 (2019) (Property Appraisal Act).

The new appraisal values under the Property Appraisal Act have not been issued. Therefore, the previous appraisal values, which applied before the enactment of the Property Appraisal Act, will remain in use until the announcement of the appraisal value schedule under the Property Appraisal Act. The announcement is set to be issued within two years from the enactment of the Property Appraisal Act.

Under the Property Appraisal Act, the appraisal values must reflect the uses and types of properties and be in accordance with the appraisal and economic principles, particularly the market value of the property. It is therefore anticipated that new appraisal values under the Property Appraisal Act could be higher than the previous appraisal values, or even equivalent to the market value.

sources :
https://news.bloombergtax.com
https://www.aseanbriefing.com/

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