New Property Tax Regime Within Sight: What

On 31 March 2017, the land and buildings tax bill (the "Draft Bill") was approved in principle by the National Legislative Assembly ("NLA"). This Draft Bill, which was prepared by the Council of State and approved by the Cabinet, is currently under the consideration of the responsible committee and will later be forwarded to the main assembly for final consideration. The Draft Bill is to replace existing house and land tax, as well as the local development tax under the Household and Land Tax Act B.E. 2475 and Local Land Development Tax Act B.E. 2508, which are currently collected by the local authorities and have criticized as being regressive and outdated. The Draft Bill is intended to decrease income disparity among taxpayers, improve and encourage land utilization, increase effectiveness in tax collection and increase public revenue.

A significant change is that the new land and buildings tax collected under the Draft Bill will be calculated on different basis from current house and land tax. The new land and buildings tax base is to be calculated on government appraised value, in contrast with the current house and land tax base which is calculated based on the yearly rent.

While the existing house and land tax has a single imposed tax rate of 12.5%, it is expected, according to the Draft Bill, that the new land and buildings tax rate will be different depending on type of the property usage as follows:

 

Type of the Property Usage 1. Agricultural use

 Ceiling Rate 0.2%

Actual Tax:

  • Property is exempted from tax if its value is THB 50 million or less.
  • Actual tax rate would be 0.05% for over THB 50 million.

 

Type of the Property Usage 2. Residential use

Ceiling Rate 0.5%

Actual Tax: 

  • First residential home, as shown in house registration certificate, is exempted from tax if the value is THB 50 million or less.
  • First residential home would be taxed at the rate of 0.05% if over THB 50 million.
  • For the second residential home of THB 50 million or less, tax rate would be 0.03%. The rate is 0.05% if over THB 50 million.

 

Type of the Property Usage 3. Use for other purposes, including commercial use

Ceiling Rate 2.0%

Actual Tax: The actual tax rates would be between 0.03% and up to 1.5% of the value of the property.

 

Type of the Property Usage 4. Unused or left vacant

Ceiling Rate 5.0%

Actual Tax:

  • The rate of tax will start at 2% of the value of the property and rising by 0.5% every three years.
  • The maximum tax rate shall not exceed 5% of the value of the property.

 

Following the consideration by the responsible committee, the Draft Bill would then be further deliberated by the NLA for approximately 2 to 3 months. After which, provided that there are no further major comments or revisions, it should be announced in the Royal Gazette within this year. However, enforcement of the Draft Bill is expected to occur one year from the date of announcement.

As the new property tax regime looms ahead, land and property owners, developers, property managers and family business should now start early assessments of their tax exposures on their assets and commence with restructuring their asset portfolios.

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