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19 Nov 2018

Real Estate and Construction

Land and Building Tax Bill: To Enhance Tax Collection Efficiency … Accelerating Understanding to Tax Payers Needed (Current Issue No.2940)

The draft of the Land and Building Tax Act, B.E….will replace the current local maintenance tax, building and land tax laws once it has been enacted. The new Land and Building Tax Act is intended to enhance the efficiency of tax collection by local administrative organizations in line with the current situation and boost effective use of land over the long term. Tax payers may include land and building owners, plus those who hold and make use of land or buildings owned by the state. It has been assessed that the government will be able to collect more taxes by approximately THB10 billion p.a. over the next four years once the new land and building tax is enforced. On November 16, 2018, the National Legislative Assembly (NLA) passed this long-awaited bill, which will become law after it is published in the Government Gazette. Tax collection shall commence on January 1, 2020.  Assets used for agricultural purposes by individuals will be exempted.

          An important issue concerning the new land and building tax is the fact that tax ceilings for various property categories will be lower than those in the current law, aimed at helping ease tax burden on land owners. For instance, tax on land used for agricultural purposes will decline to 0.15 percent (from the current 0.20 percent) and tax on residential properties will drop to 0.30 percent (from 0.50 percent). Progressive taxation will also be enforced based on the value of each property category and the actual taxes collected will be lower than those stipulated in the draft of Land and Building Tax Act, B.E….. The new tax rates will be announced by the Royal Decree while details of asset valuation will be subject to ministerial regulations.

          KResearch is of the view that the Land and Building Tax Bill is intended to promote long-term economic stability. However, a new tax assessment method based on the property's appraised value instead of income currently may present a challenge for land owners, in particular those having many plots of land but low income, to pay more taxes. It may also pressure land owners, who have limited development potential, to sell their land when the property market is plagued by such challenges as hefty household debt, rising interest rate and loan-to-value (LTV) ratio.

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