Proposed Land Tax

[Old Guy]

I am somewhat concerned by the proposed Land Tax - residential use. A number of sites including reputed lawyers quote 0.1 %, yet others (e.g. Bangkok Post on two occasons) quote a full 1 %.

On a property rated at, say, 4,000,000 baht , the difference is considerable.

Can someone give an undisputed answer ? Thanks.

[falang07]

That would hopefully prevent people buying properties without actually using it which is a big problem in Thailand (everyone buys with the intent to sell for a profit so it is hard to find a street without many unoccupied overpriced properties advertised for sell). I expect this would also drive the prices down.

[KittenKong]

I thought the actual rate was still under consideration.

[Pib]

There have been conflicting articles but I think the one talking around 0.1% is probably the approx rate that will end up passing into law....which I hope don't end up passing into law because of the residence I own. Once thing for sure even if they do include a Bt1M exemption, there are still many, many people going to get stuck with a property tax bill because in today's world it don't take much of a residence and land to reach Bt1M in value especially if you live in or close to a city.

Although this property tax draft was actually developed during Abhisit's rule which was just before Yinluck's rule, I think that same draft summarized below is being used by the current regime as a starting point. See below artricle from PriceSanond:

http://www.pricesanond.com/knowledge/proposed-amendments-to-thailands-land-and-building-tax-laws.php

Proposed Amendments to Thailand’s Land and Building Tax Laws

The Thai legislature is currently considering a draft of a new Land and Building Tax Act (the Act) which would replace the current Building and Land Tax Act B.E. 2475 (BLTA) and the Local Development Tax B.E. 2508 (LDT). If passed in its current form, the Act will have a profound impact on the general public as it will increase the tax base and introduce a new method of calculating property tax.

Background & Context
Currently, property tax revenue constitutes less than 10% of the total budget of the Thai Revenue Department. Officials thus see the Act as an easy way of boosting the government's coffers, as the method of taxation will be based on the appraised value of land and buildings and the tax base will be expanded to cover property that is currently tax-exempt. In pursuing this additional revenue, the Act aims to collect taxes more effectively and fairly from everyone based on updated valuations of land and buildings. Thus, all residential units, even those in low-income areas, will be subject to taxation, although assistance to such communities is available under the Act. Furthermore, the Act also aims to simplify the methodology for calculating and collecting taxes on property and should be easier to understand for both taxpayers and tax collectors when compared to the two laws the Act will replace.

Summary of the Act
The Act is divided into nine sections: general regulations involving tax collection and taxpayer's duties, regulations on land and building surveys, regulations on tax base calculations and tax rates, tax-form submission procedures and tax payment, tax deductions and exemptions, treatment of overdue tax, penalties and surcharges, process for objections and appeals to appraisals, and punitive clauses for taxpayer violations.
Taxes under the Act will be assessed on the appraised value of property and be payable annually. The rates will be established by a Tax Rate Committee but subject to the following maximum rates: 0.05% for agricultural property; 0.1% for residential property and 0.5% for “general use” property (which would include commercial property). Property used for certain public activities or for religious or charitable purposes will be exempt from taxation. Finally, the Act contemplates that the value of certain fixtures located on the property may also be subject to tax, as prescribed by ministerial regulation.
Administration and enforcement of the Act will primarily take place at the local level. Each province will have discretion to increase the rate of tax established by the Tax Rate Committee as it sees fit but subject to the above caps. Taxpayers will be informed of their tax liability in January of each year and be required to pay taxes by the end of April within the province where the property is located (although the taxpayer may be permitted to pay in installments). Penalties for failing to pay tax can be severe and may amount to 2% of the total appraised value of the property.
Use and development of idle land is promoted under the Act by increasing the tax rate over time for land. At first, idle land or land-bank plots that are not used for any purpose will be subject to the rate prescribed for such province. However, if the plots are not used for any purpose thereafter, the tax rate will double every three years subject to a cap of 2.0%.
Appraisals will be updated under the Act as well, as some properties have not been appraised since 1981. It is unclear, however, how land and property will be valued where its utilization is mixed, such as partly residential and partly commercial or agricultural.
The Act will be subject to a four-year transition period. For the first two years following the Act’s publication in the Royal Gazette, the BLTA and LDT will remain in effect and no tax under the Act will be applied. Thereafter, both the BLTA and LDT will no longer be effective and the new tax rates established under the Act by the Tax Rate Committee will be enforced at 50% and 75% during years three and four, respectively. For example, if the Tax Rate Committee decides to use 0.1% as the tax rate for residential property, then the applicable rate for residential property will be only 0.05% and 0.075% in years three and four, respectively, with the 0.1% rate fully imposed in the fifth year and thereafter.

Edited January 6, 2015 by Pib

[trogers]

That would hopefully prevent people buying properties without actually using it which is a big problem in Thailand (everyone buys with the intent to sell for a profit so it is hard to find a street without many unoccupied overpriced properties advertised for sell). I expect this would also drive the prices down.

I doubt a rate of 0.1% would discourage holding unoccupied speculative property. That would only be Bt5,000 per year in taxes for a property valued at 5m.

A 1% rate is more appropriate, with a 80% discount for owner occupation. Thus, second and subsequent properties would be subjected to the full rate.

[donx]

What about farm land? I would assume the tax would be less for it. When my wife went to pay the past due taxes for beach front land with no structures she was asked if there was anything growing on it. She said it had a few coconut trees and she ended up only paying something like 28 baht because it was treated as farm land.

[KittenKong]

I doubt a rate of 0.1% would discourage holding unoccupied speculative property. That would only be Bt5,000 per year in taxes for a property valued at 5m.

A 1% rate is more appropriate, with a 80% discount for owner occupation. Thus, second and subsequent properties would be subjected to the full rate.

I would vote for something like that, if I had a vote here.

What was that 18th century slogan about no taxation without representation?

[Pib]

Here's a fresh 7 Jan 15 article on subject. It's still talking a 1% "ceiling" for residential properties, repeat, "ceiling." I expect the actual rate would be lower.

http://www.nationmultimedia.com/business/Tax-breaks-for-land-developers-in-draft-bill-30251352.html

LAND TAX

Tax breaks for land developers in draft bill

The Nation January 7, 2015 1:00 am

The Finance Ministry may include exemptions for land held by developers for commercial purposes for no more than two years and residences worth no more than Bt1 million in the draft real estate tax bill.

Finance Minister Sommai Phasee said yesterday that the legal draft was being polished before it is proposed to the Cabinet late this month.

Some details still remain fluid.

His deputy, Wisudhi Srisuphan, said the ministry was reviewing the grace period for land holdings. Based on the land allotment approval procedure, the grace period may be set at one year, or in the case of condominium construction with environmental concerns, that could be set for two years.

"Setting the grace period for the property business will lessen the business burden, which could be passed onto consumers. However, the period should not be too long. If developers accumulate a land bank, that could be their cost," he said.

If the grace period is not fixed for a land bank, it could be land that is not used appropriately and it would be taxed at no more than 4 per cent of its value.

Landowners could see a tax deduction of Bt1 million. If any property is valued at no more than Bt1 million, it will bear no tax.

However, three tax ceilings have been finalised for classes of real estate. Land for agricultural purposes will be taxed at no more than 0.5 per cent of its value, while residences will be taxed at no more than 1 per cent and idle land at no more than 4 per cent.