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Tax Incentive for New Start Up business in Thailand

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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. This Act became effective in January 2017 and will be replace the existing and old Building and Land Tax Act B.E. 2475 (1932) and the Local Development Tax B.E. 2508 (1965).

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 transportations 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 Taxpayer will be Individuals or juristic persons who own land or building or Individuals or juristic persons who are in possession or pedal possession on land or building which belongs to the state. The taxable Property will be Land, Buildings and Condominiums

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

Tax rate

The purpose of use Rate
For agriculture  
 – Value ≤ 50 M
 – Value › 50-100 M 0.05%
 – Value › 100 M 0.10%
For residential  
 – The first residence which the value ≤ 50 M
 – The first residence which the value › 50 -100 M 0.05%
 – The first residence which the value › 100 M 0.10%
 – The second residence which the value ≤ 5 M 0.03%
 – The second residence which the value › 5 -10 M 0.05%
 – The second residence which the value › 10 -20 M 0.10%
 – The second residence which the value › 30 -50 M 0.20%
 – The second residence which the value › 50 -100 M 0.25%
 – The second residence which the value › 100 M 0.30%
For commercial or industry  
 – Value ≤ 20 M 0.3%
 – Value › 20-50 M 0.5%
 – Value › 50-100 M 0.7%
 – Value › 100-1,000 M 0.9%
 – Value › 1,000-3,000 M 1.2%
 – Value › 3,000 M 1.5%
Unused properties  
 1st – 3rd year 1%
 4th – 6th year 2%
 ≥ 7th year 3%

 

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

We do not believe that the REITS with assets on 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 oversupply of rooms due to AirBnB business model implementation in cities such as Bangkok or Phuket.

The new land and building tax in Thailand is 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

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