(Sept. 5, 2017) Thailand is considering changes to its land and buildings tax, including a provision to allow local authorities in the future to appraise property values. The current system in which sometimes rental income is used to determine tax liability will be ended. A draft bill on the subject, prepared by the Council of State, was previously approved in principle by the National Legislative Assembly on March 31, 2017. Consideration of the draft legislation by the Assembly was expected to continue for several months. (New Property Tax Regime Within Sight: What Should We Expect?, Baker McKenzie website (May 4, 2017).)
While currently the tax rate is a set, uniform percentage, the draft legislation envisions more differentiation. The proposed rates are:
- Land for agricultural use: the theoretical ceiling rate would be 0.2% of assessed value, with all land valued at under 50 million baht (about US$1.5 million) exempt from taxes and the actual rate 0.05% of value for land assessed at a higher level.
- Land and buildings for residential use: the ceiling rate would be 0.5%, with an owner-occupied house exempt if valued at less than 50 million baht and taxed at 0.05% if assessed at over that value. Second and other homes valued under 50 million baht are taxed at 0.03%; more valuable properties in this category are at 0.05%.
- Land for other commercial uses: the ceiling is 2%, with the actual rate currently varying between and 0.03% and 1.5%.
- Vacant or otherwise unused land: the ceiling is 5%, with the rate starting at 2% and increasing every three years by 0.05% until it reaches the ceiling rate. (Id.)
Valuations of buildings and condominiums will also be undertaken, with a nationwide rate of value per square meter set at 7,200 to 7,800 baht (about US$217-235) for buildings. In a change from previous practice, the nature of building materials will not be considered in establishing current value. There will, however, be a depreciation allowance based on the nature of the material; the value of a concrete house will be depreciated to 24% of the original after 40 years. For wooden houses, the same devaluation rate as allowed for concrete dwellings will be permitted over 18 years. (Id.) Hotels will be valued at 8,900 baht (about US$268) per square meter, with shopping malls appraised at 9,350 baht (about US$281) per square meter. (Kanana Katharangsiporn, Thailand: New Tax Worries Private Players, BANGKOK POST (Aug. 30, 2017), https://www.bangkokpost.com/business/news/1315367/new-tax-worries-private-players.)
Reactions to the Proposed Law
Private sector observer such as the Thai Chamber of Commerce, have raised concerns about the draft legislation, worrying that local authorities will have inconsistent standards that result in uneven treatment of tax payers. In addition, there is the question of whether local governments have sufficient staff to carry out tax evaluations and collections. One issue that may be difficult to resolve is how to establish the value of vacant lands that could be used for agriculture by the owners or by farmers to whom they rent. (Id.)
According to Wilawan Veerakun, Director of the Bureau of Property Valuation of the Thai Treasury Department, the Bureau will complete an appraisal of land plots throughout the country before the projected entry into effect of the new law in January 2018. She stated that there should be no concern about a rise in appraisal prices because “the new appraisal prices will still be lower than market prices. … Prices were appraised by referring to transactions people made.” (Id.) Veerakun added that training in assessing value has been given to staff members of local administrations that have more than 1,700 employees. (Id.)
Atip Bijanonda, the director of the Thai Chamber of Commerce and president of the Housing Business Association, suggested that the “government should make the law simple and easy and acceptable among taxpayers.” (Id.)
Current Land Tax
Thailand at present has a house and land tax of 12.5% of assessed rental income or of assessed value, whichever is higher, with an exemption for owner-occupied houses. Local governments in some cases also impose a development tax ranging from 0.25% to 0.5% of the assessed value of land. Owner-occupied houses are exempt from this tax as well. (Thailand: Country Survey, § 5.2 “Real Estate Tax,” IBFD TAX RESEARCH PLATFORM online subscription database (last visited Aug. 30, 2017); Thai Property Taxes: Building and Land Tax, THAILAND LAW ONLINE (last visited Aug. 30, 2017).) These taxes are imposed under the Household and Land Tax Act B.E. 2475 (1932) and the Local Land Development Tax Act B.E. 2508 (1965). (New Property Tax Regime Within Sight: What Should We Expect?, supra.)