News & Insights

Land and Building Tax Act in Thailand

Land and Building Tax Act in Thailand

On June 7th, 2016, the draft of the Land and Building Tax Act was approved by the government in Thailand and released in a Government Gazette. This Act became effective in January 2020 and will replace the existing and old Building and Land Tax Act B.E. 2475 (1932), the Local Maintenance Tax 2508/Local Development Tax B.E. 2508 (1965), the Royal Decree Designating the Medium Price (1986), and the Notification of the National Executive Council No. 156 (1972).

The new land and building tax act in Thailand emerges in a political context of fast implementation of very ambitious infrastructure projects such as the 20 megaprojects announced by the Cabinet, including transportation hubs, new BTS lines, upgrade of existing airports, and implementation of railway systems. Under the new regulation, it is considered that the price of land will increase due to the proximity of some of these infrastructure projects.

Land and Building Tax Act in Thailand

The Taxpayers will be individuals or juristic persons who own land or buildings, or individuals or juristic persons who are in possession or pedal possession of land or buildings which belongs to the state. The taxable Property will be Land, Buildings, and Condominiums. This has a major impact on property tax law across Thailand.

The Tax base is assessed on the total value of 'land and building' by calculating from the appraised value of land, buildings, and condominiums as well as the depreciation rate which is specified by the Treasury Department.

Tax rate

According to the Thai Government, the law is targeting land speculators, and the Finance Minister has confirmed that the new property tax law will help to generate THB 64,3 billion in the first fiscal year. In the private sector, the opinions are quite different; on the one hand, some well-known developers such as SET-listed developer Pruksa have confirmed that the new regulation will implement the sale of many land plots, and in contrast, international real estate consultants such as Knight Frank denied that the tax will have any effect at all on the price of land in Bangkok's prime locations.

We do not believe that the REITS with assets in retail, office, or factories will perceive much the effects of the new regulation, but perhaps the Hotel Property Funds will suffer the consequences of this new tax in a difficult context of an oversupply of rooms due to AirBnB business model implementation in cities such as Bangkok or Phuket.

The new land and building tax law in Thailand are worth watching closely to see what, if any, outcome it will have on an already fragile economy.

Phorn Patimon, Senior Associate at Juslaws & Consult

Jose Herrera, Partner at Juslaws & Consult

‍Tax Base for Land and Buildings Tax?

The tax base for this calculation of the land and buildings tax is calculated against the authorities' assessed value of the land, condo, or building.

When there is no assessed value for the land and buildings, then there are some rules, prescribed conditions, and procedures that can help determine the base for building and land tax. It should be noted that the land development tax is different from the established house and land tax, and the land value tax rate for land that will be developed must undergo a land development tax assessment in order to accurately determine the development land value tax rate.

Land Taxes and Buildings Tax Exemption

Land or buildings that are used for agricultural purposes will be exempt from a tax base if the total tax is not more than THB 50 million. Land or buildings that are used for a residential purpose is exempt if the tax is not more than THB 50 million, and the name listed on the household registration documents was listed on 1 January of the tax year. If the same applies and the owner owns the building but not the land, the amount that should not be exceeded is THB 10 million.

Owner-occupied residences are not automatically exempt from taxes for a private residence, land, or other property thereon. Tax is paid to local administrative authorities once tax payable has been confirmed according to the new maximum tax rates and communicated to the taxpayer.

When is a tax payment due?

The government notifies the taxpayer of the amount that must be paid. This notification is sent out to the person or legal entity who must pay tax by February. Payment must be made by April.

An official notification should include the amount of tax payable, the tax rate, the appraisal value, and a list of the land or buildings. Efforts are being made to improve the efficiency of tax collection by local authorities in Thailand.

Where can tax be paid?

Tax can be paid at:

  • The Pattaya City Hall.
  • The Khet Office for land or buildings in Bangkok.
  • The Tambon Administrative Organization for land and buildings.
  • Municipality Office for land or buildings in the municipal area.
  • Office of any other local government specified by the law for land or buildings in the area.

Penalties for Late Tax Payment

If your tax payment is late, then the government sends out a warning with a cutoff date in May, by which the late payment plus the penalty amount must be made. If there is further failure to pay within this specified period, then the taxpayer is liable for a 40% penalty payment on the overdue tax amount.

If the payment was made before the warning was received, then the penalty amount is only 10%. If the taxpayer misses the specified period but manages to pay within the time stipulated in the warning, then they are liable for 20%. Any subsequent months will accrue a further 1% per month (or a fraction of a month).

Who Pays the Building and Land Tax?

The new tax law stipulates that the following purposes will result in tax:

  • Empty and unused land or buildings.
  • Purposes excluding residential houses or agricultural land.
  • Building and land that is used for residential purposes.
  • Land and buildings used for agricultural purposes

The owner is liable for land tax and building tax payments.

Basically, this means that the new tax system affects immovable property in the sense that owners of land or a permanent structure built on land are liable for property tax. There are three new maximum tax rates that are dependent on the value (property's appraised value) and purpose of the land or buildings also the land classification. These new property tax laws are designed to reduce the tax burden on owners of property.

In Conclusion

Basically, the purpose of this act is to get anyone or any entity that benefits from the ownership of land or buildings to pay land or building tax. Tax rates are determined through calculations based on the purpose of the land/building and its overall value. Many individuals or entities also gain rental income from properties through a lease agreement. There are certain areas where tax reductions are appropriate during the usual tax period, even for non-rental property. Other changes to the overall Revenue Code have also been made, including significant changes to Value Added Tax.