Set to take effect from 1st January 2020 onwards, the new Property Tax Code is set to address the shortfalls of the Code’s previous version that have long been exploited. Through the Code’s latest amendments, the Thai government aims to levy taxes on property owners and use the proceeds to fund local administrative organizations.
The four land categories covered by the upcoming regulations will include commercial, residential, vacant, and agricultural property. They way in which the Code covers these categories are summarized below:
The original 12.5% house and land tax will be replaced with a 0.3% property tax; and while the tax rate seems significantly lower, it will be calculated differently. The 12.5% house and land tax that is currently in place is computed on the basis of the property’s potential annual rent proceeds, whereas the forthcoming 0.3% rate will be calculated from the property’s appraised value, which will be assessed by the Treasury Department. Property owners must therefore note that their tax liabilities will be evaluated on a case-by-case basis.
The 0.3% rate will apply to commercial property with a total value amounting to THB 50 million; however, properties that have not reached that threshold, but are nonetheless worth over THB 5 million, will be subject to a rate of 0.7%. Though, it is worth noting that these rates will be levied temporarily during the first two years of the new Code taking effect. Following the first two years, the Ministry of Finance will declare new rates which, according to the Code, will be capped at 1.2%.
A property owner’s primary residence, whether it is a parcel of land, a house, or a condo unit, with a value of THB 50 million or over will be exempt from property taxes. On the other hand, residential property that is not the owner’s primary residence valued between THB 50 million and THB 100 million will be subject to a tax rate of 0.03%, while those with values exceeding THB 100 million will be levied a rate of 0.1%.
As with commercial property, the rates mentioned above are temporary and may be subject to change after two years starting from 2020.
Property owned by individuals that is used for agriculture will be exempt from property taxes if their assessed value does not exceed THB 50 million. Individual property owners who are subject to property will also be given a three-year grace period where they will not be required to pay taxes starting from 2020. This, however, will not be the case for agricultural property that is owned by legal entities.
For two years following the enactment of the new Code, tax rates will begin at 0.01% for agricultural property valued at THB 75 million and will be capped at 0.1% for property worth THB 1 billion and over. Again, this may be subject to change, with the Act prescribing that the legal limit for taxes on agricultural property will be capped at 0.15%.
Unused property that serve no purpose have not been spared by the new Property Tax Code. Much like the rates for commercial property, tax liabilities for vacant property start from 0.3% for property valued at THB 50 million to 0.7% for property with a value of more than THB 5 million but less than THB 50 million.
The Code further declares that land which remains unused or undeveloped for more than three years in a row will be subject to an additional 0.3% the following year. 0.3% will continue to be added to the property’s tax liability every three years it is not used until it reaches the cap of 3%.
The amendments to the Property Tax Code will likely affect owners who hold prime property, and it is important for them to take note of these changes to avoid unnecessary complications with the Revenue Department. Silk Legal understands the upcoming Tax Code and is equipped to help property owners prepare for the enactment of the Code in 2020.
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