Thailand's leading real estate agent

Land and Building Tax Bill Requires Greater Clarity

By on Oct 20, 2015 in Property News

Life is getting interesting for taxpayers, with not only an inheritance tax and a new gift tax regime on the way but also a new property tax. The finance minister recently said the land and building tax bill would go before the cabinet very soon and take effect within the next two years. It could be more bad news for some residential property owners.

News_bkkbiz_20oct_02

Under the new regime, owners of properties will enjoy a lower tax rate, reduced from 12.5% of annual rentable value to 0.5% of the official assessment value, without the need to argue with local tax authorities about the criteria used to determine the tax base. Three rates based on official assessment value will apply to the following categories:

  • 0.2% for land and buildings used for agricultural purposes;
  • 0.3% for land and buildings used for residential purposes; and
  • 1% for land and buildings used for commercial purposes.

Nonetheless, depending on the land use the Finance Ministry will propose the rates shown in the table.

The land and building tax bill wisely contains a provision intended to encourage owners to use their land. An owner who fails to do so will be liable to a higher tax rate of 1% of the official assessment value for the first three years. Interestingly, the same rate applies to commercial properties. If the land continues to lie idle, the rate will rise to 2% in years four to six and 3% from the seventh year.

During the transition period, the Finance Ministry proposes to give a 50% reduction for the first three years after the new law takes effective but only to those who have been living on the property for more than 15 years and if they are low-income earners suffering from a high assessment value.

Clearly, there are serious concerns not only for property developers with large land banks but also other property owners nationwide. More clarity is needed from the drafters and the Finance Ministry on these issues:

Introducing a new tax regime at a time when the economy is weak should be considered thoroughly and carefully. That said, the land and building tax will replace the house and land and local development taxes, both of which have been used for too long, and it is time for property owners to pay tax like their peers in developed countries.

The drafters should, however, be aware that “wealth” and “income” are two different things. The new bill will hurt those who have wealth — that is, valuable properties — but lack cash. They will be unable to hold properties for the next generation, while the rich will have a greater opportunity to buy more valuable properties from them. This spoils the spirit of wealth redistribution, and the rich-poor gap will become wider. The 50% reduction during the transition period is not enough to resolve the bigger problems of land-rich but cash-poor people.

The ministry has just introduced a new stimulus scheme to encourage property purchases through reductions in mortgage and transfer taxes and personal income tax exemptions. The new land and building tax regime will shock all homebuyers and clearly conflict with the stimulus package.

For full article click here

Source: Bangkok Post – 20 October 2015

No comment





 

emailSubscribe Via Email

Privacy guaranteed. We will not share your information.

Follow Me on Twitter

Follow Me on Facebook

Subscribe via RSS Feed

Copyright © 2020 CBRE (Thailand) Co., Ltd. All Rights Reserved.