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Land and Building Tax: Clarified

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Land and Building Tax: Clarified

With the effective date on 13th March 2019, the Land and Building Tax Act B.E. 2562 (“Act”) initially scheduled the implementation of tax collection on 1st January 2020. Nevertheless, due to the prolonged economic recession and the COVID-19 impacts which have been suffered nationwide, there have been two Royal Decrees enacted to reduce tax liability in this regard. As an introductory perception, this article will firstly outline the main concepts of land and building tax as per the Act and the correlation with the tax reductions under the Royal Decrees. Then, it will touch upon the temporary mitigating measures of the tax collection in 2020.

Introduction to Land
and Building Tax

To disentangle the implementation of the land and building tax under the Act, one shall initially comprehend the following elements.

Who: Taxpayer

The persons who shall be liable to pay land and building tax are as follows:

  • A natural or juristic person who, as of 1st January of each tax year,
    • owns land or buildings; or,
    • possesses or exploits land or buildings which are owned by the state.
  • Individuals who pay tax on behalf of the liable person, such as the representative of the juristic person or the guardian of the incapacitated.

What: Taxable Properties

Two properties which are subjected to taxation under this Act include;

  • Land; and,
  • Buildings.

The buildings under the definition of this Act includes building or constructions that a person could inhabit, utilize, use as a warehouse, or operate industrial or commercial businesses. This also includes condominiums under the Condominium Act which a certificate of ownership has been issued.

Exempted properties

Properties which are exempted from tax collection under this Act include but are not limited to the following:

  • Properties which are owned by state or government agency, which is used for their activities or public interest;
  • Common properties of condominiums; and,
  • Plots of land which are used for public utilities as per laws relating to land allocation and the Industrial Estate Authority of Thailand.

How much: Tax Calculation

The assessment of tax payable shall be calculated from the two following formulas:

  • Assessed Tax

(Tax base - the available Exempted Tax Base) x Tax Rate = Assessed Tax

  • Tax Payable

Assessed Tax - the applicable Tax Reduction = Tax Payable

Tax Base

The tax base is determined by the appraised value of the taxable properties, which shall be calculated and announced by the Department of Treasury or the relevant government authority.

Exempted Tax Base

There are two purposes of utilization on the taxable properties which are eligible for the exemptions of tax base. In this regard, the value of the properties exceeding the exempted amount shall be used for tax calculation.

Purpose of utilization

Conditions

Amount of exempted tax base

1. Agricultural Purpose

Land or buildings of individual owners

Not exceeding 50 million Baht

2. Residential Purpose

Land and buildings of individual owners whose names are in the house registration book as of 1st January in such tax year

Not exceeding 50 million Baht

Buildings of individual owners whose names are in the house registration book as of 1st January in such tax year

Not exceeding 10 million Baht

 

Tax Rate

Each taxable property is imposed with a different rate of tax ceilings depending on the purpose of property utilization, which is categorized into four groups as detailed by the separate Ministerial Regulation. The imposed tax rates will be announced under a separate Royal Decree, which shall not exceed the tax ceiling stipulated by the Act. In this respect, the local administrative authorities may set a rate higher than prescribed by the issued Royal Decree, but the rate shall likewise not exceed the stipulated ceiling.

For the initial implementation of the tax collection, the Act provides an interim reduction of tax rates which are applicable for the first two years of tax collection. The overall details in this regard are clarified and arranged in the table below.

Purpose of utilization

Interim Tax Rates
2020-2021

Tax Rate
2022 onwards

1. Agricultural Purpose

0.01 - 0.1%

0.15%

2. Residential Purpose

0.03 - 0.1%
For land or buildings owned by individuals whose names are in the house registration book

0.3%

0.02 - 0.1%
For buildings owned by individuals whose names are in the house registration book

0.02 - 0.1%
For land or buildings other than the above conditions

3. Purposes other than (1) or (2)
Ex. commercial and industrial buildings, office buildings, hotels, restaurants etc.

0.3 - 0.7%

1.2%

4. Vacant properties and properties not properly utilised

0.3 - 0.7%

1.2%

Further, land and buildings owned by individuals which are used for the agricultural purpose shall be exempted from taxation for the first three years of tax collection (2020-2022).

Tax Reduction

In accordance with the Royal Decree Reducing Land and Buildings Tax B.E. 2563 (2020), two rates of tax reduction are applicable to reduce the payable amount of land and building tax. The reduction is limited to only certain types of properties prescribed thereunder.

  • 90% tax reduction shall be applicable to the following properties, as an example:
    • Land or buildings of an operator which are under development as a housing or industrial project, a condominium, or an industrial estate for not more than three years from the date of obtaining the relevant permission.
    • Land or buildings that were pending for sale and subsequently acquired by a financial institution or an asset management company for not more than five years from the date of acquisition.
  • 50% tax reduction shall be applicable to the following properties:
    • Land and buildings owned by individual owners for residential purposes, which have been acquired by inheritance prior to 13th March 2019
    • Land which is located with a power plant, including properties utilized for power generation.
    • Land and buildings which is located with a dam, and the properties utilized for power generation.

When: Tax Payment

In practice, the responsible local administrative authorities shall announce tax payable by submitting a tax assessment report to each taxpayer within February each year. Taxpayers shall accordingly pay the tax within April each year at the local administrative authorities depending on the area in which the taxable properties are situated. Nevertheless, due to the incompletion of the supporting subordinate laws in this relation, the Ministry of Interior has extended the deadline of tax payment of 2020 to August. Failure to pay the tax within the due date shall impose the taxpayers with a surcharge and penalty at the rate stipulated by the Act.

Temporary Measures for Land and Building Tax due to COVID-19 situations.

Tax Reduction

As a mitigating measure against the impact of COVID-19 situations, the recent Royal Decree Reducing Tax for Certain Types of Land and Buildings B.E. 2563 (2020) imposes a temporary 90% tax reduction on all types of taxable properties subjected to taxation under the Act. This reduction shall only be applicable for the tax payment in 2020. The tax liability of taxpayers shall be reduced accordingly, and this shall not affect the entitlement of other exemptions or tax reductions under the Act.

Extension to Tax Payment

Even though the deadline for tax payment was primarily extended to August 2020, some local administrative authorities have granted further extensions within their due consideration. Thereby, to ascertain the obligation of the tax payment in this regard, one shall primarily consult with the local authorities of the area in which the taxable property is situated.

Extension to Tax Payment

Extension to Tax Payment

Extension to Tax Payment

Extension to Tax Payment

Extension to Tax Payment

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