Land and Building Tax Scheme Finally Introduced

The government recently approved the introduction of its land and buildings tax, with the scheme due to begin in 2017. The Finance Ministry expects the new tax will add around 64 billion baht to the government’s coffers in its first year.

The new tax is designed to expand the national taxpayer base, especially in asset-based taxation, with the aim of increasing the efficiency of tax collection among local organisations as well as narrow income disparity and improve land utilisation across the nation.

The Finance Ministry believes 60 billion baht will come from commercial buildings, four billion baht from residences and 50 million baht from agricultural land. All income will be used for local development.

The bill sets ceiling rates of 0.2 percent of the appraisal value for land used for agricultural purposes, 0.5 percent for residences, 2 percent for commercial use and 5 percent for vacant or undeveloped land.

The tax will be levied on first homes and land used for agricultural purposes, although it will not affect properties valued at less than 50 million baht. As well, the rate will only be applied to the amount exceeding 50 million baht.

The tax will also apply to second homes on a progressive basis, with rates of 0.03 percent to 0.30 percent for homes with an appraisal value of less than five million baht to more than 100 million baht.

For vacant or undeveloped land, the tax rate will be imposed at one percent for land left vacant or unused for one to three years, 2 percent for four to six years and 3 percent for more than seven years.

The Finance Ministry says there are 8,556 residential units that have an appraisal price of more than 50 million baht, most of them in Bangkok and other big cities. This means well over 99 percent of residences nationwide are free from the tax liability.

After its final approval, the tax will replace existing house, land and local development taxes.

The land and buildings tax is part of the government’s attempts to boost asset-based tax income, reduce economic inequality, improve land distribution and increase the use of land nationwide.

The president of the Housing Business Association said taxation of housing units priced at 50 million baht or more would have little impact on most homeowners, as the entry level accounts for less than 10 percent of residences in Thailand.

The Association believes the tax would prompt some landlords, who own many plots, especially in prime locations where land values are high, to either develop them or sell to avoid paying the high tax rate.